Apple Reports Results for Q3 2012: $8.8 Billion Profit on $35 Billion in Revenue
Apple Reports Results for Q3 2012: $8.8 Billion Profit on $35 Billion in Revenue: Apple today announced financial results for the second calendar quarter and third fiscal quarter of 2012. For the quarter, Apple posted revenue of $35.0 billion and net quarterly profit of $8.8 billion, or $9.32 per diluted share, compared to revenue of $28.57 billion and net quarterly profit of $7.31 billion, or $7.79 per diluted share, in the year-ago quarter.
This will be considered a big "miss" for Apple, as it is dramatically weaker than what analysts were expecting. The company did beat its own guidance, however. Last quarter, Apple said it would make $34 billion in revenue and earnings of $8.67 per share.
Gross margin was 42.8 percent, compared to 41.7 percent in the year-ago quarter, and international sales accounted for 62 percent of the quarter's revenue. Apple's quarterly profit and revenue were both company records for the June quarter. Apple also declared a new quarterly dividend of $2.65 per share payable on August 16 to shareholders as of the close of trading on August 13.
Quarterly iPhone unit sales reached 26.0 million, up 28 percent from the year-ago quarter, and the company sold 17.0 million iPads, up 84 percent year-over-year. Apple sold 4.0 million Macintosh computers, a unit increase of 2 percent over the year-ago quarter. The company also sold 6.8 million iPods, representing a 10 percent unit decline year-over-year.
Apple will provide live streaming of its Q3 2012 financial results conference call at 2:00 PM Pacific, and MacRumors will update this story with coverage of the conference call highlights.
Conference Call Highlights
- Established new all-time quarterly records for iPad sales, and June quarter records for iPhone and Mac sales.
- Year over year growth of Mac of 23%.
- Strong growth in iPad and iPhone sales year over year.
- Sold 4 million Macs. This represents 2% growth year over year, higher than 1% contraction of global PC market.
- Customer response has been excellent for new MacBook Air and Pro models.
- Best quarter ever for US education institution Mac sales.
- Notable large edu sales: Rutherford County, NC -- 6k MacBook Airs. Pueblo, CO district 70 -- all high school students and K-12 staff converting to MacBook Air.
- 3-4 weeks of Mac channel inventory. Below target of 4-5 weeks.
- Mountain Lion comes out tomorrow.
- Sold 6.8 million iPods. Versus 7.5 million last year. Ahead of Apple's internal expectations.
- iPod Touch accounts for more than half of iPods sold.
- Share of mp3 market is higher than 70%. Top selling mp3 player in most countries Apple tracks.
- 4-6 weeks of iPod channel inventory, within targets.
- $1.8 billion from iTunes Store.
- Launched iTunes in 12 new countries.
- 20 million songs.
- Great interest in iTunes U. 14 million downloads of the app. 700 new K-12 schools and districts and 125 colleges enrolled in iTunes U. 750 new courses.
- 26 million iPhones. 20.3 million last year. 28% YoY growth. Ahead of amount we factored into our guidance.
- 250 carriers in over 100 countries.
- Dropped 300k iPhones in channel inventory. 4-6 weeks of inventory.
- Recognized revenue was $16.2 billion, versus $13.3 billion last year. Increase of 22%.
- More than double the iPhones in Fortune 500 from last year.
- 17 million iPads versus 9.2 million last year, up 84%.
- Very strong growth in sales around the world.
- Sold in 97 countries.
- Up 1.2 million units in channel inventory. 4-6 weeks.
- Sales setting new quarterly record for education sales. Sold 1 million iPads to education.
- Sales of iPad 2 were particularly strong to K-12 market.
- Achieved all-time record Mac sales to education, but sold twice as many iPads to US institutions.
- Number of iPads in Fortune 500 has more than tripled in past year.
- App Store in 155 countries. 650k apps, 225k for iPad.
- Surpassed $5.5 billion in payments to developers.
- 150 million iCloud users.
- iOS 6 coming this fall.
