Apple CEO Tim Cook Is 'Thrilled' With iPhone X Demand, But Mac Sales Streak Is Over
Apple executives refused to acknowledge anything besides a rosy picture for all of the company's product lines on Thursday, even while reporting that Mac sales fell in the latest quarter and as Wall Street aired fears that iPhone X demand is quickly losing steam.
Sales of the iPhone X – a fully redesigned iPhone model that debuted in early November – helped drive record quarterly revenue for Apple in the first quarter of its fiscal 2018, ended Dec. 31.
Apple reported that iPhone sales overall rose 13 percent to $61.58 billion in the fiscal first quarter, compared to $54.38 billion during the same period a year earlier. The number of iPhones sold actually dropped by 1 million in the quarter, compared to a year earlier, though the quarter was also one week shorter this time.
More worrisome is that Apple's guidance for fiscal Q2 showed revenue well below the consensus estimate of Wall Street analysts, seeming to lend credibility to recent supply chain reports that Apple is slashing production for the iPhone X because of slowing demand.
During Apple's quarterly earnings call Thursday, however, CEO Tim Cook heaped praise on the performance of the iPhone X even amid skepticism about market demand from Wall Street analysts. Cook said that "we feel fantastic about the results" and that "customer satisfaction is literally off the charts on iPhone X."
"I would tell you that we're thrilled with the reception to iPhone X. And as we said when launched it, we were setting up the next decade [of iPhone], and that is how we look at it," Cook said during the call. "That's the reason it's chock full of incredible innovation."
The iPhone X comes with a nearly edge-to-edge OLED display that, at 5.8 inches, makes it the largest iPhone released so far. The device also includes features such as Face ID facial recognition and inductive wireless-charging capabilities.
Total revenue for Apple in its fiscal Q1 climbed 13 percent year-over-year, to $88.29 billion.
But unlike in recent quarters, Apple's Mac division didn't contribute to the growth.
Even as Apple introduced a brand-new Mac into the lineup during the holiday quarter, the ultra-powerful iMac Pro, Mac sales slid 5 percent from the same period a year ago, to $6.89 billion.
That broke a streak of year-over-year revenue growth for the Mac line in each of the previous four quarters at Apple.
Granted, it was a challenging year-over-year comparison for Apple. In the same period of 2016, Apple had initially launched its overhauled version of the MacBook Pro, the first major refresh to the well-known laptop in four years.
But the Mac results in Q1 were still weaker in comparison to the preceding quarter, when the Mac line had produced $7.17 billion in revenue. That's even though Q1 included holiday sales and the first sales of the iMac Pro, which theoretically could've been a revenue driver with a starting price of $4,999.
Michael Oh, CTO of Cambridge, Mass.-based solution provider TSP LLC, said he's begun seeing a rise in hardware issues of late with Mac computers, and also was stunned by a bug in macOS High Sierra that allowed access simply by typing in the username "root."
"That clearly means someone wasn't watching the shop," Oh said. "Is there a culture of taking the eye off of the ball when it comes to quality? And does that eventually end up affecting their market share? It's an open question."
Elsewhere in Apple's businesses, the company reported that Q1 iPad sales rose 6 percent year-over-year to $5.86 billion, while Apple services rose 18 percent to $8.47 billion.
In terms of Apple's enterprise push, CFO Luca Maestri said during the quarterly call that Apple is pursuing a new initiative, Apple at Work, with the aim of increasing the traction of its products in businesses.
"Resources from both Apple and our channel partners will enable enterprise IT and procurement teams to buy or lease Apple products more efficiently, streamline the setup of iPhone, iPad and Mac, and deliver a seamless onboarding experience for employees," Maestri said.
Apple debuted the program last week in the U.S. with reseller giant CDW, he said, "and we will be expanding to more channels and regions later this year."
On net income, Apple reported generating $20.06 billion, or $3.89 per share, during its fiscal first quarter. That's in comparison to $17.89 billion, or $3.36 a share, during the same period a year earlier.
In terms of guidance, Apple is forecasting between $60 billion and $62 billion for the fiscal second quarter, in contrast to the $66 billion that a consensus of Wall Street analysts had been expecting from Apple.