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> We’re thrilled to report the biggest quarter in Apple’s history, with broad-based growth that included the highest revenue ever from a new iPhone lineup. iPhone X surpassed our expectations and has been our top-selling iPhone every week since it shipped in November

This is interesting, as the majority of the publicity I've seen about the iPhone X has painted it as lackluster.

> The Company posted quarterly revenue of $88.3 billion, an increase of 13 percent from the year-ago quarter and an all-time record, and quarterly earnings per diluted share of $3.89, up 16 percent, also an all-time record.

As much as I see people deride the touchbar or the iPhone X notch, it seems consumers are at least willing to take a chance and try out something new.

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We see this over and over - People guess how many iPhones Apple is selling, and predict a big problem. (https://www.forbes.com/sites/ewanspence/2016/10/03/iphone-7-...)

Later, Apple releases numbers which suggest that it's selling great (https://www.cnet.com/news/apple-iphone-7-tim-cook-first-quar...)

I think maybe it's time to stop listening to "analysis" on their sales until there are real numbers.

In the iPhone X's case its not analysis on sales, its leaked rumors of production cuts.

and this happens every year as they always cut them down after the initial major release.

They probably put together a production cut plan just in case (as they should), and then someone finds out about it and assumes that because they made a plan to do a thing, that they're going to do a thing.

Popular thinking can't really wrap its head around risk management.

The normal Apple analysis people/sites have been discussing this. You can run into things where Apple likes to have multiple suppliers, so maybe they decide to cut their order with supplier A by 50% because they don’t think they’re doing well enough where they can get a better price somewhere else.

Supplier A talks to a friend in the media and all of a sudden the story is that Apple has a big problem because their new phone isn’t selling.

What no one is saying (possibly because as we all know Apple like secrecy and repolish them) is that supplier B had a 30% increase in orders from Apple, or supplier C is now coming online when they weren’t involved before.

Since we don’t have the whole picture, it’s hard to know what’s actually going on outside of effectively one rumor.

Or it could be stock manipulation.

What are the actual numbers? They added a new product: a high-end phone. Maybe they aren’t selling as many of the expensive product that they weren’t selling the year before?

The simple fact that they had no idea how it would sell could mean they asked suppliers to be ready at the high-end of expectations.

There are people who successfully predict how many e.g. iPhones are being sold. But they’re not publishing this information, because it’s very valuable. They’re mostly selling it to hedge funds and market research firms (or they work internally at those companies).

In other words: when you see someone publish a “forecast” that a particular company’s product isn’t doing well, the analysis is usually flawed. If it weren’t flawed, the market price of the analysis probably wouldn’t be “free.”

I’m speaking from experience - I know a quantitative researcher who successfully forecasted Apple’s iPhone sales to a fraction of a percent a few years ago (very clever method!), and I’ve personally done this with Tesla model sales/production.

Horace Dediu at asymco.com has also consistently made pretty accurate predictions for Apple and publishes a lot of his reasoning for free, if anyone is interested in going beyond the mainstream financial press, which over-relies on sketchy reports from the supply chain.

Makes sense! I would love to hear more about that method (if it's something you can talk about)

Couldn't you use the German tank problem to solve these?

For Tesla auto sales couldn't you just look at tesla vin numbers?

For iPhones, sample mac address's?

> For Tesla auto sales couldn't you just look at tesla vin numbers?

You’ve definitely intuited some of the method, yes :). The rest of it entails:

1) how to get all VINs both authoritatively and legally,

2) how to distinguish between valid VINs and assigned VINs,

3) how to reverse the actual revenue projection from the set of all assigned VINs.

The first requirement is the hardest. Tracking self-reported VIN delivery from users isn’t rigorous enough. You could use an endpoint and scrape from it, but how would you do it legally and reliably?

The second requirement is also difficult. Assuming you’ve found an authoritative source for valid VINs, how do you distinguish which VINs are assigned?

Once you have those two, the third requirement is mostly straightforward. You can implement your own VIN decoder using public NHTSA documentation, map each VIN field to options and prices across models, and track sequential VINs using the distinguishing method of requirement 2 on the data you’re getting from requirement 1.

Naturally, there are other ways to do this that don’t involve VINs at all.

Using satellite images to monitor parking lots, cargo ships. Maybe some satellites might be tracking how many trucks leave Apple factories in China.

Sometimes it's just good old illegal insider information.

Actually, my friend simply reverse engineered FedEx and UPS tracking numbers, then backtracked sequentially by ordering an iPhone every few weeks.

