Apple finds good fit in wearables and services in fourth quarter

Consumer electronics giant sees marked pivot from products to services in quarterly results

Apple has ended its 2019 fiscal year with the main topic of interest for once not dominated by the iPhone, but instead the company’s services division, which put in a strong fourth quarter and year to date.

For the quarter ended 28 September 2019, international sales continued to accelerate for the consumer electronics giant, accounting for 60% of the quarter’s total revenue of $64.04bn, up 2% from the year-ago quarter.  Quarterly earnings per diluted share were $3.03, up 4% year on year. Net income was $13.68bn, down 3.1% on the figure posted for the fourth quarter of 2018.

Total product sales in the quarter amounted to $51.53bn, slipping 1.4% year on year. Of these, iPhone sales totalled $33.36bn, down 9.2% annually, while service revenue soared by 18% to $12.51bn. Wearables, home and accessories rocketed by 54% to $6.52bn, while iPad sales over the quarter were up 17% on Q4 2018 to $4.65bn.

For the whole year, Apple generated net sales of $260.17bn, slipping 2% annually, and acted as the driver for a total net income of $55.25bn, down 7% year on year. Yearly iPhone sales of $142.38bn represented a near 14% contraction compared with 2018. By contrast, yearly service revenues showed strong growth, up 15% compared with the end of the previous financial year, to $46.29bn.

“We concluded a ground-breaking fiscal 2019 with our highest Q4 revenue ever, fuelled by accelerating growth from services, wearables and iPad,” said Apple CEO Tim Cook. “With customers and reviewers raving about the new generation of iPhones, today’s debut of new, noise-cancelling AirPods Pro, the hotly-anticipated arrival of Apple TV+ just two days away, and our best line-up of products and services ever, we’re very optimistic about what the holiday quarter has in store.”

Going forward, Apple provided 2020 first-quarter guidance of revenue between $85.5bn and $89.5bn, gross margin between 37.5% and 38.5%, operating expenses between $9.6bn and $9.8bn, and other income/(expense) of $200m. Service revenues are expected to get a huge added boost from the launch of the Apple TV+ direct-to-consumer service on 1 November 2019.

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