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Apple Services Grow 17% in Year-End 2019 Quarter, iPhone Sales Rise to Power Record Revenue and Earnings

CEO Tim Cook says 'Apple TV Plus is off to a rousing start' but doesn't disclose subscriber numbers

Apple CEO Tim Cook
Andrew H. Walker/Shutterstock

Apple turned in stellar results for the 2019 holiday quarter — its biggest ever in terms of revenue and earnings — including strong growth in its services business and a return to growth in iPhone revenue, which climbed 8%.

Revenue hit an all-time quarterly high of $91.82 billion, up 9% versus the year-ago period, for the three months ended Dec. 28, 2019. Earnings per share were $4.99, up 19%, also a record.

The tech behemoth handily beat Wall Street expectations, an impressive feat given the company’s already massive size. Analysts on average expected Apple to post $88.38 billion in revenue and EPS of $4.54 for the period, which is its fiscal first quarter of 2020.

Apple reported a record $12.72 billion in services revenue, up 17% year over year (compared with 18% growth in the September quarter). The services segment comprises a diverse group offerings, including the App Store, Apple Music, Apple TV Plus, Apple Arcade, Apple News Plus, Apple Pay and iCloud. The company doesn’t break out results for any of the specific services; CFO Luca Maestri said Apple Music and iCloud set records for quarterly revenue.

Apple TV Plus revenue “was immaterial to our results” for the year-end 2019 quarter, Maestri said on the earnings call Tuesday. But, he said, “over time” the company expects it to “start contributing to growth of the services business.”

The company’s Wearables, Home and Accessories unit — which includes AirPod and Apple Watch products — saw sales soar 37%, to $10.01 billion.

“We are thrilled to report Apple’s highest quarterly revenue ever, fueled by strong demand for our iPhone 11 and iPhone 11 Pro models, and all-time records for Services and Wearables,” CEO Tim Cook said in prepared remarks.

Apple did not reveal specific results for Apple TV Plus — its foray into the subscription-streaming biz — which debuted Nov. 1 with a handful of original programming. The service is regularly $4.99 per month but it’s free 12 months to customers who buy a new iPhone, iPad, Apple TV, Mac or iPod touch. The “vast majority” of Apple TV Plus’s estimated 33.6 million U.S. users as of the end of 2019 were not paying for it, according to research firm Ampere Analysis.

“Apple TV Plus is off to a rousing start,” Cook said on the earnings call. He congratulated the team behind “The Morning Show” for multiple Golden Globe Awards nominations (although Apple was shut out at the Globes). The CEO also gave a shout-out to “Morning Show” star Jennifer Aniston for winning the SAG Award for female actor, as well as Billy Crudup for receiving the Critics’ Choice Award for supporting actor in a TV drama.

Cook said more original content is coming to Apple TV Plus. “We continue to focus on stories that matter,” he said, calling out the recently premiered docu-series “Little America” from Kumail Nanjiani and Emily V. Gordon.

For the company’s core iPhone family, sales were $55.96 billion, up 7.6%, following several quarters of declines. Analysts had been upbeat on projections of stronger-than-expected sales of the iPhone 11, which began shipping Sept. 20. The newest iPhone model put an emphasis on photo and video features.

Apple’s overall installed base of devices topped 1.5 billion in the year-end 2019 quarter, according to the company. “We see this as a powerful testament to the satisfaction, engagement and loyalty of our customers — and a great driver of our growth across the board,” Cook said.

Apple’s revenue grew in all regions worldwide except Japan. Sales sagged during fiscal Q1 2020 in the company’s iPad (down 11% to $5.98 billion) and Mac (down 3%, to $7.16 billion) segments.