Apple Q2 2011 by the numbers: Record $24.67B revenue and 95% profit growth

iPad 2

[Editor's Note: This is a live document from 4:49 p.m. EDT until 6:20 p.m. ET, following the end of Apple's earnings call.]

Coming into today's Apple fiscal 2011 second quarter earnings report, amateurs and professionals debated what impact iPad 2 and Verizon iPhone 4 launches would have on the results. Apple has answered them, once again sweeping past Wall Street consensus. Suddenly, Apple's Mac business looks puny alongside iOS.

Apple shipped 4.69 million iPads and 18.65 million iPhones during fiscal Q2. In total, iOS devices accounted for close to two-thirds of total revenues.

For the quarter ending March 28, Apple reported $24.67 billion revenue and net profits of $5.99 billion, or $6.40 a share. A year earlier, the company reported revenue of $13.5 billion and $3.07 billion net quarterly profit, or $3.33 per share.

"With quarterly revenue growth of 83 percent and profit growth of 95 percent, we're firing on all cylinders," Apple CEO Steve Jobs said in a statement. Jobs has been on medical leave since January. During today's earnings conference call, COO Tim Cook responded to a question about Jobs' health and participation while on leave. "We do see him on a regular basis," Cook said. "He is involved in major decisions"

Three months ago, Apple forecasted $22 billion in revenue with earnings per share of $4.90. Analyst average estimates were higher than Apple guidance: $23.34 billion revenue and $5.36 earnings per share. This is now an ongoing trend of the Street expecting more than guidance and Apple still beating consensus.

Gross margins fell from 41.7 percent in fiscal Q2 2010 to 41.4 percent in the current quarter. Sales in international markets accounted for 59 percent of revenue, down from 62 percent sequentially.

Looking ahead, Apple forecasts $23 billion in revenue for fiscal 2011 second quarter, with earnings per share of $5.03.

Q2 2011 Revenue by Product

  • Desktops: $1.441 billion, down 6 percent from $1.447 billion a year earlier.
  • Portables: $3.535 billion, up 59 percent from $1.796 billion a year earlier.
  • iPod: $1.6 billion, down 14 percent from $1.861 billion a year earlier.
  • Music: $1.634 billion, up 23 percent from $1.327 billion a year earlier.
  • iPhone: $12.298 billion, up 126 percent from $5.445 billion a year earlier.
  • iPad: $2.836 billion; no comparable -- new product.
  • Peripherals: $580 million, up 23 percent from $472 million a year earlier.
  • Software & Services: $743 million, up 17 percent from $634 million a year earlier.

iPhone. Apple shipped 18.647 million iPhones worldwide during fiscal second quarter, up from 8.752 million iPhones a year earlier. Apple counts shipments into the channel, typically making them several million units higher than numbers released by Gartner, which measures actual sales. Wall Street analyst average estimate was about 16 million units.

Fiercely debated coming into today's announcement: How would Verizon distribution affect iPhone shipments and would it cannibalize sales as AT&T subscribers switched? AT&T announced quarterly earnings this morning, before the opening Bell, revealing 3.6 million iPhone activations and Apple smartphone subscriber churn level year over year. So AT&T isn't seeing perceptible iPhone customer loss as widely predicted. ChangeWave claimed that 26 percent of AT&T's iPhone subscribers would switch to Verizon. Some other analyses put iPhone-to-iPhone churn at nearly 50 percent.

Verizon will announce earnings tomorrow, putting to rest the long controversy about how many iPhones sold? America's largest cellular carrier launched iPhone 4 in early February, with Apple and Verizon sales staff waking up to a big surprise: No lines. The two companies clearly expected them, but people didn't show up in large numbers. A few days later, I asked: "Say, whatever happened to that 1 million Verizon iPhones sold announcement?" Typically, if sales were good, Apple would say so, particularly when adding America's largest cellular network to the iPhone family. Based on comments made by Verizon Wireless CEO Daniel Mead, numerous analysts, bloggers and journalists presumed 1 million launch sales. I disagreed.

By the way, just because AT&T isn't losing substantive numbers of subscribers to Verizon doesn't mean iPhone 4 sales there are bad. We'll know for certain -- assuming Verizon releases iPhone sales figures as promised -- tomorrow. During today's earnings conference call, Apple CFO Peter Oppenheimer gave an unexpected preview, noting that U.S. iPhone sales surged 155 percent year over year.

"It was very popular, it did very, very well," Oppenheimer said about the $49 iPhone 3GS sold by AT&T. But he didn't give specific sales figures.

Apple's smartphone was available from 186 carriers in 90 countries during the quarter. Apple ended the quarter with 5.2 million iPhones in inventory, or 4 to 6 weeks.

Oppenheimer said there is "strong growth within the enterprise segment," with many businesses developong cusomized apps for iPhone.

During today's earnings call, Cook brushed off Android market share gains. He asserted that Apple's "integrated approach" is superior to Android's "fragmented approach."

