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Apple, Inc.'s Record Quarter Returns the Company to Growth

By Daniel Sparks - Updated Feb 1, 2017 at 9:59AM

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Strong iPhone sales and a boost from Apple's growing services segment led to record revenue.

After market on closed on Tuesday, tech giant Apple (AAPL 1.89%) put to rest any doubts about the company's ability to post strong holiday results. Shares moved a few percentage points higher immediately after the company released its figures for its Dec. 31-ending first fiscal quarter of 2017. Apple's revenue and earnings exceeded both management's own forecast for the quarter and analysts' consensus estimate.

An Apple store

Image source: Apple.

Here's a look at some of the biggest takeaways from the results. 

Financial results

Metric

Q1 2017

Q1 2016

Year-Over-Year Change

Revenue

$78.4 billion 

$75.9 billion

3.3%

Earnings per share

$3.36

$3.28

2.4%

Gross profit margin

38.5% 

$40.1%

(160 basis points)

Data source: Apple Q1 2017 press release. Table by author.

Apple's revenue reached an all-time high of $78.4 billion, up 3.3% from the year-ago quarter and above the company's guidance for $76 billion to $78 billion. In addition, Apple's EPS of $3.28 easily exceeded the midpoint of its guidance range for about $3.17.

Segment results

The iPhone remained crucial to Apple's overall results, accounting for nearly 70% of total revenue during the quarter. With a 5% year-over-year increase in iPhone revenue, the product segment played a key role in Apple's better-than-expected financial results.

But the tech giant's services segment, which accounts for sales from the App Store, iTunes, Apple Music, iCloud, Apple Pay, licensing, and other services, was also important. Services revenue was up 18% year over year, accounting for 9.1% of the quarter's total results -- up from 8% in the year-ago quarter. Apple CEO Tim Cook commented specifically on Apple's services segment performance, saying the growth was "led by customer activity on the App Store."

Chart showing Apple's first-quarter revenue by segment.

Data source: Apple Q1 2017 press release. Chart by author.

Another bright spot from Apple's segment results was Mac. With the help of its new MacBook Pro, the segment's revenue increased 7% year over year.

However, not all of Apple's product segments were on the rise during the quarter. Apple's iPad revenue continued its downward trend, with revenue falling 22% year over year. Other products revenue, which includes sales of Apple TV, Apple Watch, Beats products, iPod, and accessories, saw its revenue decline 8% year over year. But Apple was careful to note in its first-quarter press release that despite the decline in other products revenue, Apple Watch revenue hit an all-time high.

Guidance

Apple also notably said it expects revenue growth to continue in the company's second quarter -- an important guide, considering the company reported three straight quarters of year-over-year revenue declines in fiscal 2016. Apple guided for second-quarter revenue to be in the range of $51.5 billion to $53.5 billion, up from $50.6 billion in the year-ago quarter.

Looking beyond the financial results for Apple's second quarter, Cook said the Apple team is "excited" about the products in its pipeline.

The strong quarter for the tech giant, along with a nice return to growth for the current quarter and for expected revenue in Q2, reinforces the company's ability to drive results for shareholders even in a post hyper-iPhone-growth era.

Cook was pleased with the company's performance: "Our team executed extremely well in the face of strong macroeconomic headwinds. We are very happy with the continued strong growth in revenue from services, thanks to the incredible strength of the Apple ecosystem and our growing base of over 1 billion active devices."

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