Three theories about where it came from.
Apple’s Services revenue got a 30% boost last quarter from a $640 million windfall, source unidentified. Here’s the disclosure in Apple’s annual report:
Services net sales in the fourth quarter of 2017 included a favorable one-time adjustment of $640 million due to a change in estimate based on the availability of additional supporting information.
- Cybart: App Store payments (possible revised payment arrangements based on new usage or engagement information). This explanation makes the most sense given the language found in Apple’s 10-K.
- Cybart: Google TAC (traffic acquisition costs). Apple recently replaced Bing with Google for default web search for Siri. Apple also now relies on YouTube for Siri video searches. However, it’s not clear how this arrangement can be classified as a “change in estimate based on the availability of additional supporting information.”
- Horace Dediu: Some speculate it was a Google payment. I assume it’s maybe something to do with warranty expenses. That would indicate more of a one-off. [That] $640 million by the way is all profit. It goes straight to the bottom line. That’s remarkable if it’s something that people just gloss over it. It’s hard to find $640 million in most people’s couches.
My take: I’d don’t have a clue, but here’s the Warranty detail from Apple’s 10-K. If there’s $640 million in loose change hidden in there, I can’t see it.
UPDATE: In the comment stream, friend-of-the-blog Gregg Thurman makes a strong case for Google.
The “found” $640 million has to be derived from a Services source as that is where Apple shows it appearing. As Apple is describing it as an “estimate” I’m thinking it is revenue that can’t be directly measured, therefore it is a larger than expected payment (by Google) earned in a prior period.