Gross margins were 37.9 percent during the quarter, slightly below the 38 percent expected by a StreetAccount consensus estimate — meaning Apple is selling products that are more expensive to make.
This all comes as Apple moves within arm’s reach of a trillion-dollar valuation, securing its place as the most valuable public company in the world. Apple shares have risen about 50 percent over the past year, and Apple’s market capitalization crested $900 billion after hours on Thursday.
Though the iPhone franchise is somewhat in limbo, there are other factors afoot for Apple. For one, Apple is likely the top beneficiary of U.S. technology companies when it comes to a new Republican tax proposal on overseas cash.
Apple expects a tax rate of 25.5 percent in the coming quarter, compared with the 26 percent it forecast a year ago.
Apple also has a blossoming service business. That division includes content, AppleCare, and Apple Pay, but the App Store is the “jewel” of the services segment, Pacific Crest analyst Andy Hargreaves wrote earlier this year.
Services revenue hit $8.5 billion during the fourth fiscal quarter, an all-time high, and Cook said the company is well on its way to a goal, set in January, to double 2016’s services revenue of $24 billion by 2020. Cook said it hit $30 billion in the 2017 fiscal year.
Apple has invested heavily in greater China— historically its third-largest market behind the Americas and Europe — and has a nascent customer base in India.
Sales in China hit $9.8 billion, up 12 percent from a year ago, returning the segment to growth after an extended slump. IPads, particularly, are popular in thes regions, and sales grew 39 percent year-over-year in India, Luca Maestri, Apple’s chief financial officer, said on a conference call.
The company also showed off other new products in the back half of this year, amid back-to-school shopping season: the Apple Watch Series 3 with a cellular connection, its thinnest and lightest MacBook yet, and the Apple TV 4K. The HomePod speaker is also forthcoming.
The computer market may be shrinking, but Apple is still hitting record sales for its iconic computers: Mac revenue was $7.17 billion, up 25 percent from a year ago, and reached record revenue for the 2017 fiscal year, Maestri said. Other products revenue hit $3.23 billion, up 36 percent from a year ago.
Apple’s board also declared a cash dividend of 63 cents per share on Thursday.