Apple just reported its first significant year-over-year drop in profits since 2003, even though the company’s earnings grew from the same quarter a year ago. How did that happen? Let’s dig into the charts.
First, here’s a look at Apple’s earnings over time:
Part of the reason that profits fell while revenue grew is that, in the same quarter a year ago, Apple had its highest profit margin in five years, at 47.3%. That wasn’t the case this time around: Apple’s margin was 37.5% in the latest quarter.
The decline in margins can be partially attributed to disappointing sales of the iPhone, which is Apple’s highest-margin product, by far. This past quarter, the iPhone accounted for a smaller portion of Apple’s revenue than a year prior, and sold for $613 apiece, the phone’s lowest average retail price in at least three years.
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