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Apple prepares for its biggest holiday season ever

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Last week, Apple announced its biggest fiscal fourth quarter ever, with the promise of an even bigger holiday quarter to come. The three months encompassing holiday shopping—October through December—are always Apple’s biggest of the year, generating a third of the company’s overall revenue.

Apple delivered an early Christmas present to analysts last week when it provided guidance that it expected the holiday quarter to be an all-time record for Apple, with revenue between $84 and $87 billion. (To put that in perspective, that’s 11 percent higher revenue than the previous year’s holiday quarter.)

revenue projection

Those projections blew away Wall Street’s predictions. And driving it all, as you might expect, is the iPhone.

“We’ve put our best estimate into the guidance, and you can see from the guidance that we’re very bullish,” Apple CEO Tim Cook told analysts on a conference call last week. But he pointed out that the current state of affairs at Apple—in which three all-new iPhone models have been rolled out in the last two months—is unusual.

“We’ll see how things go,” Cook said. “Granted, we’ve never done this before, so there’s no comparison here…. And so we’re gonna learn something!” That’s an unusual amount of candor from Apple about its projections, but the company is famously conservative with its estimates. It may also be true that Apple knows exactly how many iPhone units it’s capable of shipping and selling for the holiday quarter, and unless it ends up making more than it can sell (which is unlikely), it already has a very good idea how well the iPhone will sell.

A record number of iPhones

What gets wild is when you do the math about what the holiday quarter will look like, based on Apple’s guidance. If we assume that roughly 69 percent of Apple’s revenue comes from the iPhone—that’s roughly what it’s been the past few holiday quarters—that means Apple will be seeing a record $60 billion in iPhone revenue.

apple4q iphone sales

In the most recent holiday quarter, the average iPhone selling price was $695. That number has decreased the last three quarters, but with the arrival of the iPhone 8 and 8 Plus—both of which are priced higher than the iPhone 7 and 7 Plus—and the higher-priced iPhone X, I have a hard time believing the average iPhone price will go down. So let’s say the average iPhone sold during the holiday quarter costs $700. (That might actually be low, but let’s go with it.)

Where does that leave us? It means that Apple would sell something like 85 million iPhones. That would blow past the current record number of iPhones sold in a quarter, which was 78.2 million during last year’s holiday quarter. It’s a huge number, but not unreasonable.

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