- Apple Retail: $4.1 billion in revenue, up 17% year over year. Growth coming from record iPad sales and iPhone sales. 791k Macs, half the Macs sold to customers to new Mac owners.
- 9 new stores. 372 stores total. 123 stores outside US.
- $11.1 million versus $10.8 million revenue per store.
- 80.3 million visitors total. 17,000 visitors per store per week.
- 42.8% gross margin.
- Better than expected commodity, warranty and other costs.
- Offset by strong mix by iPad sales, higher mix of lower priced iPhones, and stronger US dollar.
- $3.4 billion, $378 million in stock based compensation.
- Tax rate of 25.6%.
- Cash: $117.2 billion at end of June quarter. Up $7 billion. $81 billion in cash was offshore.
- $10.2 billion cash flow from operations.
- Board of directors announces dividend of $2.65 per common share.
- Expect to announce record and payment dates concurrently with quarterly earnings announcements going forward.
- $10 billion in stock repurchase beginning next year.
- Expect revenue of $34 billion versus $28.3 billion in 2012 in September quarter. Margin of 38.5%.
- Targeting EPS of $7.55 per share.
- Extremely confident in our strategy.
- Amazing new products in the pipeline.
Q&A
Q: Why is gross margin guidance so low? Been 2 years since been sub-40% gross margin.
A: Down 430 basis points sequentially. Most of this decline is from fall transition, strong US dollar, full quarter of back to school promotion.
Q: Seen spectacular growth in China over past several years. Macro concerns in the market and Asia-Pac growth decelerated from 100+ to 25% growth this quarter.
A: Growth in Asia Pac was 25%. Vast majority in difference in sequential growth rate was the result of greater China. 2/3 of revenue in AsiaPac comes from China. 48% increase year over year. Virtually all of the $2.2 billion sequential revenue decline was due to iPhone sales in greater China. Half of that is attributable to changes in channel inventory not underlying sell-through. Launched iPhone 4S in China last quarter, added China Telecom as second carrier in March. Increased channel inventory over the quarter to meet targets.
Mainly attributable to normal seasonality after very successful iPhone 4S launch. Didn't see large impact that we would associate with weak economy in mainland China. Up 100% year over year in iPhone sales in greater China. Launched new iPad last Friday. Sales did not benefit from new iPad in June quarter in mainland China.
New portables that we announced at WWDC began to ship in China last week. June quarter sales did not benefit from these products. We remain really confident about our plans and are very excited about opportunity in China. Looking forward to incorporating more local services to China.
Q: Thoughts on individual segments?
A: iPhone, we expect year-over-year increase in sales in September. Same for iPad and Mac. Revenue guidance is up 20% year over year. Not expecting economies in Europe, Australia, Brazil or Canada to improve. No obvious evidence of economy impacting sales in China or the US. Reading same things that you are about these economies so we'll see.
Weekly iPhone sales continue to be impacted by rumors and speculation regarding new products. In supply/demand balance. Don't expect new country or carrier additions in the quarter.
Current iPad lineup includes $399 iPad 2, will impact ASP's in September quarter. US dollar has strengthened against most currencies. This should have adverse impact to revenue in these countries in excess of $400 million.
Q: Can you walk us through some of the trends you saw for iPhone demand sequentially in other international regions?
A: Completed iPhone rollout in all countries including China. Got the channel within target inventory range of 4-6 weeks by the end of March. Last quarter, increased sell-in over sell-through by 2.6 million units. Our sell-in was less than sell-through in this quarter. Net change in channel inventory across quarters was 3 million units.
In different geographies, iPhone, US was very strong, running at 47%. Japan was strong at 45%. Greater China was up 66% but Mainland was up more than 100%. Europe did not perform well, essentially flat. Hampered our total results.
Regarding general revenue, within Europe, we see marked difference between countries. UK was solid at 30% growth. France and Greece and Italy were particularly poor. Germany was a single digit positive growth. Eastern Europe was strong compared to Western, but Western drives revenue. Seeing a slowdown in revenue in that area. US and China are not seeing an obvious economic issue.
