Services drove Apple’s best third quarter ever, but iPhone sales aren’t growing

CEO Tim Cook addressed concern about trade between the US and China as well.

Samuel Axon – Jul 31, 2018 9:10 pm | 185

Apple CEO Tim Cook speaks about the new Apple headquarters during a media event in Cupertino, California, on September 12, 2017. Credit: JOSH EDELSON/AFP/Getty Images

Apple reported very strong earnings to investors on its quarterly earnings call today. The company beat most analysts’ predictions for the quarter with a 17-percent increase in revenue year over year.

As with several recent quarters, the biggest success story is Apple’s services business, which includes Apple Music, iCloud, Apple Pay, the App Store, AppleCare, and more. It rose 31 percent compared to the same quarter last year, putting it at $9.54 billion.

“We’re on target to reach our goal of doubling our fiscal 2016 services revenue by 2020,” CEO Tim Cook assured investors on the call.

The other notable success: Apple has also seen a strong increase in the amount of money it makes per sale of an iPhone. The number rose from $606 a year ago to $724 this time around. That’s because the pricy iPhone X has been performing well; it has consistently been the best-selling iPhone since it launched last November. This led to a 20-percent increase in iPhone revenue year over year.

That said, iPhone and iPad sales were close to the same compared to this quarter last year, with 41.3 million iPhones shipped. Meanwhile, Mac sales were down 13 percent. Apple attributed the latter figure to the fact that 2017’s MacBook Pros launched within the same quarter last year, whereas this year’s models didn’t launch until right after the end of the quarter, so those sales are not included in the figures for this year. We’ll find out how the new MacBook Pro performed in the next quarter’s report.

Some analysts have been lamenting slow growth in the smartphone segment. When asked about this on the earnings call, Cook called smartphones the world’s best business to be in simply because of its size. But he didn’t provide a strong answer for concerns that the market has become saturated in developed countries or that users are upgrading their devices less frequently.

Cook also addressed concerns about tariffs and an ongoing trade spat between the United States and China. Much of Apple’s manufacturing takes place in China, and the Chinese market is Apple’s second biggest when it comes to revenue, so the company could be affected in the future. However, Cook said that current tariffs, such as one the United States imposed on steel and aluminum, do not directly affect the company’s efforts. Other potential tariffs on the horizon could, though, and Cook said he was “optimistic that the countries will get through this” and that Apple is “hoping that calm has prevailed.”

“There is an inescapable mutuality between the US and China,” he added. “Each country needs the other to prosper, and the world needs both to prosper for the world to do well.”

Looking to the future, Apple predicted revenue of more than $60 billion for the next quarter—a figure that suggests new iPhone models are very likely to come, as if there was any doubt.