Apple has just released its fiscal Q2 2014 earnings, reporting $45.6 billion in revenue, $10.2 billion in net profit representing $11.62 per share. Compared to the year-ago quarter, it corresponds to a growth of 4.6 percent in revenue, and 15.2 percent in EPS.
According to Fortune, the consensus among analysts was for Apple to report earnings of $10.22 per share on $43.45 billion in revenue, with revenue very slightly declining and EPS very slightly growing year-over-year.
Guidance from its last earnings release forecasted between $42 billion and $44 billion in revenue, with gross margin between 37 percent and 38 percent. Over the past year, Apple’s own guidance has been much more accurate, with the upper end of the forecast very close to what it actually reported.
In other words, analysts and Apple itself all anticipated a flat quarter — flat revenue, flat gross margin, flat net profit, flat everything. This was mostly due to a slight decline in iPad sales and a slight increase in iPhone sales.
But this quarter is an exception. Apple performed better than anticipated. In particular, the iPhone was a big seller this quarter. It could come from better international performance, and especially in China.
Hardware
Apple sold 43.7 million iPhones, 16.4 million iPads and 4.1 million Macs in the quarter. Compared to Q2 2013, iPhone sales grew by 16.8 percent while iPad sales declined by 15.9 percent. Read all the details about hardware sales in our separate post.
“We’re very proud of our quarterly results, especially our strong iPhone sales and record revenue from services,” Apple CEO Tim Cook wrote in the release. “We’re eagerly looking forward to introducing more new products and services that only Apple could bring to market.”
International Revenue
China is one of the main reasons behind today’s performance. Apple has a hard time selling more devices in countries where it is already well established — it has to look elsewhere. Moreover, China Mobile recently added support for the iPhone. While Q1 is usually a very strong quarter for Apple, the company actually performed better in Q2 2014 compared to Q1 in China. Read more about this in our separate post.
Apple’s Financial Strategy
The company also made a few announcements regarding its financial strategy. First, it’s going to make a 7 for 1 stock split on June 1. It just added $30 billion to its share buyback program. And finally, the dividend was increased by 8 percent. It’s an impressive buyback program.
Apple has been pursuing an aggressive share buyback strategy. In February, the company repurchased $14 billion of Apple shares. Buying back your own shares is an alternative to issuing dividends and proves that you think that your stock is currently underpriced. So far, it doesn’t seem to have a significant impact on the stock price.
But today’s update just changed that. Shares jumped more than 7 percent following the announcement. Read about Apple’s financial strategy in our dedicated post.
Guidance
Apple’s own guidance for Q3 2014 predicts between $36 billion and $38 billion in revenue with a flat gross margin between 37 and 38 percent. The company reported $35.3 billion in revenue last year, so Apple is still a growing company.
Image credit: Bryce Durbin
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