SAN FRANCISCO — Strong iPhone and Macintosh sales drove Apple to record revenues and profits despite a 13% drop in iPad sales. With its next-generation handset still ramping, Apple projected heady growth for its next quarter, despite showing caution about its Apple Watch.
Apple hit a new company record, reporting fourth-quarter revenues at $42.1 billion and net profit of $8.5 billion, compared to $37.5 billion and net profit of $7.5 billion the previous year. Revenue from iPhones increased 27% year-over-year while global unit sell-through increased 26% to 39.3 million units, said Apple CFO Luca Maestri.
With the iPhone 6 and 6 Plus still ramping, the momentum is set to continue. Apple forecasts revenue for the first quarter of 2015 between $63.5 billion and $66.5 billion with gross margins between 37.5% and 38.5%.
“It’s unclear looking at the data when supply will catch up with demand [for the iPhone 6 and 6 Plus],” said Apple CEO Tim Cook in a call with financial analysts. “It’s clear as of today, as of the end of the quarter, we’re not nearly balanced [in supply and demand]. We’re not close, we’re not on the same planet.”
In a press statement announcing the quarterly results, Cook said that “demand for new iPhones has been staggering and remarkably broad based. It’s larger than when we launched the iPhone 5.”
“I think Tim’s enthusiasm and confidence in the upcoming quarter is positive for the whole electronic sector," Rick Doherty, principal of market watcher Envisioneering, told EE Times. "Behind that [quarterly forecast] has to be knowledge that his supply chain is good and his sources are good to make this next quarter have [such high forecast] growth.”
The iPhone maintains 69% of the US market share and is growing by 50% in Latin America and the Middle East. iPhone sell-through in China was up 32% despite not launching a new device and new pressures on subsidies. Apple plans to launch new handsets with all three of China's carriers.
“I see an enormous market in China with more people graduating into the middle class than any other nation in history,” Cook noted. “50% of Chinese buyers were new to iPhone.”
Apple also reported an all-time quarterly record for Mac sales, increasing 18% year-over-year to its highest market share since 1995. Sales of iPads, however, dipped 13% this quarter to 12.3 million units, with the exception of a 46% increase in Japan.
Apple has kept iPad margins up and is still figuring out the trade-up cycle for its tablets, which tend to have a longer life, Doherty noted. In its top six revenue countries, the lowest rate of iPad buyers who were first-time tablet buyers was 50%, Apple reported.
“The iPad has a great future… I’m very bullish about where you can get the iPad over time,” said Cook.
Apple also announced it would add an "Other" segment in 2015, which will include accessories such as Beats headsets, the Apple TV, the iPod, and the Apple Watch once it ships. The watch won’t be shipped in the next quarter, Cook noted.
“The difference between optimism for the next generation of existing products versus the palpable caution... on expectations of Apple Watch is a big difference, almost the height of the Grand Canyon,” Doherty said, adding that he does not suspect trouble for the smartwatch despite the company’s lack of details.
— Jessica Lipsky, Associate Editor, EE Times