Apple’s Fiscal Q3 2018 Earnings Call: Paying Subscribers Grew by 60% Last Year

Apple financial report hits a new high in June, thanks to an iPhone X-led portfolio of high-end iPhone products and continued growth in the service sector. Following the release of results for the fiscal third quarter of 2018, the company gave more details of its record results on its earnings call.

Apple’s fiscal report in Q3 2018

For the quarter, Apple posted revenue of $53.3 billion and net quarterly profit of $11.5 billion, or $2.34 per diluted share, compared to revenue of $45.4 billion and net quarterly profit of $8.7 billion, or $1.67 per diluted share, in the year-ago quarter.

As is tradition, Apple releases its earnings via a press release and then holds a call with CEO Tim Cook and CFO Luca Maestri, who shed more light on those earnings.

Tim Cook touted Apple’s Q3 2018 in the press release, saying:

“We’re thrilled to report Apple’s best June quarter ever, and our fourth consecutive quarter of double-digit revenue growth,” said Tim Cook, Apple’s CEO. “Our Q3 results were driven by continued strong sales of iPhone, Services and Wearables, and we are very excited about the products and services in our pipeline.”

The following are highlights of the conference call:

Settled by 9to5mac

Tim Cook:

• Tim Cook will get things started momentarily…
• “Proud to report our best June quarter ever”
• Rehashing numbers from release, 17 percent increase in revenue YOY, strongest rate of growth in the past 11 quarters
• iPhone revenue up 20 percent YOY, active install base up double digits driven by switchers, first-time smartphone buyers
• iPhone X was the most popular iPhone in the quarter, 98 percent customer satisfaction
• “Stellar” record for Services, “we feel great about Services momentum,” on target to double 2016 Services revenue by 2020
• Paid subscriptions from Apple and third-parties hit 300 million, revenue from subscriptions accounts for “significant and increasing” portion of Services
• Almost 30,000 apps with subscriptions available in the App Store
• Developers have earned over $100 billion from App Store since launch
• Apple Music grew 50 percent YOY, AppleCare revenue grew at its ‘highest rate’ in 15 quarters, cloud services revenue up 15 percent YOY
• Siri requests have exceeded 100 billion this year, number of Apple News articles read doubled YOY
• Apple Pay had ‘well over 1 billion transactions’ during the quarter
• Apple Pay coming to Germany later this year, 7-11 and CVS nationwide
• More Apple Pay transactions last quarter than Square and PayPal
• “Outstanding results in wearables, which comprises Apple Watch, AirPods, and Beats”
• Wearables revenue hits $10B over last four quarters
• Touting new features coming in iOS 12, watchOS 5, tvOS 12, and Mojave this year
• Speed improvements, Screen Time, ARKit 2, macOS App Store redesign
• 4 million people in beta testing for macOS and iOS
• “Privacy is one of the most important issues of the 21st century,” Cook says; touts new features in Safari 12
• Apple TV 4K drives growth for Apple TV sales, later this year Charter will offer Apple TV 4K to customers in 50 million households
• “This fall iTunes will be home to the largest collection of Dolby Atmos-supported movies anywhere.”
• As part of climate change commitment, Cook touts investment in China Clean Energy fund
• “We couldn’t be more excited about the products and services in our pipeline.”
• “We’re welcoming communities and offering learning opportunities through Apple Stores”

Luca Maestri:

• Apple grew in each of its top 15 markets, China up 19 percent
• iPhone ASP up to $724, up 20 percent YOY
• Reduced iPhone channel inventory by 3.5 million
• Customer sat for all iPhone models at 96 percent
• 28 percent growth in services YOY, double digit Services growth in all geographic segments
• Corporate iPhone purchase intent at 81 percent
• “Apple Watch continues to be best-selling smartwatch.”
• “AirPods continue to be a runaway set, selling as fast as we can make them.”
• “Very happy to see double digit YOY growth in active install base for Mac.”
• YOY Mac sales impacted by MacBook Pro refresh in Q4 instead of Q3
• iPad unit sales grew for 5th consecutive quarter, double digit unit growth in China and Asia Pacific with new record in mainland China
• Almost half of iPad purchases in Q3 was by customers new to iPad, active install base hits new all-time high
• Salesforce and Capital One are deploying Macs based on employee preferences
• “Great interest in Business Chat in Messages, lets customers get answers to questions and complete transactions directly in Messages.”
• DISH Network rolling out support nationwide, Phillies testing Business Chat for drinks
• Retail and online had a “great quarter” thanks to iPhone, iPad, Apple Watch, and HomePod
• Over 250k ‘Today at Apple’ sessions hosted
• $243.7 billion in cash plus marketable securities, retried $6 billion in debt during the quarter
• Net cash position of $129.1 billion
• Plan to reach net cash neutral over time
• Returned over $25 billion to investors in the quarter, $3.7 in dividends and equivalents
• 112.8 million shares repurchased
• Luca outlining guidance for next quarter:
• revenue between $60 billion and $62 billion, gross margin between 38 percent and 38.5 percent, operating expenses between $7.95 billion and $8.05 billion, other income/(expense) of $300 million, tax rate of
• approximately 15 percent before discrete items