Apple's Best Year Ever

Yesterday after market close, Apple released a set of numbers that can be best described as lukewarm. I say lukewarm because this was Apple's best September quarter ever and the company beat analysts expectations on both revenues and profits. However, the company sold fewer iPhones than analysts expected, 46.89 million as compared to 47.5 million. However this came at a higher average price of $793 as compared to a projected $750.78.

Apple's revenues for the fourth quarter were $62.9 billion, higher than analysts expectations of $61.57 billion, and earnings per share coming in at $2.91, higher than the streets $2.78 forecast. The forward guidance for revenues in the holiday quarter is between $89 billion to $93 billion with best case scenario matching analysts expectation.

Apple's service business, which includes AppleCare, app sales, Apple music, iCloud storage etc. generated $9.98 billion in revenues, a 17% year-on-year increase. Comfortably ahead of the street's expectations of $8.5 billion. Apple's services business, as a standalone, is now the size of a Fortune 100 company with an annuity-like income that would make many a business drool.



CFO Luca Maestri said "We generated $19.5 billion in operating cash flow and returned over $23 billion to shareholders in dividends and share repurchases in the September quarter, bringing total capital returned in fiscal 2018 to almost $90 billion."

Apple still has a very strong position in the smartphone business, as the Apple iPhone still accounts for over 90% of smartphone profits. This is also evident in the services business where Apple Music only came to market in the year 2015, but it is now bigger than Spotify, a company that was founded seven years before it.

Doing more with less seems to be Apple's mantra as the company continues to make more profits from its strong network of active devices by distributing more superior products. We think this little pullback is an opportunity to buy the dip for long-term investors.