Apple earnings: 74.5M iPhones sold, record-breaking $18B profit

14 Comments

There was a lot going for Apple in its most recent holiday quarter. As the first quarter with the popular iPhone 6 on sale for the entire period, many expected Apple to boast eye-popping earnings, and Apple’s first fiscal quarter has traditionally been its best. Expectations were surpassed: Apple on Tuesday reported first quarter earning results of $74.6 billion in revenue and net profit of $18 billion.

In terms of device sales, that breaks down to:

  • 74.5 million iPhones, up from the 51 million sold a year ago.
  • 21.4 million iPads, down from the 26 million a year ago.
  • 5.5 million Macs, up from the 4.8 million a year ago.

Apple’s earnings beat Wall Street’s already-lofty expectations. Analysts were generally expecting total revenue around $69 billion, and Apple’s own guidance was in the range of $63.5 billion to $66.5 billion. It’s also a big increase over last year’s holiday quarter, in which Apple reported $57.59 billion in revenue.

Earnings per share works out to $3.06. Apple declared a cash dividend of 47 cents per share.

The 74.5 million iPhones sold are a record for Apple, nearly 46 percent higher than the previous quarterly record set last December. Fortune-polled analysts predicted 66.5 million iPhones sold.

“This volume was hard to comprehend,” CEO Tim Cook said during a conference call to discuss the earnings. “34,000 iPhones sold per hour, 24 hours a day, every day of the quarter.”

Clearly, the iPhone is a juggernaut, and the new models with larger screens have only increased demand for it. Cook mentioned that he believes the number of switchers from Android to an iPhone 6 were as high as they’ve been for the previous three years. The proportion of Apple’s revenue coming from the iPhone has also never been higher:

A key number to watch is Apple’s gross margins, or the proportion of revenue after manufacturing costs. Apple reported that its gross margins were 39.9 percent, which is up from 37.9 percent in the same quarter last year. It’s difficult to tell if the larger margins are due to the more expensive iPhone 6 Plus or the newly less-expensive 64 GB storage upgrade, but the average selling price for the iPhone was $687, which is nearly $50 more than last year’s holiday quarter. Cook didn’t elaborate on the sales mix between iPhone 6 and iPhone 6 Plus beyond broad strokes.

“iPhone 6 was the most popular iPhone last quarter,” Cook said. “But to sell 74.5 million they were all popular. There is clearly a geographic preference, some [regions] skew much higher on their preference to iPhone 6 plus to other [regions], it’s something that’s not consistent around the world.”

It’s no secret that iPad sales have been dropping year-over-year for the past few quarters, but this earnings report reflects a full quarter selling new models released in October, including the iPad Air 2 and the iPad Mini 3, but total unit sales were still down nearly 17 percent from the year-ago period. Cook has previously said that the lagging iPad sales were due to a longer upgrade cycle, and he reiterated that point on Tuesday.

Apple reported 5.5 million Macs sold this quarter, a 14 percent increase over the year-ago period despite the two newest Mac models released in October — the iMac with Retina Display and the Mac Mini — being niche products. However, it wasn’t a big jump from the prior quarter, which also saw 5.5 million Macs sold thanks to the back-to-school bump.

However, the average selling price for Macs was up $58, thanks to the new iMac with Retina Display which retails for $2500 or more.

We expected sales in China to make an impact in these earnings. Apple reported that revenue in the Greater China region, which includes Taiwan, was $16.1 billion, or up 70 percent from the year-ago period. CFO Luca Maestri partially attributed the “particularly impressive” Greater China revenue to the strong dollar.

Maestri said Apple would reconsider its capital return program in April, which has included $57 billion in share repurchases in the past year. Apple still holds $178 billion in cash.

Apple also issued guidance for next quarter. It expects revenue to be between $52 billion and $55 billion, a “significant revenue increase despite foreign exchange headwinds” over the $46 billion in revenue Apple posted in the year-ago period. Next quarter will see the launch of Apple’s first wearable computer, Apple Watch. “Apple Watch will ship in April, right on schedule,” Cook said.

This post was updated several times as more information became available.

14 Comments

Robby Franks

No wonder iPad sales dropped year over year– the iPad Air 2 and, especially, the iPad Mini 3 were not overwhelming improvements and hardly reason to upgrade from the superb iPad Air and iPad Mini 2.

Apple shot themselves in the foot by sticking to its too clever by half policy of doing modest upgrades, holding back features, or rather doling them out on a piecemeal basis, thinking they could attract massive upgrade customers each year.

Bruce

The iPad Mini 3 was indeed a very underwhelming update. Not sure how you can say the same about the iPad Air 2 though. It was updated pretty much across the board (CPU/GPU huge improvements, screen improvements, thickness & weight reductions, camera improvements, and Touch ID with Apple Pay for apps). What else would you have added?

