News You might have missed: Week of February 2, 2018

Earnings Thursday!


  • Revenue reached $88.3 billion, growing 13% over Q1 FY2017 and above the high end of Apple’s guidance.
  • This quarter was a week shorter than 2017: average revenue per week was up 21%.
  • Apple’s business is growing in all product categories and in all regions worldwide.
  • Apple’s installed base hit 1.3 billion devices in January, up 30% in just two years.
  • iPhone saw its highest revenue ever.
  • Apple returned $14.5 billion to investors during the quarter.
  • In the March quarter, Apple expects revenue to be between $60 billion and $62 billion.

Via Apple 


  • 77.3 million iPhones sold in the quarter, down from 78.2 in the same period of 2017. But this was with one week less in the quarter. Had Apple worked on a 14 weeks quarter iPhone sales would have actually been up yoy.
  • Production for the iPhone X started to meet demand only in December
  • iPhone X was Apple’s top-selling model since it started shipping in November all the way through January
  • iPhone 8 and iPhone 8 Plus rounded out the top three
  • iPhone ASP increased to $796 from $695 a year ago, driven mostly by iPhone X. Luca Maestri is guiding to a lower ASP in Q2 due to the change in sell-through mix. He said: “We typically reduce channel inventory for our newest iPhone’s in Q2 because they enjoy very large demand in the initial weeks of sales, which are compounded by the holiday season in Q1. So we anticipate doing that in Q2 this year as well. For ASPs, there’s also another element that we need to consider. As you know, our newest products this year have higher ASPs than they had in the past. And so as a result, as we reduce inventories of these newest products, the overall ASPs for iPhone in Q2 will naturally decline sequentially by a higher percentage than we have experienced historically”
  • Sell through in Q2 expected to be higher than a year ago while sell-in will decrease as channel was prepped in Q1 especially for iPhone X
  • When asked about how the battery replacement offer would impact replacement cycles, Cook said they did not consider that at all when making the decision. I have no doubt that is the case, as maintaining loyalty – that they quoted at 96% in the US – is way more important in the long run than making a sale in the short term. Apple knows that looking after their customers now it will mean an upgrade eventually so it is just a deferred revenue.
  • Apple reached a 1.3 billion installed base a number that is a solid foundation for continued growth in services current and future. Of course, the iPhone is making up the great majority of this number
  • The big question in 2Q will be China as Chinese New Year falls in mid-February and that is always a big driver
  • The ASP increase, even if the extent we have seen this quarter will not be sustained, is quite unbelievable considering where the rest of the market is. It also may be a more realistic metric going forward than units. As more and more market reach saturation being able to upgrade and have users spend more is critical.
  • Replacement cycles came up on the call but Tim provided a somewhat vague reply. From the data I have seen, the cycles are lengthening but by a few weeks rather than months but it is an issue that will impact the whole market sooner or later which raises some questions as to what should vendors to keep upgrades steady. Apple’s annual upgrade is one thing and the numbers for that have been growing in the US quite steadily but still small in comparison to multi-year plans.


  • Services revenue grew 18% yoy reaching $8.5 Billion. Paid subscriptions represented 240M of that – a 58% growth yoy.
  • “Apple Pay is now accepted at more than half of all American retail locations, which includes more than two-thirds of the country’s top 100 retailers”

Apple Watch

  • Apple Watch had a great quarter “with over 50 percent growth in revenue and units for the fourth quarter in a row, and strong double-digit growth in every geographic segment. Sales of Apple Watch Series 3 models were also more than twice the volume of Series 2 a year ago” Of course while the performance is clear from the growth in revenue it is still hard to point to an actual volume number as all the numbers that Apple is comparing the latest performance to are not public. So basically they are growing 50% in units over a number we do not know.
  • It is fascinating to me how Apple is able to talk about wearables now as it includes AirPods and brands like Plantronics have been unable to ride on the back to the excitement that this segment name had created a few years ago. Of course by now wearables pretty much only means Apple especially when you are talking about smartwatches.

Mac and iPad

  • These two products did not get much love during the earnings call but they both performed ok especially with iPad growing both in volume and ASP.

Overall, Apple remains an incredibly strong company that is solidifying the foundation for future growth outside of hardware.


Alphabet’s Q4 results versus Wall Street’s expectations, per Bloomberg:

  • Net revenue:$25.9 billion vs. $25.6 billion expected
  • Net Loss: $3.02 billion (due to one-time charge of $9.9 billion due to tax changes)
  • EPS (adjusted):$9.70 vs. $10.04 expected

Via Alphabet

  • Traffic acquisition costs (TAC) was $6.45 billion, up quite a bit from the $4.85 billion in TAC a year ago. TAC is what Google pays to third parties like Firefox and Apple so web searches on those platforms direct to Google. The growing TAC is one of the biggest concerns with Google’s advertising business. TAC as a percentage of revenues was the highest it’s been in at least two years.
  • Dai Wakabayashi at The New York Time linked the growth in TAC to my previous point about the value of the 1.3 billion Apple ecosystem in this article “Alphabet’s Earnings Disappoint. Blame it on the iPhone ‘


Full-year revenue came in at $177.9bn (£124.6bn), a rise of 31%, while profit hit $3bn, against $2.4bn in 2016. The company reported record sales in the final three months of the year, driven by a surge in online shopping over the holiday season and demand for its cloud services. Amazon Web Services, the cloud services business, accounted for $5.1 billion in revenue for the quarter. This is up from $3.5 billion in the same timeframe the previous year. Physical stores revenue, which primarily comes from Whole Foods, came in at $4.5 billion. This is the first full quarter to have Whole Foods revenue included in Amazon’s sales

Via Amazon

  • Online shopping continued to drive Amazon’s revenue especially thanks to holiday shopping. Cyber Monday was the biggest shopping day ever.
  • In 2017, the highest number of users joined the ranks of Prime Members. Similarly to the Apple installed base, these are captivated users that will continue to spend within the ecosystem
  • We did not get many details on Amazon’s branded hardware that was expected to contribute heavily to the holiday quarter revenue. We did, however, get a promise that Amazon will double down on Alexa – if that was not clear by all the devices Amazon launched in 2017 as well as how Amazon is making sure Alexa is the intelligence in the home, the office, and the car.
  • Similarly to Apple Watch, I wonder how long it will take for Amazon to mention some hardware numbers. Fire TV and Echo in particular. Putting some hard numbers in these two segments will only increase momentum in my view.

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Carolina Milanesi

Carolina is a Principal Analyst at Creative Strategies, Inc, a market intelligence and strategy consulting firm based in Silicon Valley and recognized as one of the premier sources of quantitative and qualitative research and insights in tech. At Creative Strategies, Carolina focuses on consumer tech across the board. From hardware to services, she analyzes today to help predict and shape tomorrow. In her prior role as Chief of Research at Kantar Worldpanel ComTech, she drove thought leadership research by marrying her deep understanding of global market dynamics with the wealth of data coming from ComTech’s longitudinal studies on smartphones and tablets. Prior to her ComTech role, Carolina spent 14 years at Gartner, most recently as their Consumer Devices Research VP and Agenda Manager. In this role, she led the forecast and market share teams on smartphones, tablets, and PCs. She spent most of her time advising clients from VC firms, to technology providers, to traditional enterprise clients. Carolina is often quoted as an industry expert and commentator in publications such as The Financial Times, Bloomberg, The New York Times and The Wall Street Journal. She regularly appears on BBC, Bloomberg TV, Fox, NBC News and other networks. Her Twitter account was recently listed in the “101 accounts to follow to make Twitter more interesting” by Wired Italy.

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