Apple Q1 - Services shine

Apple released results last week, which were broadly in line with analyst expectations. Apple's size and momentum make its results fairly predictable. Revenue for the previous quarter was $95 billion, up 5%, resulting in profits of $25 billion.

The two most important segments are iPhone sales and services, which brought in $47 billion (up 2%) and $27 billion (up 12%), respectively. Overall sales in China came in at $16 billion, down 2%, and missing analyst estimates by $1 billion. Increased competition from Chinese companies and a souring of US relations hurt demand.

Apple also announced a 4% hike in its dividend and a $100 billion share buyback. Given its size, that $100 billion will only reduce the shares in issue by around 3%. Every bit counts though, over the last year shares in issue dropped 2.7%.

Thanks to its amazing brand, Apple has very high profit margins and is a money-making machine. As a result, its shares are rather expensive, trading on a forward P/E of 30, with sales only expected to grow in the mid-single digits in the future. That valuation is fine as long as Apple steadily grows and maintains its healthy profit margins. We are happy to have this fantastic company as a core holding.