(UPDATED at 6:00 p.m. after Apple earnings release)
Apple (AAPL) reported its earnings for the quarter ended June 30 after the market closed today. The company largely beat Wall Street expectations. Total revenue of $35.3 billion was above the estimate of $35 billion and earnings per share of $7.47 beat analysts' estimates of $7.31. Investors were pleased and sent the stock up over 4% in after-market trading.
The big number: gross profit margin
A reflection of component costs, the mix of products being sold and a host of other factors, Apple’s gross profit margin has been falling since it hit 47% at the beginning of 2012. The company’s top-of-the-line iPhone 5 carries the highest profit margin, analysts say. Other products, particularly the iPad mini and older iPhones, carry lower margins.
Apple reported a gross margin of 36.9%. Analysts expected 36.6% for the, according to FactSet, down from 43% a year earlier. The beat on that score likely fed the stock price move after hours.
Future perfect: guidance for next quarter
Stock investors are typically more concerned about a company’s future prospects. Yesterday Netflix (NFLX) reported higher profits than analysts expected but projected lower subscriber growth in the future, and the stock tumbled.
Apple said it would have revenue next quarter of as much as $37 billion. Analysts had relatively modest expectations for the next quarter, which ends September 30 – earnings per share of $7.93 and revenue of $37.1 billion. That compares to Apple’s reported profit for the same quarter in 2012 of $8.67 on revenue of $35.8 billion.
Current quarter: how low will it go?
Despite Apple's higher-than-expected earnings per share, profits were still down significantly from a year ago, when the company posted $9.32. The beat could be helping boost the stock, although other factors such as the ones mentioned above could prove more important.
Moving some product: how many iPhones sold
Apple blew out iPhone expectations, selling 31.2 million phones, its highest total for the June quarter ever and well above expectations for 27 million, around the same number it sold a year ago. But a much lower proportion were Apple's most expensive, newest model. The average selling price dropped to $581 from $608 a year ago. Apple executives said booming sales of its lowest-cost iPhone, the old 4 model – particularly to first-time smart phone buyers – were a big part of the quarter.
But iPad sales both came in below expectations and at a lower average selling price, too. Apple sold only 14.6 million tablets, while analysts expected sales of 18.3 million. And the average price dropped to $436 from $515 last year.
New products: Listening for clues
Apple has never announced new products on its earnings calls. But it sometimes offers hints or clues to the careful listener. Many investors think Apple should come out with a low-cost phone offering to sell to prepaid mobile customers and in developing countries such as India and China. Such a phone might hurt margins but could also super-charge revenue growth.
CEO Tim Cook has mused on the subject in the past but he wasn't biting Tuesday. When analyst Gene Munster asked about whether Apple had new products that could significantly boost sales, CEO Tim Cook replied: "We'll see, Gene."
Cook sounded a bit more lively on the subject of Apple's rumored trade-in program for used iPhones. Declining to confirm the rumors, Cook did say he was "not opposed to it." The environmental benefit is "the part of it that is really encouraging to me," he added.