Surprise! Apple Made Massive Amounts of Money Again
Surprise! Apple is still a massive money-making machine.
The world’s most valuable company released its fiscal fourth-quarter results today, and while the company didn’t blow past expectations, it’s still doing okay by the standards of the alternate universe created by its own success. Analysts surveyed by Thomson Reuters estimated that Apple would see a profit of $1.88 per share on $51.1 billion in revenue. Today, the Cupertino company reported a profit of $1.96 per share on $51.5 billion in revenue—a 22 percent jump in revenue. That means Apple narrowly beat both analyst expectations and its own guidance to Wall Street of anticipated revenue in the $49 billion to $51 billion range.
Apple did say its guidance for its fiscal first quarter would be $75.5 billion to $77.5 billion. That’s up from $74.6 billion one year ago, but still on the low end of Wall Street’s estimate of $77 billion.
“This continued success is the result of our commitment to making the best, most innovative products on earth, and it’s a testament to the tremendous execution by our teams,” Tim Cook, Apple’s CEO, said in a statement announcing the company’s earnings.
Apple, of course, is the 900-pound gorilla of tech. According to The Wall Street Journal, citing market data research firm FactSet, Apple was expected to be the biggest contributor to earnings growth for the entire S&P technology sector this quarter. As of Friday, the WSJ said, third-quarter tech earnings were expected to grow 2.1 percent. Without Apple, however, that gain could have turned into a 3 percent loss.
All Hail the iPhone
Apple’s earnings are intimately tied to the success of the iPhone, and this quarter is no different. The larger debate is over: as we’ve argued, iPhones have become as irreplaceable as shoes. The question is whether Apple’s newest smartphones—the iPhone 6s and 6s Plus—will be as big a growth driver as previous models.
Today, Apple announced it had slightly missed expectations on the iPhone, selling 48.05 million units last quarter versus the 48.5 million expected. But these numbers don’t take into account the new iPhones’ full impact. Apple started selling the new models in late September, which means today’s results include only two days of iPhone 6S and 6S Plus sales.
Early signs, however, point to further success. Last month, to nobody’s shock, the company announced it had sold a record number of iPhones—more than 13 million units—during the new models’ first weekend. That number got a boost from Apple adding an extra week for buyers to pre-order the new models and launching the 6S and 6S Plus in China on the same weekend as in the US, breaking with past practice.
China remains a big piece of the Apple earnings story—this quarter, the company saw 99 percent revenue growth in the country compared to the same period last year. In the company’s fiscal fourth-quarter results, Apple’s sales in China reached $12.51 billion, up from $6.29 billion in 2014. That’s yet another quarter in which Apple’s sales in China beat out its sales in Europe ($10.57 billion).
Today, China represents the world’s largest smartphone market overall, grabbing 30 percent of global smartphone sales. And it’s the region where iPhone sales are still growing the fastest. This quarter, the iPhone saw 120 percent year-over-year growth in China. Yes, saturation in the Chinese smartphone market means fewer first-time buyers. But Apple could still see the market for the iPhone grow as the country transitions to 4G technology, leading to greater demand for Apple’s premium handset.
“We’ve been able to grow [in China] without the market growing,” Cook told investors on Apple’s earnings call this afternoon. “Frankly, if I were to shut off my Web and shut off the TV … and in addition, [looked] at our sales trends, I wouldn’t know if there was any economic issue at all in China.”