Blog Post

Apple Earnings 2: Annual iTunes Store Revenue Grows 35 Percent By Q2

imageApple (NSDQ: AAPL) reported the best March quarter in its history, posting revenue of $5.26 billion, 21 percent up on the same quarter in the previous year. CFO Peter Oppenheimer, in a conference call, said growth was fueled “by very strong demand for Macs and another great quarter for iPod sales”. Net income rose 88 percent from the prior March quarter to $770 million.

— Music products and services accounted for 44 percent of total revenue during the quarter.
— The company sold 10.55 million iPods – 24 percent up on the year-ago quarter. iPod shuffle was especially popular, although the company does not break down specifics on the range.
— Other music revenue grew 35 percent year-on-year, fueled by strong iTunes Store sales. Oppenheimer confirmed the store now has over five million tracks, 350 TV shows and 500 movies, having added movies from Paramount, Lionsgate and MGM. iTunes Store leads the US market on a share of over 85 percent according to Nielsen Soundscan data, he said.
— Sales of 1.25 million Mac computers was a 36 percent growth over the year-ago quarter, representing 56 percent of total revenue. The growth was ahead of expectations. Notebook sales grew 79 percent year-on-year, making 59 percent of total Mac sales.
— Sales from Apple’s retail stores grew 34 percent year-over-year to $855 million. The company announced it would open a third Manhattan store, in the Meatpacking district. Stores got over 21.5 million customers in the quarter.
— Gross margin was 35.1 percent, higher than expected.
— For the June quarter, Apple is targeting $5.1 billion revenue.

Though Apple continues its transition from computer maker to media company, music in its previous two quarters made up 59 percent and 57 percent of total revenue. If the latest 44 percent share sounds disappointing, that’s because of a surge in the popularity of the company’s traditional products – computers – as the Mac line gains market share. Apple recently sold its 100 millionth iPod and was happy to cite data from GfK and NPD showing the device enjoys over 70 percent market share in the US; over 60 percent in Australia and Canada; over 50 percent in Japan and Hong Kong; and over 40 percent in the UK, Switzerland, Singapore and Denmark. Asked if he expected the multi-functional iPhone to dent iPod sales, Oppenheimer referred back to the previous quarter’s evidence: “There was no obvious affect from iPhone on sales of iPod – we’ll just have to see how this quarter goes.” But then, the iPhone has not been released yet.

Interestingly, Oppenheimer announced both iPhone and AppleTV customers would benefit from free software additions. “We plan to build on this incredible foundation by continuing to develop new software features as well as entirely new applications and incorporate them into the iPhone. Since iPhone customers will likely be our best advocates for the product, we want to get them many of these new features and applications at no additional charge as they become available. We will be periodically providing new software features to iPhone customers free of charge. […] We hope the result will be to surprise and delight our iPhone customers, which should result in happier customers and more customers as we enter this billion-unit-per-year mobile phone market. […] Similar to iPhone, we plan to periodically provide new software features and enhancements at no charge to our AppleTV customers.”