I say “simply” because it doesn’t require any of the infrastructure you mentioned, which is what the public typically associates with “alternative data.” It was actually quite impressive and novel at the time, and inspired other projects of mine.

I can talk about this now because (to my knowledge) it no longer works, though it did for a while. He was in charge of approximately $100M when he was working on this.

Interesting. When so much money is on the table people are going to be creative.

Those who know don't talk. Those who talk don't know.

Analysts do this tactic of pushing negative news (rumors and it snowballs) waiting for the stock to take a hit, then upgrading the stock later. This primary allows big money (funds) to buy stocks at lower prices capitalizing on "value".

It is also a good way to get yourself into jail since it is illegal.

Yes, and a lot of it confidently arrived in the month leading up to these actual numbers.

Tons of money exchanged hands on the stock market because of it.

iPhone unit sales declined YoY and Apple reduced Q2 guidance by 10% below consensus.

Shares are down from a high of $180 and pre-hours this morning flat. So consistent with what analyst were saying.

It was not about Q1 but about Q2 guidance.

> This is interesting, as the majority of the publicity I've seen about the iPhone X has painted it as lackluster.

This happens every year when a new iPhone comes out. Contrarian news drives clicks.

More scandalously, contrarian news from "analysts" drives down share prices, which rebound healthfully after earnings, and the SEC really could have fun addressing this gaming of the market to the benefit of the analysts.

Not rebounding. Flat this morning and down from $180 earlier in 2018.

Barclay new price target is $162 this morning. Also a couple downgrades

"Apple gets two downgrades due to ‘dramatically’ slowing iPhone X demand"

https://www.cnbc.com/2018/02/02/apple-gets-two-downgrades-du...

From this morning after releasing results.

But iPhone unit sales did decline YoY for the quarter?

Plus Q2 guidance was $60B versus consensus of $66B for Q2.

The analyst and the reports seem accurate. Can you explain?

It was never about Q1 but Q2 - Q4 and guidance.

Apple is down from $180 in 2018 and flat this morning. Barclay new price target this morning is $162.

>>"As much as I see people deride the touchbar or the iPhone X notch, it seems consumers are at least willing to take a chance and try out something new."

The problem is that Apple is still the market leader in many respects. For example, in my opinion, Apple's build quality, customer service and trackpad are still so far ahead of the PC industry that I wouldn't buy a non-Apple laptop. I also think touch ID is a great addition. But I don't want the touchbar. Too bad, if I want the latest Mac laptop with touch ID, I'm forced to take the touchbar.

There's nothing low-quality about the touchbar on my mac. It works as expected with the added benefit of flexibility.

People just like to knock on the #1 guy. It's easy and gets clicks.

Lots of people also just don’t like the touch bar. I had one and found it useless and annoying. Previously one-touch things like adjusting the audio volume became multi-press affairs. I constantly bumped the touch bar when using the number keys, which was really fun when entering a phone number in Chrome, because it would throw me into the search bar.

I would not call the touch bar low quality. I would call it useless.

On a related note, the massive trackpad was the first one Apple has produced that bugged me. It got stuck in “drag” mode frequently because my palm would register as a touch point. It also didn’t always register clicks on the right edge. Still better than almost all other trackpads I’ve used.

Disclosure: I work at Microsoft. Was testing the latest MacBook Pro for my own use.

Changing volume and brightness is a one touch-slide affair with extra control, i can change the setting way quicker than repeated key presses.

Haven’t had a problem with the massive trackpad either.

If you like it, great. But the idea that people are just criticizing to knock on the #1 guy is a sloppy story. There are reasons for disliking the touchbar, particularly as a replacement for a row of keys. The tactile feedback from keys is missing. And the "flexibility" has its own problems -- for example, consider changing the audio volume with keys vs with the touchbar. With keys it's easy as pie to silence or incrementally change the volume without even interrupting your visual attention. The new interaction with the UI that requires a shift of your visual attention. You can't tap on a spot repeatedly for a few quick steps, because the UI transforms into a slider, which you have to reorient on, find the correct spot and drag around. Yeah, if I wanted to change the sound volume that way, I already had an option for it with the touchpad that's been there for decades and isn't any less conveniently located than the new touchbar.

And in general that's the case. It's been easy to have point-and-slide control over arbitrary UI laptop elements as long as there've been touchpads. The difference between a touchscreen and touchpad is marginal. At some margins -- particularly the operation of pocket computers with a form factor about the size of a laptop touchpad -- that's been tremendously useful, but I don't see any evidence that anyone's come up with something that genuinely matters for laptops yet.

