Apple Sees Broad Strength; iPhone Pricing Power Shines

Brian Colello: Apple reported strong fourth-quarter earnings. The stock is up about 2% after hours to $172 or so. Overall revenue and EPS were ahead of consensus. Most of it came from outside of the iPhone, which is really the big surprise in the quarter. Services revenue was exceptionally strong. Other product revenue was also very strong; watch unit sales were up over 50% year over year, and the Mac actually had a record quarter in the September quarter with strong sales from back to school season with the new Macbook lineup.

IPhone revenue is solid in the September quarter with good bounce-back and demand from China, up double digits in mainland China. The forecast for the December quarter is always the highlight. It's the first glance at how Apple is gauging demand for the iPhone X. The forecast was in line with consensus. It seems very likely that iPhone X demand is strong, but that the device will be supply-constrained. This is very good for Apple because the longer term trend is that Apple can retain pricing power with the iPhone, and bring prices even higher than in years past.

We're still running the numbers to try and make our best estimates of the mix of iPhone 8s versus iPhone Xs that will be sold in the December quarter, but overall it's still a strong forecast and strong results out of Apple.