Apple earnings top expectations, China revenue disappoints

Apple's (AAPL) fiscal first quarter results were better than analysts had been expecting. Adjusted earnings of $2.18 per share topped expectations of $2.11. Revenue was $119.58 billion versus the $117.97 billion estimate. Greater China net sales fell short of expectations, $20.82 billion compared to expectations of $23.5 billion.

Yahoo Finance's Julie Hyman and Josh Lipton report the breaking details.

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Editor's note: This article was written by Stephanie Mikulich.

Video transcript

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JOSH LIPTON: Apple's first quarter results are just now hitting the wire. Let's get right into those numbers. EPS $2.18, that is a beat. The Street was closer to $2.11. And importantly, revenue is up 2% to $119.6 billion. That is also a beat and does break that trend. So Apple returning to growth here on the top line. Also, critically, gross margins 45.9%, that is also better than expected.

And let's just turn quickly to the segments. IPhone clocks in at $69.7 billion, that is better than consensus. Services does come in a touch light, $23.12 billion. Street close to was around $23.4 billion there. Mac, $7.78 billion, iPad, $7.023 billion. Wearables home and accessories-- remember, that includes the watch, they don't break that out specifically. But that division, $11.95 billion. Street was around $12 billion. Greater China, $20.8 billion in the quarter. Consensus was closer to $23.5 billion. Remember, China was a bit of a concern heading into this print.

And one more data point we want to bring you here, Apple now saying their installed base of active devices has now surpassed 2.2 billion. That is also a very critical metric if you were an Apple investor. That's referring to the number of active devices in people's hands all around the world. That's important for future upgraders and important for people who want to subscribe to those services.

But bottom line, beats on the bottom and the top here, Julie. And, of course, now we wait for guidance on the call.

JULIE HYMAN: Yeah. And as we wait for guidance, we see the shares down 3/4 of 1%. I suspect that has something to do with those China revenues perhaps. That looks to me at first blush, like, the biggest source of miss here within the numbers. Yes, the overall revenue beat, but revenue in China at $20.8 billion is short of the 23 and 1/2 billion that some investors were looking for.

And this is not a shock, I don't think, because we had been getting reports in recent days that some of the shipments in China were looking perhaps a little bit lighter. And it's also not a shock, because, listen, we know what's going on in China, right? We know that there is--

JOSH LIPTON: Yeah, absolutely.

JULIE HYMAN: There is weakness there in the Chinese economy.

JOSH LIPTON: Yeah. This was-- I mean, for sure China was a source of concern for some analysts. We spoke to some of those analysts. And you had seen these recent downgrades, that was one issue here. And people were talking about a shaky economy over there. They were also talking about, of course, the local home team, the rival Huawei and what kind of impact that's having. And it'll be interesting to see how that shakes out in the call, how they address that question.

Remember on the call, we don't get any longer formal guidance from Apple, but we do get detailed color and commentary. Top of mind, I think, for analysts, besides China, is going to be, listen, when they listen to Tim Cook and the CFO Luca Maestri, how do they think about top line growth over the next year, right? We returned to growth this quarter. That's a big break. What do they see ahead?

JULIE HYMAN: Yeah. And we see the shares kind of swinging around here in after-hours trading here. It is interesting to me that we saw a slight miss on that service revenue number, because so many analysts and investors, part of their investing thesis for Apple going forward has been tied to services.

One other thing I just want to mention here is Tim Cook gave a shout out in the statement to a product that is not out quite yet. That's the Apple Vision Pro--

JOSH LIPTON: Tomorrow.

JULIE HYMAN: Coming out tomorrow. The reviews have been, I think, pretty darn strong. But with concern over the price tag for it, which I think is $3,500, right? But he does say as customers begin to experience the incredible Apple Vision Pro tomorrow, we're committed as ever to the pursuit of ground-breaking innovation. Now will that end up being more of a profit driver for the company? It's too early for that.