Honestly if they had kept the function row and put the Touch Bar above it instead of replacing it… I’m sure people would complain tons but I don’t think they would’ve had anywhere near the problems they’ve had.

In my experience, you rarely have to reorient on the slider, because touch-and-drag is a valid gesture on the volume and brightness sliders. i.e., you don't have to tap, find slider, touch-and-drag, you can just directly touch-and-drag the button. Doesn't work for very large changes due to where the buttons are, but it hits 90% of my use cases in a cleaner way than the old buttons did.

I do have to flick my eyes down to find the button, but it doesn't bother me---fully understand it might bother others, though.

I guess I never got around to memorizing the location of the f-keys since I had to look down to use them as well. Having a dedicated position to change often-changing settings is more useful than a trackpad, which I’m assuming you mean that you just change the volume with a mouse in the system bar.

With both the screen brightness and the volume I change them with quick taps to the keys, repeated if necessary. And for whatever reason, they were never hard for me to locate. I'd guess that's partly because they're just 1-2 keys in on both sides. I also suspect peripheral vision helps... I can't "read" symbols on keys (or a touchbar) with PV, but I can absolutely perceive key shapes and so without changing focus I know where they are.

Once I get farther into the row of function keys, I don't have as much of a memory for them. I'd guess that's at least partly because I don't use the key backlight and playback controls as much (auto key backlighting works very well for me, to the point where I almost never adjust it manually, and the playback controls don't work with much software other than iTunes which I've been avoiding for years now). Maybe mostly that, as in the past I've definitely had a "tap without looking" relationship with F5 for reload (now apparently mentally mapped to cmd-R).

"Having a dedicated position to change often-changing settings is more useful" is pretty much the whole point of function keys, except they do a better job of it than the touchbar does, and quite likely a better job than the touchbar can.

I got the touchbar because it was required for the screensize/processor combo I wanted. I don't hate it, but it's a gimmick more than anything.

I got a touchbar (2016) because that's what was offered at work. The build quality (especially the keyboard) is noticeably worse than previous Apple notebooks I've used.

The 2016 keyboards weren't as good.

I kinda like my mid-2017 keyboard. It takes getting used to, and is a bit louder than the external or my older 2013 MBP keyboard, but it's quite nice.

The trackpad sensitivity is annoying though. I had to turn off tap-to-click which I'd been used to for decades.

The last Mac keyboard I thought was great was the Titanium PowerBook (the Aluminum was ever so slightly squishier). The polycarbonate MacBooks got a decent membrane keyboard, while the Unibody MacBook Pros got a pretty terrible keyboard throughout their whole run. The touchbar keyboard is less squishy than the Unibody one (good), but it's way too noisy, the layout sucks, and it only took me a couple weeks before some keys stopped working reliably. Unless the 2017 touchbar keyboard brings back the proper amount of key travel I can't imagine it's much better than the 2016 keyboard.

Funny thing is that I sat down with my boss to troubleshoot some stuff today and he was cursing up a storm about the touchbar keyboard (usually he docks the thing and uses an external keyboard). I've largely gotten used to it, but still haven't memorized the location of the navigation / modifier keys. It's like the iPhone 6/7 -- I've gotten used to the camera hump but it still drives me nuts every single time I put the phone down.

"top selling iPhone" is a relative statement, the whole pie can be shrinking and Apple could've hoped for more sales, but compared to other (8 and older) iPhones it is still doing good.

The forecasts in the media were about the absolute levels not relative.

Well, they sold 77.3m this quarter compared to 78.3m last quarter. The whole pie is shrinking, but by a tiny amount. But they made $7b more revenue from that. So it worked out well for them.

Last quarter was 14 weeks vs the normal 13 so it's more like it's flat or a tiny bit up than shrinking.

And the smartphone market as a whole is shrinking too, and more than 1%. Context, in this cases, matters a lot. Id say sales of iPhone this Q have been really good, considering X was a very risky proposition (high price, casts shadows over 8)

The absolute levels are their best quarter ever. Can’t possibly be that bad, can it?

Their best quarters were supply-constrained.

If there are d units demanded and p units produced, and d >> p, then unit sales = p. Next year, if there are d' units demanded and p' units produced, and d' >= p' while p' > p, then unit sales are going to go up. This tells you a little bit about d', but not everything.

> This is interesting, as the majority of the publicity I've seen about the iPhone X has painted it as lackluster.

People really like believing in rumours.

