The dongles must not have been much of an issue.
Apple had an absolutely massive holiday quarter, fueled mostly by strong sales of the iPhone 7. It was a striking turnaround from the prior quarter, when the company reported its first drop in revenue and profit in 15 years.
Analysts had been expecting Apple to post $77.38 billion in revenue last quarter. Instead, it generated $78.4 billion in revenue. That’s a 3.3% increase over the $75.9 billion the company posted in the same quarter last year.
It seems Wall Street is also thrilled, with Apple shares shooting up about 3.25%—about $4, to $124.50—in after-hours trading.
Back to winning ways
Apple sold more iPhones in the last three months of 2016 than it did over the same period in 2015, breaking a streak of declines. The company sold 78.29 million iPhones in the quarter, roughly 4 million more than its previous record.
The company’s $78.4 billion in revenue is the most it’s ever generated in a single quarter, but its profit actually fell by about 2.5%, down from $18.4 billion to $17.9 billion, suggesting that Apple spent more to make and market its newest devices than it has in previous quarters.
The company had been on a negative trajectory in recent quarters, but it seems that strong iPhone sales have brought the company back to growth.
The iPhone 7 seems to have been a hit
Apple’s latest iPhones were met with mixed reviews, partially because they looked and felt so similar to the last two generations of phones that the company released, and they had no headphone jacks. But over the holiday period, it seems that millions adopted a new dongle-laden life and bought an iPhone 7.
Apple’s 78 million iPhones was an increase of roughly 5% from a year ago. “iPhone had a tremendous quarter,” CEO Tim Cook said on the company’s earnings call. He suggested that demand for the iPhone 7 Plus, which is larger and sports a better camera, had been particularly strong.
Everything else is still just nice to have
Apple’s iPhone business is still its largest business by far, accounting for 69% of the company’s revenue for the quarter.
Beyond the iPhone, things were a bit of a mixed bag: iPad sales were down nearly 22%, to $5.5 billion, suggesting that the newer iPad Pro models, seemingly targeted at users looking to replace their laptops with tablets, have not been a huge hit. That may be because people still aren’t sure what the iPad is for.
Conversely, it seems that people still can’t shake traditional Macs. Sales were up 7% over the same quarter last year, to $7.24 billion. Apple released new high-end MacBook Pro laptops in the quarter, and they seem to have sold well despite fewer ports and a confusing second screen on its keyboard. Maybe people really just needed a new laptop.
Although Cook referred to the Apple Watch as the “most-loved” smart watch in the world on the company’s earnings call, it seems that consumers did not agree. Apple’s “other products” business line—a catchall term for its smaller hardware products, such as the iPod, AirPods, Beats headphones, wifi routers, and the Apple Watch—generated roughly $4 billion, down about 8% from the same quarter last year. Apple has never commented on Apple Watch sales, but it’s likely that a large portion of this business line comprises the watch. So with this drop, it’s likely that Apple sold fewer watches this holiday season than it did in 2016.
Services are still on a tear
One of the surprise successes for Apple in recent quarters has been its services business, comprising app, music, movies, and games sales, as well as insurance and cloud services. As Apple tries to keep users locked in to its ecosystem, even when they’re not buying as many expensive devices, users will be looking for more engaging content to keep them entertained. Apple has worked to drum up exclusive albums for its Apple Music streaming service, and games, such as Super Mario Run, which was downloaded nearly 80 million times in the quarter, likely netting a decent fee for Apple from developer Nintendo, which generated about $50 million in revenue from the mobile game.
In the quarter, services sales were up 18%, to $7.2 billion, over last year. On the earnings call, Cook said that Apple believes its services sector sales will be the size of a Fortune 100 company on its own, with the aim of double the business in the next four years.
Asian revenue growth is still an issue
As much as Apple is searching for new products to generate revenue, it’s also looking to new markets to spur growth. In recent years, Apple has invested in China (and continues to do so), but regulations on foreign businesses have, in part, slowed down its advances into the quickly growing Chinese middle class. As a secondary plan, CEO Tim Cook has made overtures toward India, as well.
Chief financial officer Luca Maestri said on the earnings call that Apple posted double-digit growth in mainland China and India. Europe is still Apple’s second-largest market right now, but China looks set to reclaim that title in the near future, and India seems to be helping Apple’s “rest of Asia” bucket quickly take over from Japan as the company’s next-largest Asian market.