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Apple Makes Corporate History: Registers A Record US $18 Bn in Net Profits in a Quarter

Jan 30, 2015 | Technology | Future Market Insights

Apple’s recent announcement of its financial results for the first fiscal quarter of 2015 has left the entire world awe-struck. Apple, Inc. registered a net profit of US $ 18 Bn in its first fiscal quarter (three-month period ending on December 27, 2014), which is the biggest quarterly profit ever made by a public limited company. High iPhones sales during the holiday season and record sales in China were the major factors for Apple’s total quarterly revenues of US $ 74.6 Bn. Apple’s most profitable quarter also meant that earnings per share (EPS) rose sharply by 48% to reach US $ 3.06. Apple’s gross margin, an indicator that measures the percentage of revenue after taking manufacturing costs into account, rose by 2% to reach 39.9% in the quarter.

iPhone: Apple’s Biggest Seller

The soaring sales of iPhone 6 and iPhone 6 Plus drove Apple’s high earnings in its first fiscal quarter. The total sale of 74.5 Mn iPhones was a whopping 46% more than a year earlier. According to estimates, Apple sold close to 34,000 iPhones every hour in its most profitable quarter. Out of the total quarterly revenue of US $ 74.6 Bn, iPhone sales accounted for an astonishing 70%.

Apple’s feat is more impressive because in the recent past, it was dethroned from its No. 1 spot by arch-rival Samsung. The staggering demand for Apple’s new iPhones — iPhone 6 and iPhone 6 Plus — not only forced existing iPhone users to upgrade, but also lured those users who had been using Android-based smartphones for years.

iPhone Sales Bolster Apple’s Earnings in Greater China

Apple’s stupendous performance in China was a major contributor to its record quarterly profits. It was the leading smartphone seller in Greater China, which includes Hong Kong and Taiwan. The record-breaking sales in Greater China brought the region close to overtaking Europe as Apple’s second-largest market, after the US. Apple’s growth in Greater China is phenomenal considering that its latest iPhone models, which spurred its growth globally, had not been shipped to the region until mid-October. Apple’s Macintosh personal computers also registered higher sales and rose by 14% over a year earlier to reach 5.5 Mn units in the quarter.

Sluggish iPad Sales & Appreciating US $ Key Challenges in Future

Sluggish iPad sales have been a cause of concern for Apple in the recent past, and despite its greatest quarterly performance, the company only managed to sell 21.4 million units — a sharp 18% decline from a year earlier. Although the demand for iPhones has compensated for the declining iPad sales in this quarter, Apple will need to do better in this segment in the future. The appreciating US dollar is another cause of concern for Apple, as it impacts the company’s revenues by making its products costlier in other currencies. Apple’s Finance Chief Luca Maestri had said that the dollar’s appreciation could impact the company’s revenues in the next quarter.

Launch of New Products Will Continue to Drive Apple Globally

Apple’s record quarterly results have not only instilled confidence among its investors, but also made industry experts sit up and take notice of its future moves. Apple is optimistic about its second quarter results, and is expecting revenues in the range of US $ 52 Bn to US $ 55 Bn. The company’s gross margins are expected to range between 38.5% and 39.5% in the second quarter.

Talking about Apple’s upcoming products, Apple Watch which was expected to be launched in early 2015 will now begin to ship in April, according to Apple CEO Tim Cook. On other fronts, Apple Pay has emerged the leading service for contactless payments in the U.S. and controls two-thirds of the market currently. This is a major achievement, considering that Apple Pay was launched barely three months ago. The contactless market is expected to be worth around US $ 10 Bn by 2018, and Apple Pay is expected to continue to be the leading mobile payment and digital wallet service in the world. 

Apple opened 10 new stores in China in the last quarter of 2014 and its 70% year-on-year growth vindicated investments made in this regard. However, popularity of Samsung and Xiaomi in the world’s largest smartphone market means that Apple has a battle on its hands to become the leading player in the region. Furthermore, Apple’s plans to open 40 new stores in China by mid-2016 are expected to strengthen its position.

The collaboration between Apple and IBM, once bitter rivals in the personal computer market, will help the former in incorporating “MobileFirst for iOS” Apps on its devices. These Apps are expected to increase Apple’s corporate business, which in turn will further contribute to its revenues.