Ahead of its debut of Apple TV Plus, Apple posted financial results for the September 2019 quarter that were well above Wall Street estimates and included an all-time high $12.5 billion in services revenue, up 18% year over year.
The tech giant reported revenue of $64.0 billion (up 1.8%) and net income of $13.69 billion (down 3.1%), or quarterly earnings per diluted share of $3.03, for the fourth quarter of its fiscal 2019. That beat analyst consensus estimates of $62.99 billion in revenue and EPS of $2.84.
Sales of iPhones in the period were $33.36 billion — down 9% year over year, but an improvement over the 15% decline in sales of the flagship smartphone over the prior three quarters. The September quarter iPhone sales also were ahead of consensus estimates of $32.77 billion.
“We concluded a groundbreaking fiscal 2019 with our highest Q4 revenue ever, fueled by accelerating growth from Services, Wearables and iPad,” Apple CEO Tim Cook said in announcing the earnings.
Cook also called out Apple’s new noise-cancelling AirPods Pro, as well as “the hotly anticipated arrival of Apple TV Plus” in two days, adding, “we’re very optimistic about what the holiday quarter has in store.”
Cook claimed the recently released iPhone 11, which began shipping Sept. 20, is Apple’s best-selling phone to date but he didn’t provide any specifics.
Apple’s services segment includes the App Store, Apple Music, Apple Pay and iCloud — and, soon, Apple TV Plus.
On Friday, Nov. 1, Apple will launch Apple TV Plus, its entry into the subscription-streaming game. The service will be available in over 100 countries and regions, priced at $4.99 per month and free for 12 months with the purchase (as of Sept. 10 or later) of any new iPhone, iPad, Apple TV, Mac or iPod touch.
On the earnings call, Cook was asked about Apple’s rationale for giving away the subscription VOD service free for a year — an offer that prompted Wall Street speculation that it would have a material impact on earnings (something Apple denied). “It’s a gift to our users,” Cook responded. From a business standpoint, the strategy “allows us to maximize subscribers in the early going.”
Cook also spun Apple TV Plus’ lack of any licensed content as a positive, touting it as “the first all-original video subscription service.”
Apple is premiering nine originals on Apple TV Plus when the service launches, and early reviews of some of the shows have been tepid. The lineup includes “The Morning Show,” a drama starring and executive produced by Reese Witherspoon and Jennifer Aniston, and starring Steve Carell; “See,” a drama starring Jason Momoa and Alfre Woodard, set 600 years in the future after a virus has decimated humanity; “Dickinson,” starring Hailee Steinfeld as a young Emily Dickinson in a coming-of-age comedy; and “For All Mankind,” an alternate-history series from Ronald D. Moore in which the Russia-U.S. space race never ended.