Yes, Apple missed with their earnings today. It’s the first time in a long time that has happened. Some are suggesting that hasn’t happened since 2002. That’s big news. But it’s also masking even bigger news: Apple’s expectations for next quarter.
In a press release, it can be hard to tell what numbers on a page signify. But those who follow Apple closely must have taken one look at Apple’s guidance for next quarter and had their jaws drop. I know mine did. Apple is projecting to make $37 billion in revenue next quarter, their holiday quarter. They’re projecting an EPS of $9.30. Both are insane (in a good way).
To put this in some perspective, Apple has never had a quarter over $30 billion in revenue. The closest they’ve come was last quarter, when revenue hit $28.57 billion (this past quarter was their second best ever). A year ago during the holiday quarter, Apple did $26.7 billion in revenue. They’re projecting these numbers to be $10 billion higher.
But that’s not the craziest part.
Where this really gets insane is when you realize that Apple always lowballs their projections. For example, this past quarter, they estimated they would bring in $25 billion in revenue, which they easily beat (it was the Street projections that they missed). So if Apple says they’re going to make $37 billion next quarter, it’s entirely possible — hell, maybe even likely — that they still will never have had a $30 billion quarter — because next quarter may be a $40 billion quarter.
Obviously, to get there, they would need to hit an absolute homerun. But again, it’s the holiday quarter for the top consumer electronics company in the world. And it’s the quarter that will see the initial sales of the iPhone 4S, which just launched last weekend to the tune of 4 million units sold in 3 days — the best sales for any phone ever. The iPhone is the key to Apple’s revenue, and it’s the reason why they missed expectations this past quarter. If the iPhone 4S sells well, $40 billion is not out of the question.
For a bit more context, while Apple has held the profit title among tech companies for a little while, they’re still behind HP when it comes to revenue. HP announced revenues of $31.2 billion in their last reported quarter. A few months ago, I predicted that Apple would soon zoom past HP in this regard as well. Now it’s looking like they won’t just squeeze past, they’ll demolish them next quarter. HP’s all-time high for revenue in a quarter is around $33 billion.
It gets even crazier.
Apple is so confident that next quarter is going to be a blow-out quarter that twice on their earnings call today, Apple CEO Tim Cook and CFO Peter Oppenheimer went out of their way to predict that Apple would see record iPhone and iPad sales next quarter. That’s something Apple never does. Their guidance is always very general (and again, low) and they stick to talking about things at a high level. Not today. This is two Apple executives going out on a limb to predict records for their two key products next quarter.
I think it’s pretty obvious that they would only do that if they felt like they weren’t going out on a limb. That is to say, Cook and Oppenheimer must be extremely confident that Apple is going to sell well north of 20 million iPhones (the previous record, set last quarter) and 11 million iPads (the record set this quarter). And a lot more.
So while Wall Street is panicking right now — Apple’s stock is currently down over 27 points (6.5 percent) in after-hours trading after the miss — Apple seems more confident than ever.
Sure, a part of it may be that Apple had to throw investors some bone in a period of relative volatility (a rare miss and just weeks after co-founder and CEO Steve Jobs passed away). But no matter which way you look at it, it’s one hell of a bone.