On Feb. 1, Apple (NASDAQ:AAPL) reported financial results for the first quarter of its fiscal 2018. Typically, the first quarter in any given fiscal year is the most important for Apple because it's typically the peak quarter for the year and sets the pace for the rest of the fiscal year.
That peak occurs because Apple tends to announce new iPhone models at the very end of a fiscal year, making the first quarter of the following fiscal year the peak for Apple's iPhone business. iPhone sales made up more than 60% of Apple's total revenue in its fiscal year 2017, so as the iPhone business trends, so too does Apple's overall business.
I'd like to look at three things that were really encouraging from Apple's Q1 2018 results.
1. iPhone average selling price boost
Apple reported that iPhone revenue grew 13% year over year in its most recent quarter, with unit shipments down 1% over that same period. The dramatic revenue increase paired with the slight unit shipment decline indicates that Apple saw a sharp uptick in iPhone average selling prices during the quarter.
There was little doubt that Apple would see some degree of average selling price growth in the quarter, since Apple's latest iPhone lineup includes the iPhone X, which starts at $999 and tops out at $1,149. In the same quarter a year ago, Apple's highest-end iPhone was the iPhone 7 Plus, which started at $769 and maxed out at $969.
However, the magnitude of the year-over-year iPhone selling price increase indicates that sales of the pricey iPhone X made up a substantial portion of Apple's iPhone shipments, a notion corroborated by Apple CEO Tim Cook's claim that the iPhone X has been the best-selling iPhone model since its introduction in early November.
With the iPhone X, Apple has proved that a significant portion of its customer base is willing to pay more for its most advanced iPhone models. This should give Apple the confidence to continue to release feature-rich products at higher price points in addition to more cost-sensitive products at lower price points.
2. More iPad growth
One product category that had been on the decline for quite some time was Apple's iPad business. Fortunately for Apple, the segment returned to growth in the third quarter of its fiscal 2017 and accelerated its growth in Q4 2017.
The good news is that Apple's iPad business kicked off the current fiscal year with another quarter of year-over-year growth. In the first quarter of fiscal 2018, Apple reported year-over-year iPad unit shipment growth of 1% and revenue growth of 6%. It's important to note that the first quarter of fiscal 2018 was a 13-week quarter, while Q1 2017 had 14 weeks, which means the growth Apple's iPad business saw in the first quarter of fiscal 2018 was, effectively, even better than reported.
According to Apple CFO Luca Maestri, the company's iPad business enjoyed average weekly revenue growth of 8%, driven by "strong double-digit" percentage revenue growth in many emerging markets as well as some developed markets.
It seems Apple's iPad business now enjoys some degree of stability. If Apple can continue to grow the business, that'd be fantastic, though even just keeping things roughly flat so that the iPad business doesn't weigh down the successes of Apple's other businesses would be acceptable, too.
3. The amazing Apple Watch
During Apple's most recent earnings call, management said the Apple Watch business saw "over 50% growth in revenue and units for the fourth quarter in a row" and "strong double-digit growth in every geographic segment."
As if that weren't already great news, Apple revealed that shipment volumes of its latest Apple Watch Series 3 models, which came in variants with cellular capability installed, were up by more than 100% over the volumes the prior-generation Apple Watch Series 2 models saw last year.
There's no doubt at this point that the Apple Watch is a successful product category that could increasingly fuel Apple's overall revenue growth.
Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.