A Look Inside Apple's Surprising Third-Quarter Earnings Report

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A Look Inside Apple's Surprising Third-Quarter Earnings Report

Apple's fiscal third-quarter earnings report, released Aug. 1, dispelled much of the worry about declining iPhone, iPad and Mac sales. Apple sold 41 million iPhones, and iPad sales jumped a surprising 15 percent to 11.4 million. But that wasn’t all Apple revealed in its earnings. The company also noted its cash hoard is growing rapidly and its Services operation, which includes Apple Music and the App Store, is now its second-largest division behind the iPhone. Although much of the report was positive, Apple acknowledged continued weakness in its important Greater China market. This eWEEK slide show will discuss the highlights from Apple’s fiscal third-quarter earnings and touch on what it expects its future will look like as Apple heads into the critical iPhone season.

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Revenue Growth Was Impressive

Apple’s revenue hit $45.4 billion during its fiscal third quarter, up 7 percent compared to the same period in 2016, when the company generated $42.4 billion. However, it was down from $52.9 billion in the prior quarter. Interestingly, the iPad was an important contributor to the growth.

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Profitability Continues to Soar

Revenue was up, which translated to a jump in profit during Apple’s fiscal third quarter. The company tallied $8.7 in billion profit in the three-month period ended July 1, topping the $7.8 billion it made in the prior year. Apple has generated $37.6 billion in profit in the first nine months of its fiscal year.

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Apple’s Impressive Cash Hoard Keeps Growing

Apple has been issuing dividends and investing in its company, but that hasn’t slowed its cash balance growth. At the end of the third quarter, Apple had $261.5 billion in cash on hand, a $4.7 billion increase from the previous quarter. A whopping 94 percent is held in overseas bank accounts.

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International Sales Hit a New High

Although the U.S. is still by far Apple’s biggest market, it is performing exceedingly well internationally, now earning 61 percent of its revenue from international markets, the company noted. Apple hasn’t said in previous quarters how much of its revenue was generated internationally.

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But Sales in China Dropped 10 Percent

Although Apple’s international performance is strong, its critical Greater China division is in trouble. During the fiscal third quarter, Greater China revenue slipped 10 percent to $8 billion, down 25 percent from the $10.7 billion Apple captured in the fiscal second quarter. China was the only market in which Apple experienced a revenue decline.

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Apple’s iPhone Sales Are Growing

Apple’s iPhone division continues to lead the charge. Apple sold 41 million iPhones during the fiscal third quarter, a 2 percent year-over-year increase, and revenue jumped 3 percent year over year.

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iPad Sales Growth Was the Biggest Surprise

Apple’s iPad division, which has been suffering declining sales over the last several quarters, saw an increase in the fiscal third quarter. Total iPad unit sales hit 11.4 million, a 15 percent jump over the prior year, and revenue grew by 2 percent year over year.

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Mac Sales Continue to Grow

Apple’s Mac division nabbed $5.6 billion in revenue, a 7 percent increase over the fiscal third quarter of 2016. Total Mac unit sales hit 4.3 million, a 1 percent increase compared to the prior year.

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Services Business Is Bigger Than Ever

Apple’s Services business is now more important than ever. The division, which includes the App Store and iTunes, is now Apple’s second-largest business behind the iPhone, with revenue of $7.3 billion. That figure is up 22 percent compared to the fiscal third quarter of 2016.

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A Look Ahead to the Next Quarter

Apple told investors its business should continue to perform well, anticipating fiscal fourth-quarter revenue of $49 billion to $52 billion. Apple’s gross margin, a measure of its gross profit, will hit 38 percent, the company predicts, and its tax rate will hit 25.5 percent.

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