Apple Earnings: Strong iPhone Sales, iPad Sales Slump, $7.8B Profit
Mitch Wagner, West Coast Bureau Chief, Light Reading
iPhone sales drove a strong third quarter for Apple, but iPad sales cast a shadow, with sales down year-over-year for another consecutive quarter, the company reported Tuesday.
Quarterly revenue was $37.4 billion and profit $7.8 billion or $1.28 per diluted share. That compares with $35.4 billion and net profit $6.9 billion or $1.07 per diluted share in the year-ago quarter. The gross margin was 39.4%, up from 36.9%, Apple Inc. (Nasdaq: AAPL) said.
The record June quarterly revenue was driven by strong sales in the iPhone and Mac and growing revenue from the Apple ecosystem, driving highest EPS growth rate in seven quarters, Apple CEO Tim Cook said in a statement.
But despite the record EPS, Apple did not meet analyst estimates of $38.31 billion for the quarter.
Apple traded at $94.18 at about 7:30 p.m. EDT, down $0.52 in after-hours trading.
For its fiscal fourth quarter, Apple expects revenue between $37 billion and $40 billion, and gross margin 37-38%.
Apple sold over 35 million iPhones, for a new third-quarter record, with "healthy growth" in entry level, mid-tier and lead iPhone categories, Cook said in a conference call with analysts after market close on Tuesday. iPhone sales were up a "very strong" 55% year-over-year in the BRIC countries.
Mac sales saw strong growth, 18% year-over-year in a market that shrunk by 2% according to IDC, Cook said.
The App Store and other Apple ecosystem services were strong performers as well. For the first nine months of the fiscal year, the iTunes software and services line items were the fastest-growing part of Apple's business, Cook said. iTunes billings grew 20% year-over-year in the June quarter, and reached an all-time quarterly high driven by App Store results.
The 35.2 million iPhones sold in the third quarter was an increase of 4 million year-over-year, for 13% growth, Apple CFO Luca Maestri said. iPhones account for 41.9% of the smartphone subscriber base, according to ComScore, Maestri said.
Maestri bragged about iPhone business usage: Medtronic has developed 175 internal iOS apps for more than 16,500 iPhones used by employees to facilitate sales, improve productivity, and keep marketing materials up-to-date. Nestlé uses more than 25,000 iPhones, and NASA uses more than 26,000.
iPhone 5C sales were strong compared with last year's mid-tier model, the 4S, growing the highest year-over-year for any third quarter for mid-tier iPhones, Cook said.
But iPad sales were bad news. Apple sold 13.3 million iPads, compared with 14.6 million in the June 2013 quarter. "iPad sales grew overall in developing markets, with particularly strong year-over-year growth in the Middle East, where iPad sales were up 64%, in China, where they grew 51%, and in India, where they were up 45%," Maestri said. "This growth was more than offset by lower growth in more mature markets."