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Apple posts $18 billion profit, the largest in its history

Apple posts $18 billion profit, the largest in its history


Huge iPhone sales make up for a slumping iPad

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Apple just posted its first quarter results, and as expected, it was a big one. Led once again by record sales of new iPhones and holiday sales of iPads and Macs, Apple posted earnings of $18 billion on $74.6 billion in revenue, far above what it forecasted back in October, and marking the highest quarterly profit in its history.

By product, Apple sold 74.5 million iPhones, 21.4 million iPads, and 5.52 million Macs. Those numbers were up big from the number of iPhones and Macs Apple sold during the same time last year, but down big for the iPad.

Record revenue from iPhones and Macs

"We’d like to thank our customers for an incredible quarter, which saw demand for Apple products soar to an all-time high," Tim Cook, Apple’s CEO said in a statement. "Our revenue grew 30 percent over last year to $74.6 billion, and the execution by our teams to achieve these results was simply phenomenal."

The results came in above Apple’s own estimates, something investors have come to expect — though even for Apple it was a blowout. Apple forecasted its revenue somewhere between $63.5 billion and $66.5 billion. Wall Street was expecting about $67.50 billion according to 40 analysts polled by Yahoo Finance.

As usual, Apple is not detailing the makeup of its iPhone sales, something analysts are expected to try and pull out of the company in an after-hours conference call later today. The larger, more expensive iPhone 6 Plus carries a larger profit margin, though consumer polls have shown it wasn’t as popular as the smaller model in many regions, including the US. One hint that it's helped though is the average sale price of iPhones, which came in at $687, up from $603 in the previous quarter.

iPad sales at 21.4 million units came in just below what was expected. Apple released new models — the iPad Air 2 and iPad mini 3 — in October, meaning they were only on sale for about 7.5 weeks of the quarter. Wall Street was expecting Apple to sell about 21.5 million, down big from the 26 million it sold during the same quarter last year. That’s been part of a larger slump for the tablet, which research suggests is being replaced less often than originally believed. Apple has combated that in previous quarters by saying that there has been growth in places like Japan and other markets. Cook has also repeated the argument that the iPad’s growth should be viewed as long-term.

"I view it as a speed bump, not a huge issue. That said, we want to grow. We don’t like negative numbers on these things," Cook told analysts in October. "Over the long arc of time, my own judgement is that iPad has a great future."

The Mac continues to be a bright spot for Apple. The 5.52 million it sold this quarter was right around the 5.58 million that were expected and well above the 4.84 million it sold during the same quarter last year. Helping that was new Mac hardware like the 5K Retina Display iMac and a refresh to the Mac mini in October, as well as mid-year updates to its MacBook Pro with Retina Display.

Another bright spot was Apple's sales in Greater China, which accounted for $16.14 billion of Apple's revenue. That's 157 percent higher than it was in the previous quarter, and up 70 percent from the same quarter a year ago.

Apple no longer reveals its iPod sales

One big change this quarter is that Apple is no longer reporting its iPod unit sales. As of this quarter, Apple now lumps them into a new "other products" category that also includes the Apple TV, Beats headphones, and soon the Apple Watch. That’s less of an obfuscation into the numbers and more of a cold hard reality that the iPod is no longer a sizable part of Apple’s business. iPod revenue came in at $410 million in the last quarter, making up less than 1 percent of Apple’s total revenue. That’s a long, long way down from its peak of 55.55 percent of the $5.75 billion in revenue it brought Apple during this same quarter back in 2006.

For its next quarter, Apple expects to pull in revenue between $52 billion and $55 billion. That’s right in the middle of the $53.71 billion analysts expected. The big question ahead of earnings was whether this current quarter, which ends March 15th, will include any sales of the upcoming Apple Watch. Apple answered that question today, with Cook saying the company plans to begin shipping it by April. Apple Watch will require an iPhone to function, something that could bolster iPhone sales but also limit its initial audience in the same as the iPod and Mac back in 2001.