Cassandra: Apple Reports Q1 2018 Figures - With a Look Back to 2017 (Updated with comment from Tim Cook)

By Graham K. Rogers

Despite a cascade of negative reports in the weeks running up to Apple's Q1 2018 financial report, sending share prices down, the company again recorded excellent results. While weaknesses had been predicted with the iPhone, Tim Cook said that the iPhone X had exceeded expectations and had outsold other iPhones (including the iPhone 8 - this does surprise me). Apple "sold 77.3 million iPhones in total" (Juli Clover, MacRumors), although this was fewer than analysts had predicted. Apple has access to more accurate figures.

Part of the Apple news release is as follows:

The Company posted quarterly revenue of $88.3 billion, an increase of 13 percent from the year-ago quarter and an all-time record, and quarterly earnings per diluted share of $3.89, up 16 percent, also an all-time record. International sales accounted for 65 percent of the quarter's revenue. . .

While this was within Apple's guidance, it did not meet the expectations of analysts who of course know Apple's business better.

Luca Maestri, Apple's CFO added, "Cash flow from operations was very strong at $28.3 billion, and we returned $14.5 billion to investors through our capital return program." There is however, a sting in the tail and "Maestri said Apple is looking to shrink its cash balance, which currently stands at $285 billion or $163 billion excluding debt, down to nothing" (Mikey Campbell, AppleInsider), which many, including me will see as a mistake. It does go against some of the founding principles.

(Update) - In the Conference Call, Tim Cook confirmed, "For clarity, Luca's not saying cash = $0. He's saying there's an equal amount of cash and debt, and they balance to 0."

Last year, Apple reported quarterly revenue of $78.4 billion with quarterly earnings per diluted share of $3.36. These results compare to revenue of $75.9 billion and earnings per diluted share of $3.28 in the same quarter the previous year (2016). International sales accounted for 64 percent of the quarter's revenue.

Apple is providing the following guidance for its fiscal 2018 second quarter:

• Revenue between $60 billion and $62 billion
• Gross margin between 38 percent and 38.5 percent
• Operating expenses between $7.6 billion and $7.7 billion
• Other income/(expense) of $300 million
• Tax rate of approximately 15 percent

Note this was the Q2 guidance for this time last year:

• Revenue between $51.5 billion and $53.5 billion
• Gross margin between 38 percent and 39 percent
• Operating expenses between $6.5 billion and $6.6 billion
• Other income/(expense) of $400 million
• Tax rate of 26 percent

With another good quarter, and with guidenace for the following quarter at $60b - $62b even the casual observer may wonder about the deliberately mistaken repors from Nikkei, Wall Street Journal and others

Graham K. Rogers teaches at the Faculty of Engineering, Mahidol University in Thailand. He wrote in the Bangkok Post, Database supplement on IT subjects. For the last seven years of Database he wrote a column on Apple and Macs. After 3 years writing a column in the Life supplement, he is now no longer associated with the Bangkok Post. He can be followed on Twitter (@extensions_th)