Q:
This will be considered a big "miss" for Apple, as it is dramatically weaker than what analysts were expecting. The company did beat its own guidance, however. Last quarter, Apple said it would make $34 billion in revenue and earnings of $8.67 per share.
Gross margin was 42.8 percent, compared to 41.7 percent in the year-ago quarter, and international sales accounted for 62 percent of the quarter's revenue. Apple's quarterly profit and revenue were both company records for the June quarter. Apple also declared a new quarterly dividend of $2.65 per share payable on August 16 to shareholders as of the close of trading on August 13.
Quarterly iPhone unit sales reached 26.0 million, up 28 percent from the year-ago quarter, and the company sold 17.0 million iPads, up 84 percent year-over-year. Apple sold 4.0 million Macintosh computers, a unit increase of 2 percent over the year-ago quarter. The company also sold 6.8 million iPods, representing a 10 percent unit decline year-over-year.
“We’re thrilled with record sales of 17 million iPads in the June quarter,” said Tim Cook, Apple’s CEO. “We’ve also just updated the entire MacBook line, will release Mountain Lion tomorrow and will be launching iOS 6 this Fall. We are also really looking forward to the amazing new products we’ve got in the pipeline.”Apple's guidance for the fourth quarter of fiscal 2012 includes expected revenue of $34 billion and earnings per diluted share of $7.65.
Apple will provide live streaming of its Q3 2012 financial results conference call at 2:00 PM Pacific, and MacRumors will update this story with coverage of the conference call highlights.
Conference Call Highlights
- Established new all-time quarterly records for iPad sales, and June quarter records for iPhone and Mac sales.
- Year over year growth of Mac of 23%.
- Strong growth in iPad and iPhone sales year over year.
- Sold 4 million Macs. This represents 2% growth year over year, higher than 1% contraction of global PC market.
- Customer response has been excellent for new MacBook Air and Pro models.
- Best quarter ever for US education institution Mac sales.
- Notable large edu sales: Rutherford County, NC -- 6k MacBook Airs. Pueblo, CO district 70 -- all high school students and K-12 staff converting to MacBook Air.
- 3-4 weeks of Mac channel inventory. Below target of 4-5 weeks.
- Mountain Lion comes out tomorrow.
- Sold 6.8 million iPods. Versus 7.5 million last year. Ahead of Apple's internal expectations.
- iPod Touch accounts for more than half of iPods sold.
- Share of mp3 market is higher than 70%. Top selling mp3 player in most countries Apple tracks.
- 4-6 weeks of iPod channel inventory, within targets.
- $1.8 billion from iTunes Store.
- Launched iTunes in 12 new countries.
- 20 million songs.
- Great interest in iTunes U. 14 million downloads of the app. 700 new K-12 schools and districts and 125 colleges enrolled in iTunes U. 750 new courses.
- 26 million iPhones. 20.3 million last year. 28% YoY growth. Ahead of amount we factored into our guidance.
- 250 carriers in over 100 countries.
- Dropped 300k iPhones in channel inventory. 4-6 weeks of inventory.
- Recognized revenue was $16.2 billion, versus $13.3 billion last year. Increase of 22%.
- More than double the iPhones in Fortune 500 from last year.
- 17 million iPads versus 9.2 million last year, up 84%.
- Very strong growth in sales around the world.
- Sold in 97 countries.
- Up 1.2 million units in channel inventory. 4-6 weeks.
- Sales setting new quarterly record for education sales. Sold 1 million iPads to education.
- Sales of iPad 2 were particularly strong to K-12 market.
- Achieved all-time record Mac sales to education, but sold twice as many iPads to US institutions.
- Number of iPads in Fortune 500 has more than tripled in past year.
- App Store in 155 countries. 650k apps, 225k for iPad.
- Surpassed $5.5 billion in payments to developers.
- 150 million iCloud users.
- iOS 6 coming this fall.