Apparently this wasn't a "rumour" though.

There was a LOT of chatter about the cancellation of the X in the summer due to low numbers:

In a new report obtained by AppleInsider, acclaimed KGI Securities’ analyst Ming-Chi Kuo says disappointing sales of the iPhone X will lead to the cancellation of the model “with production ceasing in the summer”. This would be the first time Apple has canceled an iPhone model after just one generation since the iPhone 5C in 2014.

Apparently he's been pretty consistent in getting big leaks like this right:

Kuo, who has a long track record successfully revealing Apple’s plans, said lack of interest in China is the main reason. In China big screens are king and the iPhone X’s polarising "notch" is seen by Chinese consumers as removing too much usable space. Especially when the cheaper iPhone 8 Plus actually delivers slightly more.

The news also follows a new survey from Cowan that claims an interest in new iPhones has hit a historic low.

https://www.forbes.com/sites/gordonkelly/2018/01/21/apple-ip...

> Apparently he's been pretty consistent in getting big leaks like this right:

This still makes it a rumour.

It's a rumor you thought had more credence than average, but it was still a rumor. A rumor which turned out to be false, as this annual spate of rumors always does. So far.

One day they might be right. Apple can't hit and exceed expectations forever, probably. But so far it's the same old bad rumors every year.

Kuo is usually right about the supply chain, and usually wrong in interpretation.

OLED screens are in short supply, and that will take a few years to turn around. This November, Apple can either split their limited supply of OLEDs between iPhone X and iPhone Xs (or XI or whatever that winds up being called). And that's not even factoring the likely larger-screen model...

This just means that the iPhone X is not going to be next year's low-cost phone. Neither the original iPhone nor the iPhone 5 were kept in production a second year.

It got distorted through a game of telephone into the iPhone X being "cancelled." Or rather, it got distorted by people looking to gin up a sensational, yet false story.

I mean, it's not surprising considering the 8 is split into two phones. Did people really think one of them would beat out the X?

They made more money, but only because everything they sell is more expensive. Shipped fewer devices this quarter.

> International sales accounted for 65 percent of the quarter’s revenue.

Could be related to the above? Most of the publicity I've seen is domestic to US, but it's certainly possible overseas has a much different view on the iPhone X.

iPhone ASP was up to $796. That indicates that the iPhone X sold very well.

I’m a Chinese, and all of Chinese social media I read managed to convince me that it was finally the year of Apple’s decline.

iPhone X wasn't as supply-constrained as previous iPhones. Whatever that says about iPhone X demand, it won't make a revenue difference at this juncture.

Apple's improving their operations every year, so they can ship more units now than they could last year or the year before. Previously, if Apple was completely supply-constrained between launch and the holiday season, they would only earn revenue on the quantity of iPhones they could ship. Now that Apple has improved their supply chain volume, their launch quarter units shipped will go up purely as a function of that, and their revenue will also increase as a function of the higher unit price of iPhone X.

The only difference, if there truly is one, will come in the next quarter or two. If a product is supply-constrained, there's a backlog of demand for it that only gets met down the road. If the product isn't supply-constrained, there isn't as much backlog and consequently, unit sales and revenue won't be as high. But that doesn't affect the launch quarter because the launch quarter is completely limited by supply.

If iPhone X was a total flop, of course, that would have shown up by now. But "iPhone X less popular at launch than iPhone 6" is a hypothesis we can't judge yet.

Edit: It's also really, really easy to tell whether a product is supply constrained. Just go to apple.com and see how long it'll take to ship. See if people are scalping them on Craigslist for a premium over the retail price. These kinds of things happen with major console launches and used to happen with Apple's product launches, but Apple is one of the biggest consumer electronics brands in the world, has some of the best operations in the world, and contracts with the best high-volume electronics manufacturer in the world, so it's more than possible for them to overcome the supply constraints that "plagued" previous launches.

iPhone has an installed base of 1.3 billion users. That's more than 1/6 of the world population. At this point, there probably aren't even enough people in the world who can afford smartphones for demand to grow as fast as supply. If Apple's operations and supply chain can grow faster than the global middle class, they're going to get past their supply constraints, and apparently they already have. That's not necessarily a reflection on this year's iPhone.

> This is interesting, as the majority of the publicity I've seen about the iPhone X has painted it as lackluster.

It probably has become lackluster in some countries thus giving those reports. Definitely true in Singapore, there were plenty of IPX stocks available in Dec unlike previous years. But it's doing very well in China so overall it's a win for Apple.

