iPhone sales beat but Services is the real star here

Updated

Apple surprised us with iPhone sales rising to 51.3B vs. estimates of 48.9B. Some of this was likely due to the backlog of customers who were unable to purchase a new phone during the company’s supply crunch in China the previous quarter. We’re most impressed with services growth, which grew +5.5% to 20.1B. An astonishing figure: almost one billion people now use Apple’s services (iCloud, Apple music, Apple TV, Apple Pay, etc). We think as iPhone sales slow Services revenue will become more and more important – when you buy an Apple device you are effectively giving residual royalties to Apple for the rest of the device’s life. Hardware sales fell ~31%, in line with weakening consumer spending for “big ticket items” (aside from iPhones, which continues to surprise). Pleased to see continued buybacks: another of stock repurchases are authorised for this year. Continue see upside as +$190 and downside as $+140 – impeccable results once again. Note that Apple opened its first store in India this year – so far “switcher” numbers (Android users converted to iPhone) are looking good and we think this will be a continued growth area for the company.

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