Apple’s Mixed Q3 2014 With $37.4B Revenue, $7.7B Profit And $1.28 EPS

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Apple has just released its fiscal Q3 2014 earnings, reporting $37.4 billion in revenue, $7.7 billion in net profit representing $1.28 per share. Compared to the year-ago quarter, it corresponds to a growth of 5.9 percent in revenue, and 19.6 percent in EPS (adjusted for the 7-for-1 split).

Fortune‘s consensus among analysts was for Apple to report earnings of $1.26 per share on $38.31 billion in revenue, with both revenue and EPS growing. In particular, analysts estimated that the gross margin should be around 38.0 percent, boosting the company’s Earnings.

What happened in reality is that the gross margin was even higher than that at 39.4 percent. But the company slightly disappointed when it comes to revenue. That’s why it managed to stay ahead of analysts’ expectations for earnings per share with a revenue below what everyone anticipated. In particular, iPad sales were disappointing.

Apple’s own guidance from its last earnings release predicted between $36 billion and $38 billion in revenue, with gross margin between 37 percent and 38 percent. In 2013, Apple’s guidance has been much more accurate than before, with the upper end of the forecast very close to what it actually reported. Last quarter was an exception as Apple was above its numbers. Now everything is back on track.

In other words, analysts and Apple itself all anticipated a good quarter, especially due to a better gross margin. It was indeed the case, but revenue was supposed to be even better than that. While the iPhone 5c was designed to solve the company’s gross margin issue, it didn’t sell as well as anticipated. There are probably other improvements. Maybe people chose the iPad Air over the iPad mini compared to last year.

“Our record June quarter revenue was fueled by strong sales of iPhone and Mac and the continued growth of revenue from the Apple ecosystem, driving our highest EPS growth rate in seven quarters,” Apple CEO Tim Cook wrote in the release. “We are incredibly excited about the upcoming releases of iOS 8 and OS X Yosemite, as well as other new products and services that we can’t wait to introduce.”

Hardware

This quarter, Apple sold 35.3 million iPhones, 13.3 million iPads and 4.4 million Macs in the quarter. Compared to Q3 2013, iPhone sales grew by 13.9 percent while iPad sales declined by 8.9 percent. Read all the details about hardware sales in our separate post.

International Revenue

China represented once again a big growth driver for the company. A significant portion of iPhone and iPad sales came from China. Read more in our post.

Stockmarket And Guidance

Apple has performed incredible well on the stock market. After splitting its shares 7 for 1 stock split and boosting its dividend strategy, shares have been steadily going up for the last three months, nearing its all-time high of $100.81 after adjustment. Shortly after the release, shares are stable in after-hours trading (down 0.44 percent).

Apple’s own guidance for Q4 2014 predicts between $37 billion and $40 billion in revenue with a gross margin between 37 and 38 percent. The company reported $37.5 billion in revenue last year.

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Image credit: Bryce Durbin