Last night, Apple reported a terrific end to 2016, breaking its record for quarterly revenue with a gargantuan $78.4 billion for the final three months of the year. The company also checked off record revenues from its iPhone, Mac, Apple Watch, and Services divisions. There’s no denying it has been a phenomenal success from a company that has repeatedly defied its critics. But there’s one little asterisk to the whole happy affair, and that’s the fact that Apple’s financial Q1 2017 stretched out to 14 weeks rather than the usual 13, owing to a calendar peculiarity.
As was noticed in the summer, Apple’s last quarter of 2016 was already planned to include an extra week due to the last Saturday of the quarter, the day on which Apple typically closes its books, falling on December 31st. Having concluded its previous quarter on September 24th, Apple could have kept to a 13-week quarter if it had ended its reporting on December 24th — but that would have broken with its tradition and made it harder to parse by excluding the last week of December. What it means now is that the company’s totals for the last three months of 2016 look better than they otherwise might have done, while its numbers for the first three months of 2017 are likely to look worse.
Let’s be clear here: it’s no misdeed on Apple’s part to report its earnings right up to the end of the month, quarter, and year. No quarter is ever identical to any other, owing to seasonality, shifting release dates, currency fluctuations, and a bunch of other externalities. Apple CFO Luca Maestri openly addresses the extra week while discussing the company’s earnings, layering in a number of offsetting factors to ward off investors from doing a linear calculation of how much the added week contributed to iPhone sales and the overall revenue tally:
We had the benefit of a 14th week during the quarter this year, but this was offset by four factors. First, this year we grew China inventory significantly less than a year ago. Second, iPhone 7 launched earlier in the September quarter compared to the iPhone 6s launch the previous year, creating a more difficult comparison for the December quarter this year. Third, the stronger U.S. dollar affected total revenue growth this year by 100 basis points. And fourth, our year-ago revenue included the benefit of a one-off $548 million patent infringement payment. Also, strong customer interest left us in supply/demand imbalance for several of our products throughout the quarter this year.
Apple rightly makes the point that comparing quarters on an apples-to-apples basis is inadvisable and fraught with confounding factors. It’s something worth bearing in mind when considering the company’s own apples-to-apples comparisons for quarterly records.