This afternoon, Apple announced their earnings for the third quarter of the 2018 fiscal year, and as we’ve all come to expect, they did very well again. Revenue for the quarter was up 17% year-over-year to $53.3 billion. Margins were a very healthy 38.3%, although down slightly from 38.5% last year. Operating income for the quarter was $12.6 billion, with a net income of $11.5 billion. This resulted in earnings per share of $2.34, up from $1.67 a year ago.

Apple Q3 2018 Financial Results (GAAP)
  Q3'2018 Q2'2018 Q3'2017
Revenue (in Billions USD) $53.265 $61.137 $45.408
Gross Margin (in Billions USD) $20.421 $23.422 $17.488
Operating Income (in Billions USD) $12.612 $15.894 $10.768
Net Income (in Billions USD) $11.519 $13.822 $8.717
Margins 38.3% 38.3% 38.5%
Earnings per Share (in USD) $2.34 $2.73 $1.67

As usual, the iPhone continues to be the major source of revenue for the company. This quarter, Apple sold 41.3 million iPhones, which is up 1% from the same quarter a year ago, but revenue for iPhone was up an impressive 20%, meaning the higher priced models are selling well. Average sales price for an iPhone is now $724.12, which is much higher than in the past. Just a year ago, the ASP was barely over $600, and two years ago it was $595.26. This is a pretty significant jump.

Generally, we’d discuss Mac and iPad next, but both are now dwarfed by Apple’s Services segment, which is revenue from the App Store, digital content, AppleCare, Apple Pay, licensing, and other services. This has been the fastest growing segment of Apple for the past couple of years, and this quarter revenue was up another 31% from a year ago, to $9.55 billion. Clearly much of this is also tied to the iPhone, which just reinforces the profits from that device.

iPad was almost flat for the year, up 1% to 11.5 million units sold, but revenue here is down 5% to $4.7 billion, which isn’t surprising with Apple recently lowering the entry level cost to their tablet. iPad sales aren’t small by any means, but the demand for them has definitely tapered off over the last couple of years.

Mac sales were down rather sharply, with 13% less units sold this quarter compared to the same quarter a year ago. Apple sold 3.72 million Macs, which is 572,000 less than a year ago. Revenue wasn’t affected quite as strongly, being down just 5% to $5.33 billion, so the average selling price of a Mac is now $1432. A year ago, ASP for the Mac was $1302, so as with the iPhone, Apple is making more per Mac now, but unlike the iPhone the sales are down significantly when the PC market as a whole actually grew.

Apple’s “Other Products” which includes AirPods, Apple TV, Apple Watch, Beats, Home Pod, iPod, and accessories, had a strong quarter as well, with revenue up 37% to $3.74 billion. We don’t get to see a breakdown of products in this segment to see what’s performing and what’s not, but Apple has been slowly adding to their Other Products lineup, and the group as a whole is doing well.

Apple Q3 2018 Device Sales (thousands)
  Q3'2018 Q2'2018 Q3'2017 Seq Change Year/Year Change
iPhone 41,300 52,217 41,026 -21% +1%
iPad 11,553 9,113 11,424 +27% +1%
Mac 3,720 4,078 4,292 -9% -13%

For Q4, Apple is expecting revenue between $60 billion and $62 billion, with margins between 38 and 38.5%.

Source: Apple Investor Relations

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  • Kevin G - Wednesday, August 1, 2018 - link

    If Apple released more new Mac models, I'm confident they would sell more. Right now only the very recent MacBook Pro and iMac Pro are 'new' with everything else being a year old at least. In particular the state of the Mac Pro is just sad.
  • phillip.hall - Wednesday, August 1, 2018 - link

    Its a good point on this blog site. But its clear that even as Tim says Macs are an important part of the business, the sales are down 13% year over year and only account for 10% of revenue (and I'd guess an even lower amount of net profit). I don't know if they are just not concerned, if they are allowing the Mac to go the way of the iPod (slow burn into oblivion), or if they really think the iPad is the way forward. I guess only time will tell.
  • Samus - Wednesday, August 1, 2018 - link

    Mac Mini hasn't been updated in 4 years, and honestly, the 6 year old model (2012 edition) is still the only one to consider because a) it's quad core b) has memory expansion slots c) is cheaper

    I just don't get Apple sometimes...such an easy SKU to update, and the margins are way higher because it's an a la cart product. People have to spend another $500 on a Apple monitor and another $150 on a wireless keyboard and mouse.
  • prisonerX - Wednesday, August 1, 2018 - link

    Why would they waste engineering talent on products that hardly make any money relative to iPhones? The fact that they seldom update the Mac line tells you all you need to know about what Apple thinks.
  • smilingcrow - Wednesday, August 1, 2018 - link

    Given the stagnation that Intel has shown it's hardly a surprise that Apple has slowed the upgrade cycle. Not that some of the designs aren't terribly outdated even taking that into consideration.
  • name99 - Wednesday, August 1, 2018 - link

    You're all missing the point. Apple is putting the bare minimum into new INTEL Macs because all the real engineering and design talent is going to the ARM Macs. My guess (pure guess) is these are announced at WWDC 2019 to get developers on board, and released to the public a year later; though that schedule could slip by a year.

    The issue is not that Apple isn't interested in the market, or thinks it is too small; Apple will own everything that matters in this market soon enough. The issue is that to get to PCs that people want to buy, that are worth replacing what they bought 5 years ago, Apple has to boil the ocean; with not just new CPUs but a whole new architecture. All we are seeing from the outside is the small parts of that (like the T2 stuff) that can be released standalone.

    Apple has either released or announced a lot of stuff in the past few years too soon. I think they have learned from this and will NOT be announcing future mac plans up until they know everything is lined up just right.
  • duploxxx - Wednesday, August 1, 2018 - link

    amazing how many people still buy overpriced mobile phones. look in the streets, they hardly can buy cloths, food etc but still all they want is an iphone and a data package along with it just to be on level "with the people".

    Oh I forgot, most of them run with a battery charger very close to them :)
    Last Tech conference i did, all charging desks owned by the fruit guys missing juice before end of working day.

    Overpriced tech is the worst thing a consumer should buy, yet they all fall for the wannebee.

    Written on my OnePLus One with 349$ cost (4 years ago with the same screen size as current apples) running android 8.1 and 2 days on battery :)
  • yeeeeman - Wednesday, August 1, 2018 - link

    That is called ignorance, my friend.
  • randomeurope - Wednesday, August 1, 2018 - link

    Why don't you let people do what they want? If you want to buy Chinese-backed cr*pphone, then you are free to do so :)
  • rocky12345 - Wednesday, August 1, 2018 - link

    So basically what you are saying that if it's not Apple then it's a crap phone am I getting this right? Sorry to say but those crap phones as you like to put it out number Apples iPhone's like 30 to 1 in the world market so there must be more than enough smart people that do not want to buy into Apples closed ECO system.

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