The biggest takeaways from Apple’s record-breaking Q1 earnings

Apple made more money last quarter than it ever has in the company’s history, but despite bringing home $88.3 billion in revenue, not all investors were impressed.

Wall Street walked away from Apple’s Q1 2018 earnings with mixed reviews. Money and cash is at an all-time high, yet there are some worrying signs that iPhone sales are about to hit another slump and new products like HomePod aren’t doing much to excite the market.

Here are the five biggest takeaways from today’s call:

iPhone X pricing was genius

When the iPhone X came out with its $1000 price tag, many tech experts thought Apple had lost its mind. Turns out the move completely saved Apple’s bacon.

With 77.3 million units sold, overall iPhone sales were down slightly year-over-year. Wall Street was hoping Apple would move 80 million units or more, however, Apple still managed to pull in record revenues in the holiday quarter thanks to the iPhone X’s high price tag. Even though upgrade rates are slowing, the average selling price of the iPhone has increased $101 over the last year so Apple can pump more money out of its customers.

The SuperCycle Theory was wrong

For the past year, investors pointed to Q1 2018 as a huge event for iPhone upgrades. The theory was that Apple fans had been holding out on upgrading the past two or three years because the design on the iPhone 6s and 7 were too similar and everyone was waiting for new features.

That turned out to be totally wrong. The upgrade rates on the iPhone 7 and iPhone X have been pretty much the same. Apple only sold 77.3 million iPhones this last quarter. Apple had an extra week of sales during Q1 2017, but even if you adjust sales for that, Apple would have only moved about 83 million units this quarter if it had that extra week.

Even though the super cycle was a dud, it still didn’t hurt Apple. The iPhone X’s pricetag helped buoy revenues and the other products did well too.

iPad and Apple Watch sales strong

After being one of the weakest links in Apple’s product lineup for years, the iPad is now stronger than ever. Sales rose 6 percent to 13.1 million, while Mac sales dropped slightly to 5.1 million units sold.

Apple Watch continues to be a bring spot for the company as well. Overall sales were up more than 50%. Exact sales figures weren’t released, but based on analysts’ figures that could mean sales were around 9-10 million for the quarter, making it the most popular watch in the world.

Apple wants to do the right thing

Tim Cook was asked during today’s earnings call whether the company considered how the new iPhone battery replacement program would impact upgrade rates. Wall Street wants to see customers go back to the days of upgrading every two years, but fixing old batteries might ruin that and Tim says he doesn’t care.

“We did not consider in any way shape or form what [the battery replacement program] would do to upgrade rates,” said Tim Cook. “We did it because it was the right thing to do to customers. I have no idea what it will do.”

Customers will be able to have their battery replaced for $29 throughout 2018. The program was introduced after it was revealed that Apple throttles CPU speeds on iPhones with older batteries.

Don’t expect an M&A spending spree

Despite having access to over $280 billion in cash thanks to the new tax law changes, Apple CFO Luca Maestri says Apple’s thought process on mergers and acquisitions hasn’t changed.

“We are now in a position where we have $280 billion of cash,” said Luca. “We now have the flexiblity to deploy this capital. We will do this over time because the amount is very large.”

A lot of that cash will likely go back to investors in the form of buybacks. Wall Street has speculated for months that Apple could use its cash to buy Netlix and Tesla, but that’s starting to look increasingly unlikely. Luca told investors that Apple is looking for acquisitions that will help it speed up product roadmaps and that it considers companies of all sizes.

The new tax law will change Apple

Apple has hoarded its cash overseas for years rather than bring it back to the U.S. Now that the tax law is changing, Apple says it plans to reduce its net cash balance (total cash to amount of debt) to “approximately zero”, according Luca Maestri.

Adjusting to the new tax “may be a bit bumpy in the short term,” Luca added. The revised tax code remains very complex but Apple expects to pay the IRS $38 billion to bring its cash home and then pay a steady rate of 15%.