Apple announced its financial results for the first quarter of 2014 on 27 January, revealing that the company had a record-breaking quarter thanks to new iPhones, iPads and Macs. But how did the official figures compare to analyst predictions? Did Apple manage to please investors?
The quarter in question was the first full quarter that the iPhone 5s and iPhone 5c were available, and also the quarter that saw the launch of the iPad Air and iPad mini with Retina display, so it was expected to be a big one. Not only that, but Apple also made its brand-new Mac Pro available to order.
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Analyst predictions varied, but most analysts correctly predicted that Apple would report record-breaking numbers.
How much revenue and profit did Apple make in Q1 2014?
Overall, analyst expectations averaged at $58.10 billion in revenue, which would be a 6.6 per cent growth year-over-year.
In reality, Apple announced a quarterly revenue slightly lower than the average analyst prediction, at $57.6 billion (£34.8bn), with a quarterly net profit of $13.1 billion (£7.9bn). Despite being lower than expected, it's still impressive figures from Apple, and compares with $54.5 billion revenue and $13.1 billion net profit from the year ago quarter.
Analysts predicted earnings of $14.36 per share, and Apple managed to top that in the quarter with an official figure of $14.50 per diluted share. Apple has reported a negative earnings growth for three quarters in a row, so the growth this quarter is great news for the company.
Gross margin was 37.9 per cent, slightly higher than the company's forecast, but lower than the 38.6 per cent reported in the year-ago quarter.
Apple has declared a cash dividend of $3.05 per share of the company's common stock, which is payable on 13 February.
During its last financial results report for the September quarter of 2013, Apple provided guidance for its fiscal 2014 first quarter. The company said it expected revenue for the quarter to be between $55 billion and $58 billion, with a gross margin of 36.5 to 37.5 per cent. Apple slightly exceeded these expectations.
Apple used its earnings call for the December quarter to provide guidance for the March quarter, too. It expects revenue to be between $42 billion and $44 billion, with a gross margin between 37 per cent and 38 per cent. That could come as a disappointment to some analysts, as the average estimate for the March quarter is $46 billion. This forecast indicates that Apple isn't planning on launching anything new during the March quarter.
"We are really happy with our record iPhone and iPad sales, the strong performance of our Mac products and the continued growth of iTunes, Software and Services," said Apple CEO Tim Cook.
"We generated $22.7 billion in cash flow from operations and returned an additional $7.7 billion in cash to shareholders through dividends and share repurchases during the December quarter, bringing cumulative payments under our capital return program to over $43 billion," said Apple's chief financial officer Peter Oppenheimer.
Despite making headlines for a record-breaking quarter, Apple's shares plummeted by more than eight per cent after the results had been announced.
Now on to sales figures. Below, we compare analyst expectations with Apple's official figures. Above, you can see a chart that demonstrates Apple's iPhone, iPad and Mac sales since 2007 (when the iPhone launched).
With the December quarter largely focused on new iOS devices, all eyes were on Apple as it announced the numbers for its iPhones and iPads. Of course, it was the lead-up to Christmas, too, so holiday shoppers will have been flooding Apple Stores around the world to buy gifts for their loved-ones.
How many iPhones did Apple sell in 2014 Q1?
Analyst estimates for Apple's iPhone sales ranged from 50 million to 60 million, with an average right in the middle at 55 million, according to Fortune. Apple announced that it had sold 51 million iPhones during the quarter, with revenues up 6 per cent.
While 51 million iPhones is at the lower end of the analyst expectations, it's still record-breaking. Apple sold 47.8 million iPhones in the first quarter of 2013, which was the previous record. The iPhone accounted for a whopping 56 per cent of the company's overall revenues during the quarter.
How many iPads did Apple sell in 2014 Q1?
On average, analysts predicted a year on year growth of 8.8 per cent for Apple's iPad sales. Estimates ranged from 21 million to 28 million units, according to the data collected from a total of 47 analysts by Fortune.
Apple was close to the top estimate with its iPad sales during December quarter, selling a record-breaking 26 million iPads. During the same quarter last year, Apple sold 22.9 million iPads.
According to a report from Consumer Intelligence Research Partners, it's Apple's iPad Air that's the star here. It suggests that, in December, Apple's iPad sales were made up of 41 per cent iPad Air sales, 25 per cent iPad mini sales and 16 per cent iPad mini with Retina display sales, with the remaining iPad sales made up of older models.
iPod sales dropped 52 per cent, 54 per cent revenues. The iPod contributes to just 2 per cent of Apple's income.
Apple's software and services brought in $4.4 billion in revenue, though, which is up from $3.7 billion in last year's December quarter.
How many Macs did Apple sell in 2014 Q1?
On to Macs now, and analysts predicted a 13.6 per cent year-over-year increase. The average estimate from analysts suggested that Apple sold 4.61 million Macs, with predictions ranging from 3.83 million units to 5.20 million.
Apple exceeded the average expectation here, selling 4.8 million Macs compared to 4.1 million in the year-ago quarter. That's an increase of 19 per cent, and is believed to be driven by iMac and MacBook Air sales. Importantly, the quarter marked the first time since 2012 that Apple's Mac sales have increased. That's despite a drop in the overall PC market of 6 per cent.
How do Apple's rivals compare?
Samsung has recently reported its earnings for the most recent quarter, revealing that it saw a drop in profit for the first time in two years. Bloomberg has suggested that the profit dip could be due to impressive sales of Apple's iPhone during the quarter.
However, Samsung is expected to launch a Galaxy S5 smartphone in the coming months, possibly in April, while Apple's next iPhone isn't expected until September.
According to research by IDC, the global smartphone market topped 1 billion shipments for the first time in 2013, covering about one-seventh of the world's population. The research suggests Samsung has 31.3 per cent market share in smartphones compared to Apple's 15.3 per cent.
Apple in China
Overall, 63 per cent of Apple's revenue for the quarter came from outside the US. Revenues from China rose by 29 per cent during the December quarter, and Apple's China Mobile deal hadn't even begun yet. Expect big things from Apple's presence in China during the current quarter.
Apple could sell 12 to 17 million iPhones to China Mobile customers in calendar 2014, say analysts.
During the China Mobile launch, Apple CEO Tim Cook said that the company had already broken iPhone sales records in China during the December quarter, which an IDC analyst expects means Apple sold in excess of 10.4 million iPhones in the region. Cook declined to comment further, and said: "I'll let others predict the numbers."
During the call, Cook spoke a bit about China and the deal with China Mobile. "In China we grew at 20 per cent, but as you know we just added China Mobile, the largest carrier there, this quarter," he said. "One of the most important things for us in the iPhone business was to do really well in emerging markets, and we had the best quarter ever from that respect. Another was to grow in China, because I think you can't be in the business that we're in and not have a reasonable China business. And you can see how we did last quarter, and we've now followed that up with a deal with China Mobile. And I also feel great about that."
"I'm not going to give you a forecast for it," Cook continued. "I think if you just back up and look at it from a commonsense point of view, China Mobile has more subscribers than anyone in the world; it has three-quarters of a billion. And so I do see it as a watershed moment for Apple, and have a very, very strong belief in the abilities of the two companies to do the great things together."
Apple is providing an audio recording of the call for two weeks.