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Apple increases its margins with its latest iPhone, and shifts 61m in the process

Apple gear

© Flickr/CC-licence/Omar Jordan Fawahl

The Cupertino success story continues as Apple’s coffers bulge and swell to sanity-defying proportions. In its latest quarter, Apple reported revenue up 27% year-on-year to $58bn and net profit up 33% to $13.6bn. The numbers were never going to exceed those of the previous quarter, which covered the holiday period, but nevertheless they exceeded previous guidance and surprised many. Gross margins exceeded 40% for the first time in over two years.

Central to Apple’s runaway success is the iPhone, and the launch of its new larger iPhone 6 models resulted in very strong sales figures. It reported that it shipped 61.2m phones in the quarter, an increase of 40 per cent from Q2 last year. Perhaps even more important than the headline sales figures is the fact that Apple managed to reverse the recent trend of declining average selling prices (ASP). This started late last year with the iPhone 6 launch, and is continuing through into the latest quarter, despite also selling lower cost older models, as Jan Dawson explains on his Beyond Devices analysis blog.

Apple has now sold in excess of 725 million iPhones, and when you add the iPad this figure is rapidly approaching the one billion mark (in fact, it may well exceed that milestone in the next few weeks). But speaking of the iPad, it continues its downward sales trend, reflecting the much longer usage life of the device and underlining the need for Apple to release a significant upgrade, rather than just a performance boost. Sales of the iPad in the second quarter were down 23% to 12.6m units. In fact, its $5.4bn revenue contribution was lower than the $5.6bn from Apple’s Mac products. Don’t write off the personal computer yet.

In fact, Apple CEO Tim Cook told analysts during a conference call that: “We’ve seen [iPad] cannibalisation from the iPhone and from the Mac. It is what it is, but we’re not worried about that. At some point it will level out.” If you want more evidence that the iPad is actually performing well, and that it’s just being overshadowed by it’s older iPhone parent, then here’s a chart (the last one in the article) that shows sales growth from launch, plus there’s the major enterprise deal with IBM that has yet to kick into full gear.

In terms of regional growth, China topped the list, with total revenues up 71% year on year to $16.8bn, and meant that the US market is no longer Apple’s largest in terms of iPhone sales. International sales now makes up 69% of the company’s total revenue.

The impact of the Apple Watch will be felt next quarter, but for the moment, Cook refused to give details of launch sales numbers, leaving analysts to come to their own conclusions that about one million pre-sales is about right. We will see.

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