I am thinking your comment is a bit of “anti-Apple” off the cuff.

flowergirl

It’s always amazed me that Apple are seen as some fantastic company, that exist for the good of all mankind (and Steve Jobs was a God) and yet Microsoft are seen as nasty and Bill Gates is the anti-Christ.

But Bill Gates has done huge amounts for the world and given away millions, if not billions but what exactly did Steve Jobs do ?

That’s marketing and spin for you.

It’s always amazed me that Apple are seen as some fantastic company, that exist for the good of all mankind (and Steve Jobs was a God) and yet Microsoft are seen as nasty and Bill Gates is the anti-Christ.

But Bill Gates has done huge amounts for the world and given away millions, if not billions but what exactly did Steve Jobs do ?

That’s marketing and spin for you.

How many of these phones were built in Europe – zero.????
How much does a Chinese worked get – about £4 a week.
Cost of phone c.£350-£550.
$16bn dollars now sitting in a bank account to rot
countries should put massive import taxes on products built outside EU etc – want us to buy your stuff? then build it here, or pay the price.

vince

Or you could just buy other shit. I’m pretty sure Apple is not putting a gun to anyone’s head forcing them to purchase their products.

jjj

The margins were up on a bunch of reasons, volume, mix, prices for key parts slightly offset by currency and large price cuts for the ipad.
It is a bit amusing that Cook is allowed to get away with idiotic statements like highest number of Android converts , they sold by far the highest volume in a quarter, ofc the number of buyers with 2 heads and 11 legs is higher than ever. He made the same claim about new buyers .
The most obvious nonsense is the tablet upgrade cycle that he keeps using as an excuse. If the buyer is not upgrading it means you aren’t giving him a reason to, it’s not written in the stars ,it’s their own inability to innovate in significant ways. This kind of mentality is what “killed”the PC. and there Apple at least tried to do a few things. Will be interesting to see if the next ipads have 4k screens, marketing feature or not,they need it , just like they need a new design but they won’t do that,they are afraid of such a risk. They are not making refrigerators ,although even there you shouldn’t give up.
In Q1 they’ll ship over 60 million iphones ( some 60mil plus w/e they add to inventory, could be 2-5 mil, i expect 3) and the mix will be strong since they need inventory in the channel for the new models.That’s all pretty normal though if you factor in a bit of context ( upgrade from toy screen to modern smartphone, 2 flagship models not 1) and the size of the market and Apple’s share. The major upgrade is a one time fix for the share loss.
Since nobody mentioned it, this brings 2014 total iphones shipped to 192.66 million units so Apple’s share in smartphone was just under 15% , down from 15.3% in 2013. The transition to a bigger screen is a one time plug for the share bleed and this year they might even gain a little bit of share (my expectations are different than what others expect for the smartphone market, if you ask iDC they’ll go with 1.4billions , i’m sure it will reach 1.5 so even with 230 millions apple would gain minimal share).

Shiggity

Go figure, they increased the screen size and increased sales 25%. HMMMMMMMMMMM!

hundoman

Consumers are not buying iPhones it is the cellular companies who are buying these billions of dollars of iPhones as they have sales quotas with Apple.

Consumers really have no choice in the matter of what phone to get as these cellular firms are required to sell Apple products or be stuck with them. Therefore you have companies such as Verizon $21.5 billion, ATT over $14 billion, Sprint and T-Mobile over $7 billion each a year of guaranteed sales of Apple iOS products alone.

When you think about what this means and then throw in the always positive press and media coverage that is required to move these unit volumes the world really is forced to buy Apple iOS products above all others.

Frac

Yeah…I really hated it when I was met at the phone shop door by the pressure-selling Apple sales reps, that there were no other phones to buy and that I wasn’t allowed to leave until I had an iPhone!
Oh wait! Actually there were no iPhone 6’s for sale, the sales staff really pushed Samsung phones even though I said I only wanted to buy an iPhone and the deals were better on Android handsets.
Apart from that, I’m sure you’re right.
/,

pkdecville

Guess you missed the memo:

Even Verizon which has had a hot/cold relationship to iPhone sales has been selling as many as it could (far above its contractual commitment).

“Shopping for an iPhone? How do you know you’re in a Verizon store?”

They’ll be doing all they can to sell you an Android, instead.

winod rai

how much tax did they pay on the $18billion ?
my guess is that they will throw some rulebook at the taxman, saying “we’re in ireland, no really”

winod rai

@pkdecville, oops! was meant to add to the discussion instead added as a reply. my bad.

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