- Apple Retail: $4.1 billion in revenue, up 17% year over year. Growth coming from record iPad sales and iPhone sales. 791k Macs, half the Macs sold to customers to new Mac owners.
- 9 new stores. 372 stores total. 123 stores outside US.
- $11.1 million versus $10.8 million revenue per store.
- 80.3 million visitors total. 17,000 visitors per store per week.
- 42.8% gross margin.
- Better than expected commodity, warranty and other costs.
- Offset by strong mix by iPad sales, higher mix of lower priced iPhones, and stronger US dollar.
- $3.4 billion, $378 million in stock based compensation.
- Tax rate of 25.6%.
- Cash: $117.2 billion at end of June quarter. Up $7 billion. $81 billion in cash was offshore.
- $10.2 billion cash flow from operations.
- Board of directors announces dividend of $2.65 per common share.
- Expect to announce record and payment dates concurrently with quarterly earnings announcements going forward.
- $10 billion in stock repurchase beginning next year.
- Expect revenue of $34 billion versus $28.3 billion in 2012 in September quarter. Margin of 38.5%.
- Targeting EPS of $7.55 per share.
- Extremely confident in our strategy.
- Amazing new products in the pipeline.
Q&A
Q: Why is gross margin guidance so low? Been 2 years since been sub-40% gross margin.
A: Down 430 basis points sequentially. Most of this decline is from fall transition, strong US dollar, full quarter of back to school promotion.
Q: Seen spectacular growth in China over past several years. Macro concerns in the market and Asia-Pac growth decelerated from 100+ to 25% growth this quarter.
A: Growth in Asia Pac was 25%. Vast majority in difference in sequential growth rate was the result of greater China. 2/3 of revenue in AsiaPac comes from China. 48% increase year over year. Virtually all of the $2.2 billion sequential revenue decline was due to iPhone sales in greater China. Half of that is attributable to changes in channel inventory not underlying sell-through. Launched iPhone 4S in China last quarter, added China Telecom as second carrier in March. Increased channel inventory over the quarter to meet targets.
Mainly attributable to normal seasonality after very successful iPhone 4S launch. Didn't see large impact that we would associate with weak economy in mainland China. Up 100% year over year in iPhone sales in greater China. Launched new iPad last Friday. Sales did not benefit from new iPad in June quarter in mainland China.
New portables that we announced at WWDC began to ship in China last week. June quarter sales did not benefit from these products. We remain really confident about our plans and are very excited about opportunity in China. Looking forward to incorporating more local services to China.
Q: Thoughts on individual segments?
A: iPhone, we expect year-over-year increase in sales in September. Same for iPad and Mac. Revenue guidance is up 20% year over year. Not expecting economies in Europe, Australia, Brazil or Canada to improve. No obvious evidence of economy impacting sales in China or the US. Reading same things that you are about these economies so we'll see.
Weekly iPhone sales continue to be impacted by rumors and speculation regarding new products. In supply/demand balance. Don't expect new country or carrier additions in the quarter.
Current iPad lineup includes $399 iPad 2, will impact ASP's in September quarter. US dollar has strengthened against most currencies. This should have adverse impact to revenue in these countries in excess of $400 million.
Q: Can you walk us through some of the trends you saw for iPhone demand sequentially in other international regions?
A: Completed iPhone rollout in all countries including China. Got the channel within target inventory range of 4-6 weeks by the end of March. Last quarter, increased sell-in over sell-through by 2.6 million units. Our sell-in was less than sell-through in this quarter. Net change in channel inventory across quarters was 3 million units.
In different geographies, iPhone, US was very strong, running at 47%. Japan was strong at 45%. Greater China was up 66% but Mainland was up more than 100%. Europe did not perform well, essentially flat. Hampered our total results.
Regarding general revenue, within Europe, we see marked difference between countries. UK was solid at 30% growth. France and Greece and Italy were particularly poor. Germany was a single digit positive growth. Eastern Europe was strong compared to Western, but Western drives revenue. Seeing a slowdown in revenue in that area. US and China are not seeing an obvious economic issue.
Q:
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