Goes to show you that if you lower expectations enough, you can beat them when you actually report earnings. Even if the earnings report itself is bad news.
After the close of the New York market today, Apple (AAPL) reported December quarter earnings of $4.18 a share versus the Wall Street consensus of $4.17 a share. Revenues at $84.3 billion were slightly above projections of $84 billion. (That was a 4.5% drop in revenue year over year. In its pre-announcement Apple cut its estimates of revenue for the quarter to a range of $89 billion to $93 billion.) Overall gross margin was 38.0% versus an estimate of 38.0%. (That estimate reflected a cut to gross margin from 38% to 38.5% in the company’s negative earnings pre-announcement.) Gross margins in the company’s growing services business were 62.8% versus projections for 63%.
But the big deal is another cut to guidance from the company, this time for the quarter that ends in March 2019. (Which is the fiscal second quarter for Apple.) For the March quarter Apple told Wall Street to expect revenue of $55 billion to $59 billion against the current consensus projection of $58.97 billion. Gross margin will drop slightly to 37% to 38% from current estimates of 38%.
The message in the regional revenue breakdown also argues that Apple’s revenue problem isn’t over. iPhone revenue fell 15% to $52 billion. iPhone revenue from China was down 27%. Revenue from services helped save the quarter with a 19% year over year increase to $10.88 billion. But looking at the size of the revenue streams–$52 billion from iPhones and $10.88 billion from services in the quarter–gives you a good idea of the limits on the ability of service revenue to make up for drops in iPhone sales.
Apple shares were down during the regular trading session but were up in after-hours trading on the earnings news. In after-hours trading Apple shares gained 4.28% to $161.45.