How Apple’s Earnings Report Smashed Corporate Records

By Don Reisinger

Apple posted the strongest quarterly earnings in its history during the three-month period ended Dec. 27. The company’s quarterly revenue hit $74.6 billion, representing a 30 percent gain from the same period the year before. In this interval, Apple’s net profit jumped to $18 billion from $13.1 billion.

The biggest contributor to Apple’s growth in its latest quarter was the iPhone. Apple sold a record 74.5 million iPhones worldwide during the period, generating $51.2 billion of its $74.6 billion in revenue.

China is a hugely important market for Apple. The company reported that it generated $16.1 billion in revenue in China, easily topping all other markets, except Europe and the Americas. Apple’s China revenue was up 70 percent from the same quarter in the previous fiscal year.

Mac sales were up again at the end of 2014, generating $6.9 billion in revenue and reaching 5.5 million unit sales. During the same quarter the previous fiscal year, Apple’s Mac sales were $6.4 billion. The company sold 4.8 million Mac units that quarter.

Apple has been loath to break out much of its financials over the years, so it puts its many services, including iTunes Store, App Store, iBooks and AppleCare, into a division it calls Services. That division had a strong end to 2014, generating $4.8 billion in revenue during the quarter, up 9 percent from the same period in the previous fiscal year.

Like Services, “Other Products” is a catch-all for Apple’s other hardware businesses, like Apple TV, iPod, Beats Electronics and accessories. That business was down 5 percent year-over-year, generating revenue of $2.7 billion, compared with $2.8 billion during the same quarter in the previous fiscal year.

Although Apple didn’t even mention the iPad in its press release announcing its record sales, some digging reveals that the tablet had some trouble in the latest quarter. Apple sold 21.4 million iPads during the period, down 18 percent year-over-year. Furthermore Apple’s iPad revenue dropped 22 percent year-over-year. That will need to be addressed this year.

To its credit, Apple is generating more profit from its sales. Apple reported that its gross margin—a measure of sales minus the cost of sales—was 39.9 percent at the end of 2014, up from 37.9 percent in the year-earlier quarter. In a hotly contested market like technology, having a 40 percent gross margin is staggering and perhaps a credit to Apple’s strong supply chain management practices.

Not surprisingly, Apple’s investors are extremely pleased with the company’s performance. On Jan. 28, the day after the earnings were released, Apple’s stock opened at $117.62 per share and topped out at $118.12. Apple’s stock closed the day on Jan. 27 at $109.14 per share.

One of the main reasons investors seem pleased is that Apple is giving out some cash to its shareholders. The company announced in its earnings release on Jan. 27 that it will issue a 47-cent-per-share dividend on Feb. 12. Eligible investors will be shareholders of record at the close of trading on Feb. 9.