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Apple Gains on Better-Than-Feared Guidance and New Disclosures: 7 Key Takeaways

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Three months after Apple’s (AAPL) shares were hurt by its plans to stop disclosing hardware unit sales, its stock appears to be getting a post-earnings boost from a different set of disclosures.

After the bell on Tuesday, Apple reported December quarter (fiscal first quarter) revenue of $84.31 billion (down 5% annually in dollars and 3% in constant currency) and GAAP EPS of $4.17 (up 7%). Revenue was slightly above a $83.97 billion consensus and the guidance issued in Apple’s early-January sales warning. EPS slightly topped a $4.17 consensus.

For the seasonally weaker March quarter, Apple expects revenue of $55 billion to $59 billion. That’s mostly below a $58.98 billion consensus and implies an annual drop of 4% to 10%.

Nonetheless, Apple’s recently-beaten-up shares rose 5.7% in after-hours trading to $163.48, and took the shares of chip suppliers such as Cirrus Logic (CRUS) , Skyworks (SWKS) , Qorvo (QRVO) and Broadcom (AVGO)  higher with them. Low expectations are helping Apple’s cause, as are some of its disclosures.

Here are some notable takeaways from Apple’s report and call.

1. Apple’s Services Margins Are Pretty High

During its Nov. 1st earnings call, Apple — in addition to stating it will no longer break out iPhone, iPad and Mac unit sales — said it would start separately breaking out its gross margin GM for product businesses and services businesses. And sure enough, the company just disclosed that it had a December quarter product GM of 34.3% (down from 36.1% a year ago thanks to lower iPhone sales) and a services GM of 62.8% (up from 58.3% a year ago).

That disclosure is going over well, since Apple’s services revenue (up 19% annually last quarter to $10.88 billion in spite of an accounting change that hurt the annual growth rate) has been steadily growing as a percentage of total revenue, and is expected to continue doing so. The high margins recorded (from all indications) by businesses such as the App Store, iCloud storage and AppleCare services have much to do with the gap between product and services GMs.

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2. There Are Over 900 Million iPhones in Use

Apple says its total active device installed base, which was at 1.3 billion in Jan. 2018, surpassed 1.4 billion last quarter. Perhaps more notably, the company shared the size of its iPhone installed base for the first time, disclosing there are over 900 million iPhones being actively used today, with the base growing by almost 75 million over the last 12 months in spite of recent iPhone sales pressures.

Given how pivotal of a role the iPhone plays in driving both services revenue and the adoption of other Apple hardware, that remark, which suggests there’s a pretty large base of iPhone owners relying on older and/or used devices, is also going over well.

CFO Luca Maestri added that Apple’s iPad and Mac installed bases also hit new highs last quarter — in October, Apple noted the Mac base was above 100 million — and that half of all iPad and Mac buyers were first-time users of a Mac or iPad.

3. There Were a Slew of New Stats About Individual Services Businesses

Apple Pay transactions totaled over 1.8 billion last quarter, with annual growth said to be “well over” 100%. Cloud services revenue (driven by iCloud Storage subscriptions) rose over 40%, and the total number of paid subscriptions that Apple either directly provides or takes a cut on grew by another 30 million sequentially to over 360 million, with Apple forecasting the number will top 500 million next year. Paid Apple Music subscriptions are said to have topped 50 million; in November, it was reported that total Apple Music subscriptions (both paid and free trial) had topped 56 million.

Maestri added that Apple’s paid services accounts grew by a strong double-digit percentage annually, and Cook mentioned that no services business accounted for over 30% of total services revenue. In addition, Maestri indicated (as Cook did earlier this month) that Apple is prepping new services offerings that will arrive later this year..

4. Chinese Sales Were Weak, But Other Regions Did Better

As indicated in its warning, Apple had a rough time in China last quarter: Its “Greater China” revenue, which covers the mainland, Hong Kong and Taiwan, fell 27% to $13.17 billion. Cook reiterated that Greater China iPhone, iPad and Mac sales all fell, while adding that the region’s wearables revenue was up over 50% and that Apple’s installed base continued growing.

European revenue fell 3% to $20.36 billion, and Japanese revenue (hurt by phone subsidy reductions) fell 5% to $6.91 billion. However, Americas revenue rose 5% to $36.94 billion, and (in spite of Apple’s remarks about seeing pressures in many emerging markets) “Rest of Asia Pac” revenue rose 1% to $6.93 billion.

5. The iPad, Mac and Wearables Offset iPhone Pressures to an Extent

In line with what Apple…

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