Apple's profits rarely disappoint, but nobody can beat the Street forever. Apple reported quarterly earnings of $9.32 per share ($8.8 billion total) on $35 billion in revenue. It's a $1.5 billion gain over last year's profit in the same quarter, but missed analyst estimates of $10.37 earnings per share.

"We're thrilled with record sales of 17 million iPads in the June quarter," said Tim Cook, Apple’s CEO. "We've also just updated the entire MacBook line, will release Mountain Lion tomorrow and will be launching iOS 6 this fall. We are also really looking forward to the amazing new products we've got in the pipeline."

As expected, sales of the iPhone dropped to 26 million, as consumers wait for the likely release of a new iPhone model this fall. Last quarter, Apple sold 35 million iPhones. Moving the iPhone from summer to fall has made this quarter a less profitable one for Apple for the past two years.

Apple's major new hardware release this quarter was the MacBook Pro with Retina display, but the new laptop didn't move the needle much on Mac sales: just four million, about a two percent increase over the year-ago quarter.

Sales of the new iPad, combined with the discounted iPad 2, however, were a bright spot. The company sold 17 million new iPads and discounted iPad 2s, with sales of both models continuing strong after the new model's launch last quarter.


Q2 2012 Q3 2012 % Change
Net profits $11.6b $8.8b -24%
Revenue $39.2b $35b -10.7%
Cash on hand $110.2b $117b +6.2%
Mac 4m 4m 0%
iPhone 35.1m 26m -25.7%
iPad 11.8m 17m +44%
iPod 7.7m 6.8m -12%

Apple will host an earnings call at 2PM PT, which we'll be following right here.

2:01: CEO Tim Cook and CFO Peter Oppenheimer are on the call.

2:03: Peter Oppenheimer says Apple's record quarter was driven primarily by strong iPad and iPhone sales.

2:03: Tremendous momentum for iPad in education and record Mac sales in education. Oppenheimer names two districts distributing MacBook Airs to all students.

2:05: Tomorrow, Mountain Lion will be released. (Yay!)

2:06: iPod sales beat expectations, and iPod Touch continues to sell more than half of all iPods.

2:07: Credits launch of iTunes and App Store in four new countries with strong growth in sales.

2:08: Apple have iPhone distribution with 250 carriers in 100 countries.

2:08: $16.2 billion in iPhone and iPhone accessories sales.

2:09: 84 percent growth in iPad sales. Particularly strong sales of discounted iPad 2s to K-12. (A lot of education talk here.)

2:10: Apple loves touting its institutional sales to education and enterprise. This isn't just a consumer technology company anymore, folks.

2:12: There are more iOS devices than ever, which means more $5.5 billion paid to developers through the iOS App Store.

2:13: $4.1 billion in revenue through the Apple Stores. All-time record iPad sales, and strong growth in iPhone sales. Half of all Mac sales in the quarter to customers who'd never owned a Mac before. $11.1 million revenue per store. 83 million visitors (17,000 per store per week) in the quarter, about a 12 percent increase.

2:16: Announces a dividend of $2.55 per share, payable on August 12 of this year. Expect to announce record dividends. Board has authorized three year, $10 billion stock repurchase program beginning in September 2012.

2:18: Question for Tim Cook about growth in China. Cook: China represents about two-thirds of revenue in the region. Revenue decline is attributable to iPhone sales in mainland China. The iPhone 4S launch was very successful, but there's a seasonal lag. Still up 100 percent year-over-year. New iPad sales from its delayed launch in China will largely be reflected in the next quarter.

2:23: Looking ahead, Apple and other companies are fighting a tough economy, in North America, Europe, Australia, and elsewhere.

2:24: No expectation to add any new iPhone countries or carriers next quarter.

2:25: Tim Cook says it's important to understand that the iPhone 4S rollout had been completed worldwide by January and was able to get new units from inventory to market by March. So there wasn't the usual pent-up demand for iPhone that we've seen in previous years.

2:27: iPhone sales were largely positive except in Europe, which was flat or slightly down. France, Greece, and Italy were particularly hard hit, and Germany showed only modest growth. UK and Eastern Europe performed well. Demand in US and China remains strong.

2:30: Both Cook and Oppenheimer are stoked about future products and demand for them.

2:31: Question about Mac growth. Cook says the low growth is largely attributable to the timing of the announcement of the new MacBooks. There were only 3 weeks left in the quarter. Before the new MacBooks launched, sales were down year-over-year; after they launched, sales were up, which caught Apple up overall. Apple is hoping to finally meet demand for the Retina-display MacBook Pro next month.

2:34: Question about relationship with carriers; Cook demurs on making any specific comments. Our job is to make the best smartphones in the world, says Cook: "We're maniacally focused on this." Carriers' job is to give customers what they want. An iPhone customer is more likely to have an iPad, so carriers value this relationship (so carriers can sell more data plans). Cook claims Apple products make the most efficient use of data relative to their competitors on app-rich platforms. So Cook thinks carriers should like Apple.

2:36: Oppenheimer: "Given what's going on all around us, we're very happy with our quarter." The economy in Europe is not doing well. That has a big effect.

2:37: "We're reading the same speculation about a new iPhone as you are, and we think this has caused some delay in purchasing," says Oppenheimer.

2:40: Cook says Apple is very focused on China, sees it as an enormous opportunity. "People in emerging markets want products, just as they do in developed markets." Making the very best product overshadows everything else; that's what creates a great business.

2:42: "The most popular iPad is the new iPad, but the iPad 2 did very well," says Cook. "We've all seen many different tablets, hundreds of them, come to market, over the least year, but I've yet to see any of them gain any traction overall."

2:44: "Most customers feel that they're not looking for a tablet, they're looking for an iPad," says Cook. And (teasing!): "We're going to keep innovating in the space." 84 million iPads sold — it took Apple more than twice as long to see the same growth rate for iPod, a third more than for iPhone.

2:45: Latin American sales growth is tripling. "We're seeing growth in some countries that is downright shocking," says Cook.

2:47: 1.3 million Apple TVs sold last quarter, up 170 percent year-over-year. Four million total new Apple TVs sold. "It's still at a level where we'd call it a hobby," says Cook. "We're not one to keep around projects we don't believe in. There are a lot of people here who still believe in Apple TV… four million [sold in the fiscal year so far] is not a small number," except in comparison to things like iPads and iPhones.

2:50: What about Passbook? Is that a hobby? Is it a move towards a digital wallet? Cook says, "it's an important feature of iOS 6. I wouldn't want to speculate on where it might take us."

2:53: Tim Cook says "the adoption rate of iPad in education is unlike anything I've ever seen in history."

2:53: Why hasn't Apple been more successful in India? Tim Cook: "I love India!… But the multi-layer distribution in India adds to cost of getting products to market. Because of that, in the intermediate term, there are better opportunities for Apple elsewhere."

2:55: Retina displays for the Macbook Pro have been short, which makes getting those to customers difficult. As for new products, Cook is mum, except to say that the component costs are included in the earnings statements and projections.

2:57: How can Apple move to lower price points without compromising quality. Cook says "our north star is to be maniacally focused on making the best products… That's why we breathe, that's why we live. We're not changing that." (Second time he's used a variation on "manical.") The economy might be tough, but Apple can distinguish itself by continuing to emphasize quality. But hey, the iPhone 3G is free in the US, so you've got that too.

3:00: Cook: "I'm not going to spend any energy" in stopping people from speculating about new products. "I'm glad people want the next thing."

And that's it!

Ben Popper and Evan Rodgers contributed to this report.