5 things to watch for during Apple’s last earnings report of 2018

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Tim Cook earnings apple
Tim Cook is really good at making money.
Illustration: Ste Smith/Cult of Mac

Hot on the heels of Tuesday’s big keynote, Apple is set to unleash its final earnings report of 2018 on Thursday, November 1. The report will give investors their first glimpse into how well the iPhone XS and iPhone XS Max are selling.

Apple shares are trading up again today after climbing Tuesday, signaling that Wall Street is pretty optimistic about Apple’s ability to rake in the cash. Tim Cook and Apple CFO Luca Maestri are set to get on the phone with investors at 2 p.m. Pacific today — and there are some key areas investors will be watching intensely.

$62 billion in revenue

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In its Q3 2018 earnings report, Apple projected that it will make between $60 billion and $62 billion in revenue during Q4. That would be an all-time high for Q4 and a big jump over the $52.6 billion in revenue the company posted last year. Most investors are expecting Apple to come in with around $61 billion. If the company brings in $63 billion or more it would be a huge beat.

iPhone sales

iPhone XS and XS Max

Because Q4 was a transition period for Apple, iPhone and Apple Watch sales might be a bit disappointing. The iPhone XS and iPhone XS Max weren’t available for most of the quarter and customers might have been holding off on upgrading until then.

Analysts estimate that iPhone unit sales will come in between 44 million and 48 million units. Anything over 48 million would be a strong quarter, but going below 44 million units would be a big disappointment. This quarter last year, Apple sold 46.6 million iPhones.

The Average Selling Price is a key metric investor will be looking at because it shows whether Apple’s high-end iPhones are performing well.

Guidance for Q1 2019

tree1
Christmas is the most important time of year for Apple’s money-making machine.
Photo: Visit Britain

The iPhone XS and iPhone XS Max were only on sale for a few days during Apple’s Q4, but what investors really want to know is how much money they’ll bring in during Q1 2019. Apple always posts its biggest revenues during Q1 thanks to holiday sales and the next earnings report should be its biggest earnings ever.

During Q1 2018 Apple scored $88.3 billion in revenue. Depending on how well the iPhone XS, XS Max and XS are selling, guidance could top $100 billion for Q1 2019 but it will probably come in just a bit under that figure.

Services Revenue

Apple Music
There are now nearly 40 million paid Apple Music subscribers.
Photo: Apple

While the iPhone is Apple’s bread and butter, Services are becoming more and more important for the company’s growth. Some analysts predict services could make up nearly half of Apple’s profits by 2020. In Q4 2017, Services accounted for $8.5 billion of Apple’s total revenue. Last quarter, Services raked up $9.5 billion in revenue. We expect this to be the first quarter that it tops $10 billion.

Greater China

Tim Cook meets with Apple Store employees in China.
Tim Cook meets with Apple Store employees in China.
Photo: Apple

As always, all eyes will be on Apple’s performance in China. With tensions rising in the US vs China trade war. Revenues from Greater China have been bouncing up and down over the last few years. Apple has warned that anti-American sentiment thanks to Trump’s trade war could cause Chinese customers to spurn the iPhone and Mac. We’ll see if that happened during Q4. If revenues drop lower than the $9.5 billion Apple made in China last quarter it could be a sign of bad things to come in Apple’s second most important market in the world.

Note: We originally published this article on Oct. 31. We updated it with new info on AAPL stock price.