Ahead of the earnings call scheduled for 2 PM today, Apple has released its Q1 2013 earnings. The earnings are decidedly mixed with narrowly missing estimates with $54.5 billion in revenue, but beating estimates with $13.1 billion in profit. In the crucial device department metric, iPhone sales were up 29%, iPads up 48%, but iMacs down 22% and iPods also down 18%.
This story and analysis is developing, so stay tuned as we update the post.
First thing that needs to be kept in mind as we analyze all these numbers is that Q1 2013 was a 13 week quarter while Q1 2012 was a 14 week quarter. Would this have made a tremendous difference in iMac or iPod sales (both down), maybe not. However, since Apple narrowly missed estimates for revenue for the quarter, maybe they could have narrowed the gap a bit.
That said, let’s put this into perspective (something after-hours trading seems not to be with the stock dropping and recovering) is that these results still broke all time Apple quarterly records:
“We’re thrilled with record revenue of over $54 billion and sales of over 75 million iOS devices in a single quarter,” said Tim Cook, Apple’s CEO. “We’re very confident in our product pipeline as we continue to focus on innovation and making the best products in the world.”
“We’re pleased to have generated over $23 billion in cash flow from operations during the quarter,” said Peter Oppenheimer, Apple’s CFO. “We established new all-time quarterly records for iPhone and iPad sales, significantly broadened our ecosystem, and generated Apple’s highest quarterly revenue ever.”
Now what would that extra week in Q1 2013 have done? Well, the average weekly revenue was $4.2 billion versus $3.3 billion in 2012. So if Apple had just one more week, they might have had revenue of $58.7 billion…not too shabby. Plus as, TNW points out, Apple beat its own (conservative) guidance of $52B in revenue and earnings of $11.75.
For Q2 2013 (this quarter), Apple is giving the following guidance:
• revenue between $41 billion and $43 billion
• gross margin between 37.5 percent and 38.5 percent
• operating expenses between $3.8 billion and $3.9 billion
• other income/(expense) of $350 million
• tax rate of 26%
We’ll update this post after the earnings call finishes (it just started).
Updates from the earnings call:
Lots of data and figures, but here are some key facts and quotes that are pretty interesting:
- Apple sold 312,000 Macs per week. Related to this, Cook and Oppenheimer believe that supply constraints on the iMac are a big factor in the poor Mac sales figures
- Over 2 billion iMessages are sent per day
- iCloud grew 31.5% with 250 million users
- On phone screen size: “We put a lot of thinking into screen size and believe we have picked the right one,” Cook said.
- On the supply chain reports as analogous of iPhone sales: “We obviously have multiple sources for things,” he said. Yields can also vary, as does inventory
- On Apple TV (in response to a question by Gene Munster): Cook: “in terms of the product we sell today. We sold more last quarter than we have ever before. It was up almost 60% YOY. There is very good growth with that product. What was a small niche at one time… this is an area of intense interest for us and I tend to believe there is a lot we can contribute in this space.”
- On device cannibalization:
“We know iPhone has cannibalized the iPod business. We know that iPad has cannibalized the Mac.”
“Our strategy is to never fear cannibalization. If we do somebody else (will cannibalize).”
But computer cannibalization is “the mother of all opportunities” for Apple, because Windows share of computers is so much greater than the Mac.
Also, there is the potential “halo effect” as those that get an iPad as their first Apple product given that history shows those that buy one device often buy more.
“I see cannibalization as a huge opportunity.”
There is a lot to take in with these results. The Street is disappointed, especially in the profits, but I think we all have to step back and consider how successful Apple is. Truly. Very profitable, lots of cash, products they can’t make enough of. Personally I like this take from John Gruber:
Bruno J. Navarro, CNBC:
Apple stock is headed to a level of $425 per share this quarter, DoubleLine CEO Jeff Gundlach said after the company reported disappointing earnings Wednesday.
“I think this is really a broken company that is over-owned,” he said on “Fast Money.”
Record-breaking revenue. Record-breaking profit. Over 75 million iOS devices sold in the quarter. Totally broken.
Yeah I wish I had Apple’s problems.