Apple’s US$58bn second quarter revealed some key insights into Apple’s future, including the decline of the iPad, the rise and rise of China’s middle classes and the fact that the iPhone is the gift that keeps giving.
The company last night revealed Apple reports Q2 revenues of US$58bn and profits of US$13.6bn, or US$2.33 per diluted share.
These figures compare to revenue of US$45.6bn and net profit of US$10.2bn, or US$1.66 a share, in the same quarter a year ago. This equates to a 27pc revenue growth and 40pc EPS growth for the company, setting new second quarter records.
According to Apple, the growth has been driven by record second quarter sales of iPhone and iMac devices, as well as an all-time best performance of the App Store.
The iPhone is king — 700m iPhones have been sold since 2007
Apple sold 61.1m iPhones in the second quarter, up 40pc on a year ago but down on the record-breaking Christmas quarter. The success of the iPhone 6 and iPhone 6 Plus, in particular, has seen Apple overtake arch rival Samsung in global smartphone sales in the last quarter. The sale of iPhones brought in US$40.3bn in revenue, the second biggest quarter for iPhone sales and overall revenue in its history. This is up from 43.7m iPhones sold in the same quarter last year. However, the last quarter (Q1) Apple sold a record 74.7m iPhone devices and posted US$51.2bn in revenue. “We’re seeing a higher rate of people switching to iPhone than we’ve experienced in previous cycles,” said Apple CEO Tim Cook.
The Mac is making Apple more money than the iPad
Apple sold 12.6m iPads in the second quarter, down 23pc from a year ago. Since 2011, the iPad business had overtaken Apple’s Mac business in terms of revenue, but now that has changed. Apple made USR$5.6bn in revenue from its Mac sales in Q2, compared with US$5.4bn in iPad revenue. Apple makes more money from its Mac business if you consider it sold 4.5m Macs compared with 12.6m iPads. iPad sales are likely to continue to decline because, overall, consumers are not refreshing tablets as quickly as companies would like. Apple has made only slight improvements and changes to the iPad. However, Apple CEO Tim Cook believes iPad sales will stabilise. “It is what it is. It will play out, and at some point it will stabilise. I am not sure precisely when, but I’m pretty confident it will.”
China rising to become Apple’s second-biggest global market
The rising middle and millionaire classes in China drove Apple’s sales in that country, which grew by 71pc to US$16.8bn. Apple launched the iPhone 6 in China last autumn with a number of carriers. In fact, China is now Apple’s second-biggest global market after the US, not Europe. The Chinese market for Apple products is growing three times faster than Europe or the Americas. Apple opened five new stores in China during the first quarter and plans to add 40 new retail locations across China by 2016. App Store revenue grew 100pc in China over the last year and developers in China have earned more than US$5bn from Apple.
The iPod is dead, or dying
To understand Apple is to understand a company that is unafraid to cannibalise itself. 14 years ago Apple’s music player, the iPod, was the device that set Apple on its journey to the iPhone and the iPad, but now it is bundled in with other products and bringing in a fraction of a paltry US$1.6bn under the heading ‘Other Products’.
Watch this space – the Apple Watch has only begun shipping
The forthcoming third quarter will reveal a drastically changed set of results for Apple when the new form factor, the Apple Watch, is taken into account. Apple’s foray into wearables will be interesting to watch, of course, as it represents a whole new sales model for Apple. Users are being encouraged to buy their devices online rather than solely in Apple stores, as well as by walking into high-fashion stores in London, Paris and Tokyo. But it appears that, despite promising sales, Apple has a shipping headache to overcome. According to statistics published by online commerce market research firm Slice Intelligence, only 376,000 of the 1.7m Apple Watches pre-ordered in the US were dispatched over the weekend since its 24 April launch. Another 547,000 watches are expected to ship between now and 11 June, though a further 639,000 consumers are waiting to receive word about when their devices will be sent. The new watch is available in two sizes (38mm and 42mm) and across three editions: Apple Watch Sport (US$349 to US$399), Apple Watch (US$599 to US$1,099), and from US$10,000 for the Apple Watch Edition.
iPhone image via Shutterstock