Apple Q4 Earnings Prove That Exorbitant iPhone Pricing Is Paying Off With Fat Profits

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Apple is typically boisterous when it comes time to post its quarterly and year-end financial results, and while that was again the case with its latest earnings report, there is also cause for concern (or at least suspicion) among investors. First, let's start with the $62.9 billion in revenue Apple raked in during its fiscal fourth quarter ended September 29, 2018.

That figure represents a 20 percent jump in revenue from the same quarter a year ago. Part of that includes $10 billion in services revenue, a 27 percent year-over-year jump and an all-time high for Apple. The other key revenue generator came from higher selling prices for iPhones. Year-over-year, the average selling price (ASP) of iPhones ballooned from $618 to $793. That figure is even higher than the previous quarter (Q3), which saw the iPhone's ASP hit a high of $724. This contributed greatly to Apple's bottom line despite relatively flat iPhone sales.

"We concluded a record year with our best September quarter ever, growing double digits in every geographic segment. We set September quarter revenue records for iPhone and Wearables and all-time quarterly records for Services and Mac," said Luca Maestri, Apple’s CFO. "We generated $19.5 billion in operating cash flow and returned over $23 billion to shareholders in dividends and share repurchases in the September quarter, bringing total capital returned in fiscal 2018 to almost $90 billion."

That's the boisterous Apple we've come to expect when reporting on earnings. Apple also noted that it shipped its 2 billionth iOS device in 2018, which happens to coincide with the 10-year anniversary of the App Store.

"Over the past two months, we’ve delivered huge advancements for our customers through new versions of iPhone, Apple Watch, iPad and Mac as well as our four operating systems, and we enter the holiday season with our strongest lineup of products and services ever," said Tim Cook, Apple's CEO.

So, what's the issue? There are two. The first is that Apple is no longer breaking down unit sales for iPhones and other hardware. Some investors seem to be concerned that Apple is trying to hide something by going this route, especially as IDC just reported that smartphone sales are down for the fourth consecutive quarter.

The other issue is Apple's forecast. Looking ahead to next quarter, Apple expects revenue to be around $89 billion to $93 billion. Combined with Apple's lack of transparency going forward, investors are concerned.

This is reflected in Apple's stock price. Shares of Apple are down nearly 7 percent this morning. We've seen this before, where Apple's share price drops in reaction (often an overreaction) to a forecast or some other tidbit. This time, however, it will be interesting to see how things go, given Apple's decision to withhold certain sales data.