Apple's numbers are out, and they're good.
Revenue, EPS, and iPhone sales are ahead of expectations. iPad sales were a little worse than expected, but not too bad.
The stock initially tanked after the numbers were out thanks to weaker than expected margin guidance. Apple guided to 36.5%-37.5%, which suggests a flat margin despite a new iPhone.
On the company's earnings call, it explained why margin was lighter than expected and the stock came roaring back. At last check it was down slightly in after hours trading.
Apple's margin will be hit by a combination of factors. It is selling new iPads that cost more to make, new laptops, foreign exchange issues, and most importantly, a $900 million sequential increase in deferred revenue thanks to all the software it is giving away with iOS and Macs.
On the earnings call, Gene Munster of Piper Jaffray said the real margin would have been closer to 38.5%, and Apple basically confirmed it. This sent the stock climbing.
Here are the big numbers from the report:
- Revenue : $37.5 billion versus expectations of $36.82 billion
- EPS : $8.26 versus expectations of $7.92
- iPhone : 33.8 million units versus expectations of 31 million units
- iPad : 14.1 million units versus expectations of 14.5 million units
- Mac : 4.6 million units versus expectations of 4.6 million units
- Gross Margin : 37% versus expectations of 37%
- December quarter revenue guidance : $55-$58 billion versus expectations of $55.53 billion
- December quarter gross margin guidance: 36.5-37.5%
- iPhone ASP: $577 versus $581 in the June quarter and $613 in the March quarter.
- iPad ASP: $439, versus $436 in the previous quarter.
- Cash in hand: $146.8 billion.
- Apple says it generated $9.9 billion in free cash flow. It returned $7.8 billion to shareholders through dividends and buybacks. It has spent $36 billion as part of its "capital return program".
Highlights from the earnings call:
- Apple talked a lot about its cash. It said it will take all suggestions for how to spend its cash into consideration and if it changes policy the change will happen in the first half of 2014. It also said that it is basically giving away all the cash that it generates in the U.S. to shareholders. 75% of its cash is overseas.
- Tim Cook said Apple plans to do new products in 2014. He said Apple has skills in hardware, software, and services, and those skills will allow it to enter new product categories. Weirdly, analysts didn't follow on this. They were too focused on margins.
- Cook is bullish on the iPad for the holidays. "It's going to be an iPad Christmas," he said. He says iPad will be up year over year, and he thinks people will have a hard time getting their hands on the iPad Air this weekend.
- Cook also said the Mac would be up on a year over year basis in the December quarter .
- Cook pooh poohed people let down by 5C pricing. Basically, he said you may have thought it was going to be cheap, but we never did. Apple has seen price elasticity with the iPhone 4, and decided to go with the 4S as the cheap model as an entry.
Here's a chart of iPhone sales:
Here's a chart of iPad sales:
Here's a chart of iPhone average selling prices:
Business Insider Intelligence
Here's a chart of iPad average selling prices:
And, here's a chart of where Apple's revenue comes from:
LIVE NOTES FROM THE CALL
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