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Apple posts $7.7 billion in profit, but all eyes look to new products in the fall

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Profits beat expectations, but sales miss as the iPad becomes less popular

In what can only be described as the typical lull for Apple ahead of new fall product launches, the company's reported earnings that beat its own expectations, but fell just shy of Wall Street's. Helping once again though was the 10-month-old iPhone, which accounted for more than half of Apple's sales.

Apple just reported earnings of $1.28 per share, on revenue of $37.4 billion. Wall Street was expecting the company to announce earnings of $1.23 a share, on $37.99 billion in revenue, according to a poll of estimates compiled by Yahoo. The results come on the short side of what Wall Street was expecting in terms of revenue, but are right in the middle of Apple's own forecast, which was between $36 and $38 billion. If those earnings per share numbers seem a lot smaller, it's because of a seven-for-one stock split that went into effect last month. By comparison, Apple pulled in earnings of $7.47 per share, on $35.3 billion during the same quarter last year, or $1.07 per share when adjusting for the split.

iPad sales are down from last year, and last quarter

The iPhone led the way for Apple once again, with the company selling 35.2 million units and accounting for $19.75 billion in revenue for the quarter. That’s up from the 31.2 million iPhones Apple sold during the same time last year, something Apple CEO Tim Cook attributed to sales in Brazil, Russia, India, and China. Apple also sold 13.27 million iPads, which is down considerably from the 16.35 million the company sold during the last quarter, and even more from the 14.6 million it sold the same quarter a year ago. In a call with analysts following the news, Cook said the iPad numbers met the company's expectations that "we realize they didn't meet any of yours." He added that the reason for the lower figures can be attributed to reduced channel inventory and market softness in places like the US and Western Europe.

Apple also said it sold 4.4 million Macs, and 2.9 million iPods, with the company attributing much of the growth on the Mac side to strong sales of the MacBook Air.

A lot's happened for Apple in the past three months, but not in the way of new products. Besides the stock split, which took shares from $654.57 down to $94, last month also brought demos of new software for iOS and Macs due out this fall. Apple's also made two major business ventures with other companies, including agreeing to buy Beats (a deal made in May that closes next quarter), and a partnership with IBM announced last week to push iOS apps and hardware into the enterprise. But on the hardware front, it's been extremely quiet, with the release of LTE iPad Air and iPad mini models in China, a spec-bumped MacBook Air, color versions of its entry-level iPod touch model, and a cheaper iMac.

It's been quiet on the new hardware front

All eyes are now on the company to unveil new products, something Cook has been promising for a long time now. That list includes new iPhones, which Apple just ordered 70 to 80 million of in time for the holidays, according to The Wall Street Journal. Also strongly expected is Apple's wearable device, which reports say Apple will show off in October.

"We are incredibly excited about the upcoming releases of iOS 8 and OS X Yosemite, as well as other new products and services that we can’t wait to introduce," Cook teased once again in a statement.

For its next quarter, Apple’s forecasting revenue between $37 billion and $40 billion, with a gross margin between 37 and 38 percent. Analysts polled by Yahoo ahead of today's report expected the company to bring in earnings of $1.34 per share on $40.44 billion in revenue, making Apple's top estimate look short.

Some tidbits from the earnings call with analysts:

  • Apple's iTunes business is the fastest growing, which the company attributed to App Store sales.
  • Apple's paid App Store developers $20 billion so far, up from the $13 billion the company reported last October.
  • Apple's acquired 29 companies since fiscal 2013, with five of those occurring since this April (and not including Beats).
  • Apple's sold 225 million iPads since 2010, with Cook adding that there's still "significant innovation" that can be brought to the category.
  • More than 50 percent of iPads are going to first time tablet buyers
  • Cook views iPhone trade-ins as "hugely beneficial" to Apple since someone else in a family might give their device to another family member, and that person might end up purchasing another Apple product.

Update July 22nd, 6:07PM: With additional information from the earnings call.