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Slowing iPhone sales cause Apple profits to dip despite record services sales

Paul Lipscombe
October 31, 2019

iPhone sales dropped nearly 10 per cent year-on-year during the fourth quarter

Apple profits dropped for the fourth quarter of 2019 despite Apple’s services business achieving an all-time high.

In the quarterly report Apple also revealed that revenue reached £49.42 billion, an increase from the £48.55 billion in the same quarter last year.

However profit dropped slightly for the period to £10.5 billion from £10.89 billion last year as the fourth quarter ended September 28 2019.

This was due to smartphone sales declining by almost 10 per cent year-on-year, as iPhone sales generated £25.7 billion for Q4 2019 compared to £28.33 billion last year.

Although sales of iPhones and Mac’s declined year-on-year, iPads, wearables and Apple services all grew, with services growing from £8.11 billion to £9.65 billion during the quarter.

Quarterly earnings per diluted shares also set a new fourth quarter record of £2.34, up from £2.25.

Apple CEO Tim Cook said in a statement: “We concluded a groundbreaking fiscal 2019 with our highest Q4 revenue ever, fuelled by accelerating growth from services, wearables and iPad.

Cook is optimistic ahead of the holiday season that Apple can have success with the latest flagship smartphones plus continued growth in wearables and services.

Forecast

Apple also reported that it anticipates revenue to be between £66 billion and £69 billion for the first fiscal quarter of 2020, with a gross margin between 37.5 per cent and 38.5 per cent.

The Cupertino-based giant expects operating expenses to be between £7.41 billion and £7.57 billion, plus other income (expense) of £154.4 million.

IDC EMEA associate vice president for devices Francisco Jeronimo has called the results “solid” for Apple, despite a challenging quarter for smartphones.

“One of the most important takeaways from this quarter’s results is Apple’s excellence in attracting their current customers to spend more with them, by adopting new products and services beyond the iPhone, the Mac or the iPad.

“Being an aspirational brand and providing products and services with the best user experience continues to help Apple drive stickiness to their ecosystem and long-term loyalty from their customer base. The stars of this quarter – the Apple Watch and Apple services, resulted from the success in driving additional dollars from each of their customers.”

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