Apple Q2 FY 2019 Earnings Report: iPhone Struggles But iPad And Services Expand

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Today Apple announced their earnings for the second quarter of their 2019 fiscal year. Revenue was down 5.1% to $58.0 billion this quarter. Gross margin for the quarter was 37.6%, down from 38.3% a year ago. Operating income was down 15.6% to $13.4 billion, and net income fell 16.3% to $11.6 billion. This resulted in earnings per share of $2.46, down 9.9% from a year ago.

Apple Q2 2019 Financial Results (GAAP)​
Q2'2019​
Q1'2019​
Q22018​
Revenue (in Billions USD)
$58.015​
$84.310​
$61.137​
Gross Margin (in Billions USD)
$21.821​
$32.031​
$23.422​
Operating Income (in Billions USD)
$13.415​
$23.346​
$15.894​
Net Income (in Billions USD)
$11.561​
$19.695​
$13.822​
Margins
37.6%​
38.0%​
38.3%​
Earnings per Share (in USD)
$2.46​
$4.18​
$2.73​

Although Apple no longer provides individual unit sales of their products, iPhone sales continue to struggle. Revenue for this quarter for iPhone was down 17.3% to $31.0 billion, and this is at a time where per-unit prices are at their highest in history of the iPhone. What once seemed like an unstoppable force has met the immovable object of market saturation.

Mac sales were also down, but only 4.5%, with revenues of $5.5 billion for the quarter. As with iPhone, we are no longer privy to the unit sales numbers though.

iPad has seen a bit of a resurgence after several years of revenue declines. iPad revenue was up 21.5% over Q2 2018, with revenues of $4.9 billion for the quarter. Here Apple has not only increased the price of their Pro models, but also lowered the entry level price for the basic iPad, and this two-tiered approach seems to have helped correct the declining sales, at least for now.

Apple’s ever-expanding list of products in their Accessories group continues to do well, so much so that the group is now called Wearables, Home and Accessories. Lack of an Oxford comma can be forgiven since this segment had revenues increase 30% to $5.1 billion for the quarter.

Finally, Apple’s Services segment also continues to grow, thanks to their 1.4 billion active devices. Services, which includes iTunes, Apple Music, iCloud, and other products grew 16.2% to $11.4 billion. If you divide that by active devices, Apple is generating $8.18 per device in service fees in just three months.

Apple Q1 2019 Segment Revenue (Billions USD)​
Q2'2019​
Q2'2018​
Year/Year Change​
iPhone
$31.051​
$37.559​
-17.3%​
iPad
$4.872​
$4.008​
+21.5%​
Mac
$5.513​
$5.776​
-4.5%​
Wearables, Home, and Accessories
$5.129​
$3.944​
+30.0%​
Services
$11.450​
$9.850​
+16.2%​

Apple has approved a cash dividend of $0.77 per share, and authorized a repurchase of an additional $75 billion in shares. Looking forward to Q3, the company is expecting revenue between $52.4 and $54.5 billion, with gross margin of between 37% and 38%.

Source: Apple Investor Relations

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