Apple Q3 2014 Fiscal Results Analysis
by Brett Howse on July 22, 2014 9:20 PM EST
Today Apple announced its Q3 results for the period ending June 2014, and sales of the iPhone once again dominate revenue and earnings for the company.
Revenue for the quarter came in at $37.4B – a 6% increase year-over-year, and a down sequentially from the previous quarter.
Net profit was $7.7B for the quarter which is up 11.6% from the same period last year, and earnings per share came in at $1.28, also up over last year’s $1.07. Gross margin was up as well at 39.4% compared to 36.9% in Q3 2013.
| Apple Q3 2014 Financial Results (GAAP) | |||||
| Q3'2014 | Q2'2014 | Q3'2013 | |||
| Revenue (in Billions USD) | $37.432 | $45.646 | $35.323 | ||
| Operating Income (in Billions USD) | $10.282 | $13.593 | $9.201 | ||
| Gross Margin (in Billions USD) | $14.735 | $17.947 | $13.024 | ||
| Net Income (in Billions USD) | $7.748 | $10.223 | $6.900 | ||
| Margins | 39.4% | 39.3% | 36.9% | ||
| Earnings per Share (in USD) | $1.28 | $1.66 | $1.07 | ||
Once again, the iPhone is the dominate force for Apple right now, accounting for $19.75B in revenue for this quarter with 35.203 million iPhones sold. The device numbers and revenue are both down over last quarter, but sales are up 13% year-over-year with revenue close behind at a 9% gain. Apple doesn’t break down numbers for each model, but using some math we can see the revenue per unit sold at $561 which is a great number.
Software, Services, and App/Music store sales came in at $4.485B for the quarter which is down 2% compared to last quarter but up 12% year-over-year.
Mac sales were up again with 4.4 million Macs sold which accounted for $5.5B in revenue. Sales were up 18% and revenue was up 13% compared to Q3 2013, with an increase in sales of 7% over last quarter with revenue remaining flat.
iPad sales have definitely slowed, with the second quarter in a row of decline. Total sales were 13.2 million units for a revenue of $5.9B, but the device sales are down both year-over-year (9%) and sequentially (19%).
Unsurprisingly, iPod sales continued their decline with 2.9 million devices sold – down 36% year-over-year. Revenue for the iPod was $442M which was down 40% from Q3 2013. Somewhat surprising was that iPod sales ticked up 6% from last quarter, but revenues declined 4%.
Finally, accessories now account for about three times the revenue of the once ubiquitous iPod, with revenue for the quarter of $1.3 billion which is up 12% over last year’s numbers.
| Apple Q2 2014 Revenue by Product (billions) | |||||
| Q3'2014 | Q2'2014 | Q3'2013 | Revenue for current quarter | ||
| iPhone | $19.751 | $26.064 | $18.154 | 52.8% | |
| iPad | $5.889 | $7.610 | $6.374 | 15.7% | |
| Mac | $5.540 | $5.519 | $4.893 | 14.8% | |
| iPod | $0.442 | $0.461 | $0.733 | 1.2% | |
| iTunes/Software/Services | $4.485 | $4.573 | $3.990 | 12% | |
| Accessories | $1.325 | $1.419 | $1.179 | 3.5% | |
During this quarter, Apple performed a 7-1 stock split, and returned $8 billion to shareholders through dividends and the share repurchase program. Apple will pay a dividend of $0.47 per share on August 14 for this quarter’s results.
Analysts were hoping for 36 to 38 million iPhones to be sold this quarter, with sales missing that mark. iPad sales were also lower than expected. With the new iPhone likely not being released until Q1 of fiscal year 2015, outlook for the next quarter is also lower. With the new iPhone not expected until late in Fiscal Year Q4 (ending September), revenues are not expected to be bumped from new iPhone sales much until Q1 2015 results are available in January 2015. Revenue outlook for the next quarter is $37 to $40 billion.
| Apple Q3 2014 Device Sales (thousands) | |||||
| Q3'2014 | Q2'2014 | Q3'2013 | |||
| iPhone | 35,203 | 43,719 | 31,241 | ||
| iPad | 13,276 | 16,350 | 14,617 | ||
| Mac | 4,413 | 4,136 | 3,754 | ||
| iPod | 2,926 | 2,761 | 4,569 | ||
While sales were still strong for the iPhone, the iPad has now declined in numbers for the second straight quarter. Mac sales were up a healthy 18% year-over-year which means the Mac is almost back to being the number two revenue stream for Apple. We seem to have hit some maturity in the tablet market, and upgrade cycles aren’t quite as quick as they are in the smartphone space. The waiting game is now on for new product announcements from Apple to keep the sales strong.
