Apple hit with Q1 mixed bag as iPhone sales slow

Apple was expected to make $3.23 per share on revenue on $76.6 billion.

(Image: CNET/CBS Interactive)

Apple sold more iPhones during the December holiday quarter than the combined population of France and Switzerland.

But it wasn't enough to satisfy Wall Street expectations.

The Cupertino, Calif.-based technology giant reported quarterly profit of $18.4 billion, or $3.28 cents a share ( statement). The company made $75.9 billion in revenue.

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Scratch the veneer off Apple's rosy quarter and dig into the sales data and things don't look good at all.

Wall Street was expecting earnings of $3.23 per share on revenue on $76.6 billion.

That's a mixed bag: a hit on earnings, but a miss on revenue.

Apple chief executive Tim Cook said in prepared remarks:

"Our team delivered Apple's biggest quarter ever, thanks to the world's most innovative products and all-time record sales of iPhone, Apple Watch and Apple TV. The growth of our Services business accelerated during the quarter to produce record results, and our installed base recently crossed a major milestone of one billion active devices."

Here's the breakdown for the quarter:

  • iPhones: 74.7 million, up by a hair from 74.5 million in the year-ago quarter

  • iPads: 16.1 million million, down from 21.4 million in the year-ago quarter

  • Macs: 5.3 million, down from 5.5 million in the year-ago quarter

  • Services (which includes iTunes and Apple Pay): $$6.05 billion, up 26 percent on the previous quarter

  • Other products (accessories and Apple Watch are included, but not broken out separately): $4.35 billion, up 62 percent on the previous quarter

Apple said its gross margin was between 40.1 percent, up slightly from 39.9 percent on the year-ago quarter. Meanwhile, international sales accounted for 66 percent of the first quarter's revenue.

Apple's board also declared a cash dividend of 52 cents per share, payable on February 8.

The company made almost half of its sales in mainland China, reiterating how important the region is -- not just to Apple but also wider Silicon Valley.

Cook noted on the follow-up conference call that although investors have been concerned about China's economic instability, Apple has seen "incredible momentum."

That said, not everything is peachy.

"Notwithstanding these record results we began to see some signs of economic softness in Greater China earlier this month, most notably in Hong Kong Beyond the short-term volatility, we remain very confident about the long term potential of the China market and the large opportunities ahead of us and we are maintaining our investment plans," said Cook.

Apple said for the fiscal second quarter that it expects revenue between $50 billion and $53 billion.

Wall Street was expecting earnings of $2.23 a share on revenue of $55.6 billion.

The company's stock ( $AAPL) stock was up 0.5 percent at market close.



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