Apple Q3 2011 by the numbers: $28.57B revenue and $7.31B profit

iPad Business

Wall Street analysts were bullish almost to the point of insanity about Apple's fiscal 2011 third quarter results, with consensus estimates putting revenue growth at nearly 60 percent and income up by more than 65 percent, year over year. Apple did even better.

For the quarter ending June 25, Apple reported $28.57 billion revenue and net profits of $7.31 billion, or $7.79 a share. A year earlier, the company reported revenue of $15.7 billion and $3.25 billion net quarterly profit, or $3.51 per share. Apple announced fiscal Q3 results after the market closed today.

Three months ago, Apple forecasted $23 billion in revenue with earnings per share of $5.03. Analyst average estimates were higher than Apple guidance: $24.92 billion revenue and $5.80 earnings per share. This continues an ongoing trend of the Street expecting more than guidance and Apple still beating consensus.

"We're thrilled to deliver our best quarter ever, with revenue up 82 percent and profits up 125 percent", Apple CEO Steve Jobs, says in a statement. "Right now, we're very focused and excited about bringing iOS 5 and iCloud to our users this fall".

By the way, revenue grew 83 percent and income by 95 percent during fiscal 2011 second quarter.

Gross margins rose to 41.7 percent from 39.1 percent a year ago. Sales in international markets accounted for 62 percent of revenue.

Looking ahead, Apple forecasts $25 billion in revenue for fiscal 2011 fourth quarter, with earnings per share of $5.50. Apple expects gross margins of 38 percent.

Apple shipped 9.2 million iPads and 20.34 million iPhones during fiscal Q3. Analyst consensus was around 8 million tablets and 17.5 million smartphones.

Q3 2011 Revenue by Product

  • Desktops: $1.58 billion, up 21 percent from $1.3 billion a year earlier.
  • Portables: $3.525 billion, up 14 percent from $3.1 billion a year earlier.
  • iPod: $1.325 billion, down 14 percent from $1.55 billion a year earlier.
  • Music: $1.571 billion, up 29 percent from $1.2 billion a year earlier.
  • iPhone: $13.31 billion, up 150 percent from $5.33 billion a year earlier.
  • iPad: $6.046 billion, up 179 percent from $2.17 billion a year earlier.
  • Peripherals: $517 million, up 31 percent from $396 million a year earlier.
  • Software & Services: $696 million, up 8 percent from $646 million a year earlier.

During today's conference call, Apple CFO Peter Oppenheimer revealed that Mac OS X 10.7 "Lion" launches tomorrow.

Oppenheimer also announced major accounting changes, which started June 6. Because of software updates and services delivered over time, including Lion, Apple is deferring $22 per Mac over three years. Apple also is deferring $16 per iPad and $11 per iPod touch over two years.

iPhone. Apple shipped 20.34 million iPhones worldwide during fiscal third quarter, up from 8.4 million iPhones a year earlier. That's a 113 percent increase, year over year. Wall Street analyst average estimate was about 17.5 million units. Apple counts shipments into the channel, typically making them several million units higher than numbers released by Gartner, which measures actual sales. Apple ended the quarter with nearly 6 million iPhones in inventory.

The iPhone vs Android debate heated up coming into today's quarterly earnings announcement, with Apple Fanclub bloggers and analysts using market share data to claim Verizon iPhone, which debuted in February, had stalled Android's momentum. There are lots of parties interested in keeping Apple's share price high, particularly after a decline through mid-June. Since, shares rose nearly 20 percent ahead of today's close. iPhone -- or other Apple product hype -- helps generate positive perceptions about the stock's value.

Yesterday, ChangeWave claimed that 46 percent of mostly American survey respondents would buy an iPhone within 90 days, while only 32 percent for Androids. However, what people say isn't what they often do. In March, ChangeWave's 90-day buying intention survey had 44 percent of consumers buying iPhone and 31 percent Android smartphones. But that's not what actually happened. According to Nielsen, which measured March to May, 49 percent of new smartphone acquirers chose an Android handset, but only 31 percent iPhone. What people say and what they eventually do often differ. At best, surveys of this kind represent what people would like to do.

Q3 2011 Unit Shipments by Product

  • Desktops: 1.155 million units, up 15 percent from 1million units a year earlier.
  • Portables: 2.792 million units, up 13 percent from 2.468 million units a year earlier.
  • iPod: 7.535 million units, down 14 percent from 9.4 million units a year earlier.
  • iPhone: 20.338 million units, up 142 percent from 8.4 million units a year earlier.
  • iPad: 9.246 million units, up 183 percent from 3.27 million units a year earlier.

