You might not know it, but one of the unsung heroes of the stock market so far this year had been Apple (AAPL -1.00%). The iPhone maker was one of the few companies to buck the recent market rout, going into its earnings release up more than 31% in 2018.

With that kind of performance, investors were looking for a better-than-average earnings report in order to justify a continued ascent in the stock price, similar to its unexpected strength in the third quarter. Unfortunately a strong earnings report was dampened by weak guidance and an unexpected announcement, which conspired to strip Apple of its $1 trillion market cap.

Apple exec Phil Schiller on stage introducing the iPhone XS.

Apple exec Phil Schiller on stage introducing the iPhone XS. Image source: Apple.

Impressive metrics


Q4 2018

Q4 2017

Year-Over-Year Change


$62.9 billion

$52.6 billion


Operating income

$16.1 billion

$13.9 billion


Net income

$14.1 billion

$10.7 billion


Diluted earnings per share




Data source: Apple's fourth-quarter financial report.

For the fiscal fourth quarter (which ended on Sept. 30), Apple again defied expectations. It reported revenue of $62.9 billion, up 20% year over year, and exceeding both analysts' consensus estimates of $61.48 billion and the high end of Apple's forecast -- which topped out at $62 billion. Profits were also a pleasant surprise, as earnings per share of $2.91 sailed past expectations of $2.78 per share.

The iPhone continued to make up the lion's share of Apple's sales at $37.2 billion, up 29% year over year. The company sold 46.9 million units, up less than 1% year over year, and falling short of the 48.4 million expected by analysts. That didn't stop Apple from achieving near-record prices for the flagship device, as consumers continued to choose the higher-end models, like the recently released XS and XS Max; they paid an average of $793 for the iPhone, up 28% year over year, and just shy of the record $796 achieved in the first quarter.

Other highlights

Apple's Other Products segment -- made up of the Apple Watch, AirPods, Apple TV, Beats headphones, and HomePod -- again reported the highest segment growth, producing revenue of $4.2 billion, up 31% year over year.

Services also got a nod from Apple execs, as revenue from the segment "reached an all-time high of $10 billion"; excluding a one-time adjustment in Q4 of 2017, its revenue increased 27% year over year. Apple has generated $37.2 billion from services over the preceding four quarters, putting it on track to reach its goal of $51 billion annually from the segment by 2020.

"We concluded a record year with our best September quarter ever, growing double digits in every geographic segment. We set September quarter revenue records for iPhone and Wearables and all-time quarterly records for Services and Mac," said Apple's CFO Luca Maestri in a press release.

In an unexpected move, Apple executives said they would no longer report the individual product unit sales figures for the iPhone, iPad, and Mac computers that have historically been part of the company's financial disclosures. Combine that with Apple's miss this quarter in unit sales for the iPhone, and it appears Apple wants to mask weaker unit sales from now on.

What the future holds

For the fiscal first quarter (which began Oct. 1), Apple is forecasting revenue of $91 billion at the midpoint of its guidance. The company is expecting gross margin of between 38% and 38.5%, and operating expenses in a range of $8.7 billion to $8.8 billion.

For their part, analysts' consensus estimates are calling for revenue of $92.91 billion, an increase of 5% year over year, and earnings per share of $4.94, up 27% compared to the prior-year quarter.

The fiscal first quarter includes the highly important holiday shopping season, and is typically Apple's best quarter, setting the stage for the entire year. The company's muted growth estimates and the decision to stop reporting device unit sales gave investors an uneasy feeling, and took the sheen off an otherwise stellar quarter. Apple wants investors to focus more on the big picture, but sometimes the devil's in the details.