Apple reported earnings yesterday, and the company not only blew past estimates and its own guidance but set a record for the most profitable quarter by a corporation--ever. For context, the company's $22.2 billion in profit last quarter is more than the total revenue generated by Tesla over the course of the entire past year.
Overall, the company generated $91.8 billion in revenue for the quarter that ended on December 28. That's a record for Apple, and it pushed the company's stock price over $326, an all-time high. While the numbers are certainly impressive, even more important are the three biggest reasons why.
iPhone revenue for the quarter was up 8 percent, due largely to high demand for the newest iPhone models. Despite plenty of reports that iPhone sales are in decline (including a few written by me), Apple managed to drive sales with the iPhone 11 and iPhone 11 Pro models. Clearly the lower entry prices this year, along with upgrades to both the camera and processors, were enough to persuade a lot of consumers to pull the trigger.
To be fair, iPhone sales are still below their 2017 Q1 record of $61 billion. Still, Apple has managed to turn around a declining trend at a time when many expect Apple to see an even larger upgrade cycle this year with the introduction of 5G to as many as four models.
One of Apple's most important areas for the future is the growing services division, which includes Apple TV+, iCloud, Apple News+, AppleCare, the App Store, and Apple Music. Apple said it now has 450 million paid subscriptions across all of those platforms, generating $12.7 billion last quarter. That represents a 17 percent increase compared with the previous year.
As a signal of the division's increased importance to Apple's overall strategy, the company expects to have as many as 600 million paid subscriptions by the end of the year. That seems astonishing until you realize that Apple also pointed out that it now has 1.5 billion iOS devices in use, each of which is a potential subscriber for each of those services.
Despite the growth in services and the dominance of the iPhone, neither represent the biggest story. That honor belongs to the company's wearables division. That segment includes the Apple Watch and AirPods, and grew by 37 percent in the past quarter. Apple says it sold $10 billion in wearables, outselling Macs for the first time ever.
I don't think anyone is worried that the Mac is going anywhere, but clearly, wearables are a far bigger growth area for the company. That's especially true as consumers look beyond their computers and even their smartphones to stay connected and easily find information. The Apple Watch and AirPods already dominate their respective categories, and it doesn't seem all that unrealistic that they could soon start to dominate Apple's growth.