However, there's a big difference now. Apple is expected to release iOS 5 and iPhone 5 as soon as September. If anything can slow down Android's momentum, these two products will be it. But Apple faces challenges that shouldn't be ignored in any analysis. Android activations are now 550,000 a day. About three weeks ago, the number was 500,000 a day. That's up from 400,000 in May and 300,000 in December. That puts Android's run-rate at about 16.5 million per month -- the majority of devices phones.

During today's earnings conference call, Apple COO Tim Cook said that Apple sold 33 million iOS devices, including iPad and iPod touch, during the quarter, which works out to 367,000 per day. Cumulative iOS device sales are 220 million.

iPad. The tablet's impact on Apple simply cannot be understated. The company shipped 9.26 million iPads. Apple's tablet generated nearly $6.1 billion in revenue. Analysts estimated 8 million iPads for the quarter.

Supply remains constrained, "We sold every iPad that we could make", Oppenheimer said. Apple ended the quarter with 1.05 million iPads in inventory, "which was well below our target range of four to six weeks", he added.

One question hanging over iPad's success is it's potential cannibalization of Mac sales.

Cook said that Apple does believe that "some customers chose to purchase an iPad instead of a new Mac". But that the number choosing iPad over a Windows PC was greater. Overall, he described iPad sales as a "frenzy". That said, he noted that, unexpectedly, Apple sold more iPads to K-12 schools than it did Macs.

Q3 2011 Revenue by Geography

  • Americas: $10.126 billion, up 63 percent from $6.227 billion a year earlier.
  • Europe: $7.098 billion, up 71 percent from $4.16 billion a year earlier.
  • Japan: $1.5 billion, up 66 percent from $910 million a year earlier.
  • Asia Pacific: $6.332 billion, up 247 percent from $1.83 million a year earlier.
  • Retail: $3.505 billion, up 36 percent from $2.578 billion a year earlier.

If nothing else, iPad affected PC shipments. "Given the hype around media tablets such as the iPad, retailers were very conservative in placing orders for PCs", says Mikako Kitagawa, Gartner principal analyst, in a statement. "Instead, they wanted to secure space for media tablets. Some PC vendors had to lower their inventory through promotions, while others slimmed their product lines at retailers".

Computers. Mac shipments soared during fiscal third quarter, but not as high as in recent quarters. Apple sold -- what company executives really mean by shipped -- 3.947 million Macs during the quarter, up from 3.472 million units a year earlier; growth was 14 percent year over year. Wall Street consensus was about 4 million units worldwide. Today's results end a long-running dance where Mac sales beat analyst estimates. One reason: Sequential growth was less, just 5 percent, than previous quarters.

Last week, Gartner and IDC released calendar quarter 2011 preliminary PC shipments. Apple was a star performer, moving up to third place in the United States. Apple US PC shipments grew by 8.5 percent or 14.7 percent according to Gartner and IDC, respectively. That's a straight measure of PCs; neither firm includes media tablets, unlike Canalys and others.

Q3 2011 Unit Shipments by Geography

  • Americas: 1.487 million units, up 9 percent from 1.358 million units a year earlier.
  • Europe: 922,000 units, up 1 percent from 914,000 units a year earlier.
  • Japan: 150,000 units, up 16 percent from 129,000 units a year earlier.
  • Asia Pacific: 620,000 units, up 57 percent from 394,000 units a year earlier.
  • Retail: 768,000 units, up 13 percent from 677,000 units a year earlier.

By comparison, US PC shipments were disastrous, falling 5.6 percent year over year, according to Gartner, and declining 4.2 percent by IDC's reckoning.

"After strong growth in shipments of consumer PCs for four years, driven by strong demand for mini-notebooks and low-priced consumer notebooks, the market is shifting to modest, but steady growth", Kitagawa says in the statement. "The slow overall growth indicates that the PC market is still in a period of adjustment, which began in the second half of 2010".

Maybe, but Apple sells mainly to consumers, which seem to have no trouble plunking down credit and debit cards for shiny new Macs.

iPod. Apple shipped 7.535 million iPods during fiscal third quarter, down from 9.406 million a year earlier. Analyst consensus for fiscal Q3 was about 8.3 million.

Retail. Revenue rose 36 percent year over year, with Apple retail stores selling 768,000 Macs, compared to 677,000 a year earlier, up 13 percent. Average revenue per store was $10.8 million up from $9 million a year earlier. Apple retail stores had 73.7 million visitors during the quarter, up 22 percent from 60.5 million visitors a year earlier. Apple opened for new stores during the quarter and plans to open another 30 during the current quarter, for 40 new stores during fiscal 2011. Apple has 327 stores now open globally.

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