Source: Apple
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jjj - Tuesday, July 22, 2014 - link
561 ASP is the lowest on record,calling it great is amusing.New iphone is without a doubt launching in calendar Q3 (fiscal Q4). Apple guided up and if there was nothing new the quarter would have been pretty hard down.
There are a bunch of other things to be said here but who cares really.
Brett Howse - Wednesday, July 23, 2014 - link
I reworded it, what I meant to say was revenue from the iPhone launch won't be felt much in Q4 not that it won't be launched in Q4.jjj - Wednesday, July 23, 2014 - link
There might be quite a lot.Last year the first weekend of sales for 5s and 5c was 9mil units,remains to be seen if this year there is a 4.7 and 5.5 inch in Q3 or just the smaller one and if the 5c gets updated. Actual features and supply matter too. There is also the inventory shift from old product to the new one(s) and the new ones have higher ASP so all in all the new product revenue will be quite a lot. Too early to say if it's going to be 6B or 9B but that's gonna be 15-20% of revenue for the quarter.(assuming 40-45B revenue -the higher range includes a few mil units of the 5.5 inch and some new ipads)
NightSniper - Wednesday, July 23, 2014 - link
Some revenue numbers are wrong with the article."Revenue for the iPod was $442,000 which was down 40% from Q3 2013."
I think you mean $442,000,000.
"Ipod, with revenue for the quarter of $1.3 million which is up 12% over last year’s numbers."
I think you $1.3 billion.
Brett Howse - Wednesday, July 23, 2014 - link
Yes sorry the summary data sheet has devices in thousands next to revenue in millions I obviously tripped up the columns!przemo_li - Wednesday, July 23, 2014 - link
Maturity in tablet market?With 14% + growths industry wide?
That is not maturity. :D
Thats covering Apple poor performance (but hey, they are premium niche, so when whole industry slows down, they would feel it most, right?)
xype - Wednesday, July 23, 2014 - link
Yeah, that’s the thing with "industry wide", as the iPhone and iPad got released at the high end and filled up that market, while there is still room on the low end. The question is whether the growth in the low end that is fuelling the overall market growth is worth the trouble.I think it would be best to specify stuff like "mature market" with an asterisk explaining that we’re talking about the market Apple competes in (high end), not some fuzzy definition of an "industry".
At the end of the day it’s profits that are important anyway—if Apple can manage to grow profits or keep their profit market share stable or growing, they’re performing well. If they have 0% marketshare in an area where profit-per-device is <$25 it’s not poor performance, but a conscious business decision (would be a bit like saying a major league team is not performing well because they only won the major league title and no local league games at all).
uhuznaa - Wednesday, July 23, 2014 - link
Apple's profits are mostly important for Apple, not for the users or third parties. And Apple can only continue to live off good margins in the "premium" segment as long as enough people actually pay these prices. When slipping marketshare starts to eat into mindshare Apple will have barricaded itself onto a shrinking island. I don't think that this will happen this year or next year, but sooner or later an ecosystem that covers only 10% of the market or so will stop to be attractive enough to pull the prices that Apple needs for its margins.Apple needs to be careful here. Of course it's fine to have only the top 10% of the market, but the question is if you can stay there then. Way back in the PC/Mac wars Apple did the same thing: Fat margins lead to plummeting sales and fewer and fewer people were willing to pay those prices for something that cut them off from where the rest of the world was going.
OK, Apple is far away from were it was back then, but the "margins are everything" mantra has its limits.
xype - Wednesday, July 23, 2014 - link
Way back in the PC/Mac "wars"? Aren’t those still on, and how is Apple doing there?The thing is, unless a whole product category is replaced by another, you have to be silly like BlackBerry to really mess it up. It’s not an endgame scenario, even a 10% market share would work just fine. If anything, it might make the cheap knockoff/scam app developers move on to the bigger player, which would be a good thing.
Apple didn’t stop making good quality products all of a sudden, and they likely won’t—and even if they to in 5-10 years, they’ll have amassed a huge amount of money by then, enough so to be able to even enter new markets with a Google-level of "throw shit at the wall and see what sticks" for a long time.
Also, the mindshare is still there, no matter what linkbait articles and idiot analysts (and Samsung’s Marketing Department) would like to believe. Otherwise there would be no increase in sales across most departments. As it is, the fluctuations can still be explained by normal market dynamics.
smalM - Monday, July 28, 2014 - link
"Way back in the PC/Mac "wars"? Aren’t those still on, and how is Apple doing there?"Their profits with Macs are higher than those of Acer, Asus, Dell, HP, and Lenovo with PCs combined. The PC guys failed miserably to set up a sustainable business model.
BTT:
A fiscal results analysis which doesn't mention the expenses with a single world?
Brett may need a little more practise... :-)