Q2 2011 Unit Shipments by Product

  • Desktops: 1 million units, down 12 percent from 1.147 million units a year earlier.
  • Portables: 2.751 million units, up 53 percent from 1.796 million units a year earlier.
  • iPod: 9.017 million units, down 17 percent from 10.885 million units a year earlier.
  • iPhone: 18.647 million units, up 113 percent from 8.752 million units a year earlier.
  • iPad: 4.94 million units; no comparable -- new product.

iPad. The tablet's impact on Apple simply cannot be understated. The company shipped 4.694 million tablets during the quarter for a total about 19.5 million for the first four quarters of sales. Apple's tablet generated nearly $12.4 billion in new revenue during the first 11 months of availability. Analysts estimated 6.2 million iPads for the quarter. Apple launched iPad 2 during the last month of the quarter, and the tablet was only available broadly -- in 26 countries -- for just three days. Apple will add 13 countries next week. Combined with iPad 1, the tablet was available in 59 countries during the quarter.

Channel inventory fell by 400,000 units, which was well below the normal 4-6 weeks. "We sold every iPad 2 we could make in the quarter," Oppenheimer said. Cook was more explicit, calling the iPad 2 shortage as "the mother of all backlogs."

"CIOs continue to ebrace iPad at an unprecedented rate," he said. Corporate adopters include ADP, Boston Scientific, Disney, RiteAid and Xerox,

Analyst firms Gartner and IDC classify iPad as so-called media tablet, rather than a PC. Same categorization applies to Android tablets. Last week, Gartner forecast that iOS would be the dominate media tablet OS through 2015. However, the analyst firm sees Apple's media tablet OS market share steadily declining through the forecast period, from 83.9 percent last year to 68.7 percent this year to 63.7 percent next year to 47.1 percent in 2015. By comparison, Gartner predicts that Android will go from 19.9 percent this year to 38.6 percent in 2015. Gartner predicts that about 48 million iOS tablets will ship this year, reaching 138.5 million shipments in 2015.

Perhaps most startling is iPad's revenue share. Based on Gartner data about tablet spending and Apple financial disclosure, iPad accounted for nearly 100 percent of media tablet revenues in 2010 -- all but $34 million out of $9.6 billion.

Q2 2011 Revenue by Geography

  • Americas: $9.323 billion, up 87 percent from $4.993 billion a year earlier.
  • Europe: $6.027 billion, up 49 percent from $4.05 billion a year earlier.
  • Japan: $1.383 billion, up 56 percent from $887 million a year earlier.
  • Asia Pacific: $4.743 billion, up 151 percent from $1.886 million a year earlier.
  • Retail: $3.191 billion, up 90 percent from $1.683 billion a year earlier.

Computers. Mac shipments soared during fiscal second quarter. Apple sold -- what company executives really mean by shipped -- 3.76 million Macs during the quarter, up from 2.943 million units a year earlier; growth was 28 percent year over year. Wall Street consensus was about 3.5 million units worldwide.

Last week, Gartner and IDC released preliminary first calendar quarter PC shipment data. In the United States, Apple shipped 1.375 million computers, for 9.6 percent year-over-year growth, according to IDC. However, Gartner put Apple shipments higher, at 1.491 million, with growth a much higher 18.9 percent. Gartner ranked Apple fifth and IDC put the company in fourth place. Apple's U.S. market share rose from 7.3 percent to 9.3 percent year over year, according to Gartner. By IDC's measure, Apple's share rose from 7 percent to 8.5 percent.

Gartner concluded that unquestionably, media tablets negatively affected PC shipments, which fell 1.1 percent year over year instead of rising the projected 3 percent. "With the launch of the iPad 2 in February, more consumers either switched to buying an alternative device, or simply held back from buying PCs. We're investigating whether this trend is likely to have a long-term effect on the PC market," Mikako Kitagawa, Gartner principal analyst, said in a statement. "Low prices for consumer PCs, which had long stimulated growth, no longer attracted buyers."

Nearly two weeks ago, AdMob released startling behavioral stats based on a survey of tablet owners: 28 percent use their device as primary PC. Clearly there is sales cannibalization going on, with many consumers either putting off new computer purchases or choosing a tablet as PC companion instead.

Q2 2011 Unit Shipments by Geography

  • Americas: 1.217 million units, up 25 percent from 971,000 units a year earlier.
  • Europe: 995,000 units, up 11 percent from 899,000 units a year earlier.
  • Japan: 155,000 units, up 20 percent from 129,000 units a year earlier.
  • Asia Pacific: 596,000 units, up 76 percent from 338,000 units a year earlier.
  • Retail: 797,000 units, up 32 percent from 606,000 units a year earlier.

iPod. Apple shipped 9.017 million iPods during fiscal second quarter, down from 10.885 million a year earlier. Analyst consensus for fiscal Q2 was about 10 million. Like the previous quarter, iPod touch accounted for more than 50 percent of iPod sales. Apple ended the quarter with anticipated 4-6 weeks of inventory.

Including iPad, iPhone and iPod touch, Apple has had 189 million cumulative iOS device sales, through end of fiscal second quarter.

Retail. Revenue rose 95 percent year over year, with Apple retail stores selling 797,000 Macs, compared to 600,000 a year earlier, up 32 percent. Average revenue per store $9.9 million up from $5.9 million a year earlier, or 67 percent. Apple retail stores had 71.1 million visitors during the quarter, up 51 percent from 47 million visitors a year earlier. Apple expects to see its 1 billionth retail store customer in just a few days. Apple plans to open 40 new stores during fiscal 2011, the majority internationally.

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