10 Important Takeaways From Apple's Record-Breaking Earnings Call
Earnings Call Shatters Records
Apple's first-quarter earnings call on Tuesday evening shattered records and sent shares up 6 percent.
The Cupertino, Calif.-based tech company sold a record-breaking 74.4 million iPhones for its first quarter ended Dec. 27, powering $18 billion in profit on a nearly 30 percent increase in sales to $74.6 billion.
The 37 percent increase in profit to $3.06 per share blew away the Wall Street consensus of just $2.59 on sales of $67.5 billion for the quarter.
But there were many other aspects of Apple that CEO Tim Cook (pictured) and CFO Luca Maestri celebrated during the historic quarterly review. Following are 10 things CRN learned about Apple's products, sales and future.
10. 'High Expectations' For Apple Watch
Cook said he had "high expectations" for Apple Watch, noting that the company's first smartwatch was coming along on schedule and was set to be released in April.
"Developers are hard at work on apps, notifications and information summaries that we call glances, all designed specifically for the Watch's user interface," he said. "The creativity and software innovation going on around Apple Watch is incredibly exciting and we can't wait for our customers to experience them when Apple Watch becomes available."
Apple Watch, the first new product line in Cook's tenure as the CEO of Apple, is composed of a curved, rectangular frame made of stainless steel with a sapphire display. It also comes in 18-karat gold and aluminum models.
9. 2015 Will Be 'The Year Of Apple Pay'
Apple Pay, another category introduced in the fall, has also been making great progress, said Cook.
According to Cook, three months after Apple Pay's release, some 750 banks and credit unions have signed on to bring the mobile payment system to their customers. Apple Pay makes up more than $2 out of $3 spent on purchases using contactless payment across the three major U.S. card networks.
"More merchants are excited to bring Apple Pay to their customers, and adoption is strong," said Cook. "Point-of-sale suppliers tell us they are seeing unprecedented demand from merchants, and all of our partners and customers simply love this new service. With all of this momentum in the early day, we are more convinced than ever that 2015 will be the year of Apple Pay."
8. IBM-Apple Global Partnership Making Strides
In December, Apple and tech firm IBM partnered to produce MobileFirst for iOS solution products and apps. As part of the exclusive agreement, IBM would sell iPhones and iPads with industry-specific solutions to business clients worldwide.
Since then, the two companies have delivered their first 10 apps for banking, retail, insurance and financial services. According to Cook, another 12 apps will be released in the coming quarter, including three new industries: health care, energy and industrial products.
"The list of new customers is expanding rapidly," said Cook. "IBM is engaged with more than 130 additional companies looking to empower their employees with MobileFirst for iOS solutions, and the list keeps growing. We couldn't be more pleased with this partnership."
7. Swift Growing At Unprecedented Rates
Cook said the company has been "blown away" by the reaction to Swift, Apple's new programming language that became available in September as part of its Xcode Apple developer toolset.
In the first month after Swift's release, Cook said the tools were downloaded over 11 million times, and a recent report from Redmond shows that the language is growing at unprecedented rates.
"Inventing a new programming language is something very few companies can do, and we believe it will have a profound effect on our ecosystem," said Cook. "We've seen many of our developers choosing Swift as they build significant new projects, and we are seeing fantastic work with Swift going on in education."
6. Solid App Store Revenue
CFO Luca Maestri said that Apple's record performance was driven by the "tremendous momentum of the App Store," as revenue grew 41 percent in the December quarter.
In addition, iOS developers have earned more than $25 billion from the App Store, and total sales of media and software from iTunes were $2.6 billion, high compared to the same quarterly results last year of $2.4 billion.
"App Store revenue was up a remarkable 41 percent. Demand was strong around the world. Flurry estimated that Apple products accounted for over half all mobile device activations globally from Dec. 19 to Dec. 25," said Cook.
5. Mac Sales See 14 Percent Growth
Maestri said Apple sold 5.5 million Macs, a record-breaking 14 percent increase over the 4.8 million units sold in the same quarter last year.
Maestri called these results "truly remarkable," especially given the fact that the research firm IDC had estimated a 3 percent global PC market decline in the quarter.
Driving the popularity of Macs during the holiday season was the popularity of the new iMac with Retina 5K display. Maestri added that the company achieved double-digit year-over-year unit growth in both desktops and portables.
4. Dropping iPad Sales
Apple reported selling 21.4 million units during the holiday quarter for iPads, down from the 26 million in the December quarter last year.
Cook remained optimistic about iPad's future, although he acknowledged there wouldn't be an immediate sales bump.
"I see that the first-time buyer rates are very high," he said. "When you have that kind of buyer rate, you don't have a saturated market. When you look at the customer [satisfaction] rates on the iPad it's literally off the charts. When I back up and look at all of these, I believe over the long arc of time that the iPad is a great business. That said, I'm not projecting something very different next quarter or the next. I'm thinking over the long run."
3. Blowout iPhone Sales
Apple executives cheered the record-breaking 74.5 million level of iPhones sold in the holiday quarter, an increase of 23.4 million over last year, or 46 percent growth.
iPhone sales were strong in both developed and emerging markets, said Maestri, and sales doubled year-over-year in China, Apple's second-largest iPhone market. The release of the iPhone 6 and iPhone 6 Plus in September, at the beginning of the holiday quarter, was a large driving factor in the high sales levels.
"Demand for iPhone has been staggering, shattering our high expectation, with sales of over 74 million units, driven by the unprecedented popularity of iPhone 6 and iPhone 6 Plus," said Cook.
2. Cook 'Bullish' On iPhone Future
Given the blowout sales of the iPhone, Cook stressed that he expects future smartphone sales to be strong. He noted that Apple's smartphones were appealing to new customers, both new to smartphone and to the iPhone.
"We are incredibly bullish about the iPhone going forward," he said. "We believe that it's the best smartphone in the world. Our customers are telling us that. The market is telling us that. We're doing well in virtually every corner of the world. And so we're very bullish that it does have legs … and also the current iPhone lineup experienced the highest Android switcher rate in any of the last three launches in the three previous years."
1. Strong Outlook For The Future
Maestri and Cook cited strong predictions for the March quarter. Apple expects revenue to be between $52 billion and $55 billion, a significant revenue increase from the $45.6 billion revenue in the year-ago quarter.
In addition, Apple expects a gross margin of between 38.5 percent and 29.5 percent, and operating expenses of between $5.4 billion and $5.5 billion.
"Interest in Apple products is at an all-time high, with over 0.5 billion customer visits to our physical and online stores during the quarter," stressed Cook.