10-QPeriod: Q2 FY2019

Apple Inc. Quarterly Report for Q2 Ended Mar 30, 2019

Filed May 1, 2019For Securities:AAPL

Summary

Apple Inc.'s Q2 2019 (ended March 30, 2019) filing shows a 5% year-over-year decline in total net sales to $58.015 billion, primarily driven by a 17% drop in iPhone sales. This was partially offset by strong growth in Services, which increased 16%, and Wearables, Home and Accessories, up 30%. The company demonstrated resilience in its gross margin, which remained relatively stable at 37.6% for the quarter, with Services gross margin improving to 63.8%. Net income for the quarter was $11.561 billion, a decrease from $13.822 billion in the prior year's comparable quarter, leading to diluted EPS of $2.46. Despite the overall sales dip, Apple continues to return significant capital to shareholders. During the quarter, the company repurchased $24.0 billion of its common stock and paid $3.4 billion in dividends. Management highlighted ongoing investments in R&D and new services like Apple News+, Apple Card, Apple Arcade, and Apple TV+, underscoring a strategic focus on future growth drivers beyond iPhone. The company maintains a strong liquidity position with $37.988 billion in cash and cash equivalents.

Financial Highlights

55 data points
Beta

Revenue

$58.02B

37.6% Gross Margin

Net Income

$11.56B

19.9% Net Margin

EPS (Diluted)

$0.61

Total Assets

$342.00B

Cash & Equivalents

$37.99B

Free Cash Flow

$8.79B

Financial Statements
Beta
Revenue$58.02B
Cost of Revenue$36.19B
Gross Profit$21.82B
R&D Expenses$3.95B
SG&A Expenses$4.46B
Operating Expenses$8.41B
Operating Income$13.41B
Interest Expense$1.01B
Net Income$11.56B
EPS (Basic)$0.62
EPS (Diluted)$0.61
Shares Outstanding (Basic)18.70B
Shares Outstanding (Diluted)18.80B

Key Highlights

  • 1Total net sales decreased 5% year-over-year to $58.015 billion for the fiscal second quarter.
  • 2iPhone net sales declined 17% year-over-year, a primary driver of the overall sales decrease.
  • 3Services revenue grew 16% year-over-year to $11.450 billion, indicating continued strength in this segment.
  • 4Wearables, Home and Accessories sales saw robust growth of 30% year-over-year, reaching $5.129 billion.
  • 5Gross margin held steady at 37.6%, with Services gross margin improving significantly to 63.8%.
  • 6Net income for the quarter was $11.561 billion, resulting in diluted EPS of $2.46.
  • 7Apple returned $27.4 billion to shareholders through $24.0 billion in share repurchases and $3.4 billion in dividends during the quarter.

Frequently Asked Questions

The primary reason for the 5% year-over-year decline in Apple's total net sales to $58.015 billion in the fiscal second quarter of 2019 was a significant decrease in iPhone net sales, which fell by 17%. This was partially offset by strong performance in the Services and Wearables, Home and Accessories segments.

Apple continues to aggressively return capital to shareholders. In the fiscal second quarter of 2019, the company repurchased $24.0 billion of its common stock and paid $3.4 billion in dividends and dividend equivalents. Additionally, on April 30, 2019, Apple announced an increase in its share repurchase program authorization from $100 billion to $175 billion and raised its quarterly cash dividend.

The Services segment demonstrated continued strength, with net sales increasing 16% year-over-year to $11.450 billion in the fiscal second quarter. The gross margin for Services also improved to 63.8%. This growth was primarily driven by the App Store, licensing, and AppleCare, indicating a positive trajectory for this key revenue stream.

While not directly impacting the reported quarter's results significantly, Apple is involved in ongoing matters. Notably, the European Commission's State Aid Decision regarding tax rulings in Ireland resulted in an escrow of €13.1 billion plus interest, pending appeals. Apple also settled all litigation with Qualcomm in April 2019, agreeing to a multi-year license and supply agreement, which involved a payment to Qualcomm. The company also accrues its best estimate for other legal matters, such as the VirnetX patent infringement cases.