When Apple Inc. (AAPL 0.52%) released its most recent financial report last month, investors initially didn't know what to make of the mixed results. The company reported all-time record revenue of $88.3 billion was up 13% year over year, while earnings per diluted share of $3.89 increased 16% over the prior-year quarter. Both numbers were higher than analysts' expectations of $87.28 billion and $3.86 per share, respectively.
It was the company's lackluster unit sales that caused investors concern, however, particularly in light of fact that this was the first full quarter since the release of the 10th anniversary edition of Apple's flagship iPhone X.
The financial headlines led investors to believe that the results left much to be desired. Those willing to dig a little deeper and put those numbers into perspective, however, would find that Apple's performance was much better than the headlines numbers would have us believe.
Where iPhone sales really down year over year? Maybe. Image source: Apple.
Product sales slow or declining?
A quick glance shows why investors might find the numbers a little disappointing. Unit sales for the iPhone fell by 1% year over year, which is unusual considering the recent upgrades of both the iPhone 8 and the iPhone X. The number of iPads was up a paltry 1% over the prior-year quarter, while Mac sales fell 5% year over year.
While unit sales fell, it was an increase in the average selling price of $796, up more than $100 from the prior-year quarter that buoyed the financial results.
If there was a bright spot, it was the increase in both the "other products" and services segments, up 18% and 36% respectively year over year, though these account for the smallest part of Apple's overall revenue.
Things are not what they appear
It seems curious, then, that Apple CEO Tim Cook would laud sales of the iPhone X saying, "it has been our top-selling phone every week since it launched." Why the seeming disconnect?
Apple went to great pains during its conference call to point out that the comparisons were skewed, because the year-ago quarter had 14 weeks, compared to 13 weeks in the current year quarter. The company also indicated that due to the disparity, it was best to compare the numbers on a per week basis, which factors out the effect of the additional week on the comparisons.
When reviewed on that basis, the results appear far better than what the unadjusted numbers show.
|
Metric |
Q1 18 |
Q1 17 |
YOY Change |
As reported |
|---|---|---|---|---|
|
Revenue (per week) |
$6.79 billion |
$5.60 billion |
21% |
13% |
|
iPhone unit sales (per week) |
5.95 million |
5.59 million |
6% |
-1% |
|
iPad unit sales (per week) |
1.01 million |
934 thousand |
8% |
1% |
|
Mac unit sales (per week) |
393 thousand |
384 thousand |
2% |
-5% |
Data from SEC filings. YOY = Year over year. Chart by author.
Even the sales from the segments that grew were all the more impressive when adjusting for the extra week.
|
Metric |
Q1 18 |
Q1 17 |
YOY Change |
As reported |
|---|---|---|---|---|
|
Services revenue (per week) |
$651,615 |
$512,286 |
27% |
18% |
|
Other products revenue (per week) |
$422,231 |
$287,429 |
47% |
36% |
Data from SEC filings. YOY = Year over year. Chart by author.
Got off on a technicality
Those investors that merely read the headlines regarding Apple's quarterly performance were given information that, while technically correct, didn't provide the complete picture. Sometimes it pays to go beyond the headlines, and in this case looking just below the surface reveals a wealth of information.