That could mean demand is down, or it could mean that supplies are up.

There were a lot of rumors last year that Apple was shifting a lot of their supply to China and other Asian countries where they thought demand would be much higher relative to the US for the new model. That could explain it too.

Apple has officially said that stocks are constrained for IPX during launch. You can easily get an iPhone X in Singapore two weeks after its launch in late Nov onwards. And this is the week IPX is launching in further 13 countries. For the past many years, limited number of new iPhone are given to telcos each day during launch month. If you want to get one through telco, you have to queue up before the shop opens and stocks are gone by noon. Unless Apple changes its marketing strategy by flooding IPX to a very small Singapore market, I see this as clear sign demand is weak.

It could still be lackluster and sell more than previous versions. The iPhone is still spreading out into the world I assume, and the proportion of the world that wants or can buy an iPhone keeps increasing for a while longer.

Yeah if someone could explain the disparity between this press release and the general narrative that would be sweet.

When the iPX first launched the narrative was "holy shit this phone is flying off the shelves", since then OLED stock has been falling (really good time to buy tbh), apple cuts back production, and the narrative has gone sour.

What gives?

So, without taking a side, the part quoted doesn't conflict with what the press is saying.

1. highest revenue ever from a new iPhone lineup

It's also the most expensive. Simply put, they could sell fewer iPhone Xs and still make more revenue simply because of the increased price.

So even with the highest revenue, it could still be lackluster in quantity sold, as well as what the profit is like.

2. [iPhone X] has been our top-selling iPhone every week since it shipped in November

It simply needs to sell more the other iPhones during the same time period. This makes sense, as it was released later than the iPhone 8. You could make the assumption that the majority of everyone that wanted an iPhone 8 would have bought one prior to the iPhone X being released.

For here, a better comparison would have been units sold of a new iPhone and if it beat that.

Again, I'm not suggesting it's a failure or a success, merely trying to look at the quote objectively and what it says, and what that really means.

Apple sold fewer phones than analysts expected, and fewer than they did last year. They sold 77.3m phones, and analysts expected them to sell 80.2m. They had greater revenue because the average price of phones has gone up.
Apple issued guidance for this quarter that they expected revenue to be $60-62b. Analysts expected revenue of $65.9b.
Stocks are priced on the expectation of the future, so the change in the expectation has probably had a negative effect on the price. As an individual investor (disclosure: I own a little AAPL) I think it is foolish to worry quarterly earnings and revenue forecasts. Yet it is what people write about. It is easier to write about quarterly earnings then it is to write about industry trends, in the same way it is easier to write about polls than it is to write about policy.

https://www.bloomberg.com/news/articles/2018-02-01/apple-for...

The current, negative narrative around the iPhone X is based on supply chain rumors. We don't know what Apple's original orders to suppliers were, but the numbers in many rumors were: "Apple cuts production 50%, from 40M to 20M." Analysts try to tease these numbers from the supply chain, but Apple is notoriously opaque with their supply chain, and typically use multiple suppliers for the same part.

As noted by @rjones [1], 2Q total units sold historically range between 50-52M.

If Apple had originally placed orders in Q218 for 40M iPhone Xs, then either a) iPhone X is 80% of all iPhone sales, which is hard to believe because of the current lineup diversity, or b) Apple expects total unit sales for 2Q18 to be above 80M, which is hard to believe because of 1Q18 guidance.

The better explanation is that Apple probably cut production for any number of reasons, but nowhere near as drastic as 50%. 20M is 40% of 51M, which would point to the iPhone X selling very well through 2Q18, and continuing to be the best-selling iPhone model.

[1] - https://twitter.com/rjonesy/status/958421107245232128

Exactly. Apple also has said the iPhoneX was a phone to show new technologies. It may not move into the second cheaper slot next gen, and instead may just go away. If that's the case then of course they are starting to figure out how to slow down production to prep for later this year.

> This is interesting, as the majority of the publicity I've seen about the iPhone X has painted it as lackluster.

I'm pretty sure China alone made the X worthwhile.

Since the X is very expensive, “top selling” doesn’t necessarily mean “most units”. Maybe they sold more 8s for less overall.

Publicity is almost always wrong.

People fucking love their iPhones. People on this site don’t seem to realize that — I see comments of the form “I can’t run bash on it, so it’s going to fail.”

> This is interesting, as the majority of the publicity I've seen about the iPhone X has painted it as lackluster.

You just were looking for such opinions.

Also of note, sounds like slowing all those batteries down really did the trick.

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