How to measure Apple’s success without unit sales

A veteran analyst suggests six new metrics.

From a note by Gene Munster to Loup Ventures’ subscribers that landed on my desktop Thursday:

I’m guilty of falling into the unit trap. It took me 5 days to realize the company grew revenue 20% y/y and earnings 40% y/y in the Sept. 2018 quarter, despite Apple highlighting those data points 3 times on the earnings call…

We believe this is how Apple would have reported the Sep-18 quarter under the new reporting approach:

  • Grew revenue by 20% (highest rate in 3 years) and earnings by 41%. (We expect 11% revenue growth and 26% earnings growth in FY19).
  • Grew installed base at “double digits,” which now likely exceeds 1.4B devices.
  • Services grew at 17% despite a difficult y/y comp.
  • Returned $23.2B to investors.
  • Retail now has 506 locations, with 70k employees, up from 65k earlier in the year.
  • Saw Wearables growth of over 50%, compared to 60% in Jun-18, and 50% in Mar-18…

In a separate list, Munster suggested six data points Apple ought to release each quarter going forward:

  1. Earnings growth
  2. Revenue growth
  3. Hardware gross margin
  4. Services gross margin
  5. Installed base
  6. Revenue per user

My take: If that is Munster’s wish list, it falls pretty short. It doesn’t even provide the kind of detail he says Apple would have reported in the new regime. The fact is we have no idea—and investors have no control over—the level of transparency Apple chooses to offer. The whole thing is a mystery and a source of uncertainty. It will remain one until the company posts the new schedule Luca Maestri promised last week. I’ve been keeping an eye on the Investor Relations website. No sign of it as of Thursday morning.

See also: Apple’s new translucency: Watch CNBC freak (video)


  1. Fred Stein said:

    I think Apple is sick of being labeled “The iPhone company”.

    The SmartPhone market has matured. Apple still takes share but only when current owners sell their used phones to buy new ones.. That is why Apple’s installed base is growing while the total smart phone shipments are shrinking.

    Apple is an ecosystem company. In that light AirPods or Apple Pay, which generate small revenue, matter because they extend the value of other products. Installed base growth indicates that new customers, even those who buy used Macs or iPhones, will likely buy more Apple products far into the future. All of Apple’s developer kits for verticals, gives Apple new long-term and growing revenue from Apps. It’s hard to see these little things if we obsess on new iPhone unit sales.

    November 8, 2018
  2. Gregg Thurman said:

    Noted from Apple’s past guidance/actual performance:

    Starting in FQ2/2013, and for the first time, management guided revenue in a high/low range. The following depicts the range amount by quarter (with the percent of range achieved).

    FQ2/2013 $2 Billion (130.15%) CFO Oppenheimer
    FQ3/2013 $2 Billion (91.15%) CFO Oppenheimer
    FQ4/2013 $2 Billion (115.73%) CFO Oppenheimer
    FQ1/2014 $3 Billion (86.67%) CFO Oppenheimer
    FQ2/2014 $2 Billion (182.30%) CFO Oppenheimer
    FQ3/2014 $2 Billion (70.00%) CFO Oppenheimer
    FQ4/2014 $1.5 Billion (241.53%) CFO Oppenheimer
    FQ1/2015 $3 Billion (370.00%) CFO Oppenheimer
    FQ2/2015 $2.5 Billion (220.40%) CFO Oppenheimer
    FQ3.2015 $2 Billion (180.25%) CFO Oppenheimer
    FQ4/2015 $2 Billion (125.05%) CFO Oppemheimer/Maestri
    FQ1/2016 $2 Billion (18.60%) CFO Maestri
    FQ2/2016 $3 Billion (18.57%) CFO Maestri
    FQ3/2016 $2 Billion (67.90%) CFO Maestri
    FQ4/2016 $2 Billion (67.60%) CFO Maestri
    FQ1/2017 $2 Billion (117.55%) CFO Maestri
    FQ2/2017 $2 Billion (69.80%) CFO Maestri
    FQ3/2017 $2 Billion (95.40%) CFO Maestri
    FQ4/2017 $3 Billion (119.30%) CFO Maestri
    FQ1/2018 $2 Billion (164.65%) CFO Maestri
    FQ2/2018 $2 Billion (56.85%) CFO Maestri
    FQ3/2018 $2 Billion (88.25%) CFO Maestri
    FQ4/2018 $2 Billion (101.69%) CFO Maestri
    FQ1/2019 $3 Billion (?) CFO Maestri

    Eliminating FQ1/2018 and FQ2/2018 as high/low outliers of the prior 8 periods I get an average of 98.66% of range achieved.

    This translates to a projected revenue of $92.946 Billion for FQ1/2019. I look forward to constructive criticisms of the above (PLEASE).

    November 8, 2018
    • Jonathan Mackenzie said:

      If I recall, AAPL also got slammed when they announced they would start reporting a range that was, to paraphrase “meant to be accurate”. They also got slammed on the ER they were telling folks to start looking at service revenue and beyond the iPhone revenue.

      Apple’s team seems to have a grasp of where the company is going, but each time they try to tell investors about it, the stock gets dinged.

      November 8, 2018
  3. Gregg Thurman said:

    Robert, what do you see for FQ2 revenue? My model (now obsolete) indicates YoY growth of only 2%.

    I’m having a hard time reconciling that what with iPhone ASP growth (ignoring unit volume), Services growth and potential for Mac and iPad growth (ASPs and unit volume).

    November 8, 2018

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