Tech —

iPhones and Macs rise, iPads and iPods drop in Apple’s Q3 2014 [Updated]

Apple increases sales and profit margins despite releasing few products in 2014.

Apple has set another quarterly record for iPhone sales, despite the fact that the iPhone 5S is due for replacement relatively soon.
Apple has set another quarterly record for iPhone sales, despite the fact that the iPhone 5S is due for replacement relatively soon.
Jacqui Cheng

It's been another quiet, by-the-books quarter for Apple, which has yet to release any major updates to any of its products so far in this calendar year. For the third quarter of 2014, the company projected it would maintain profit margins between 37 and 38 percent on revenues between $36 and $38 billion, and it met the revenue estimates with profits of $7.7 billion on revenue of $37.4 billion. Revenue is about six percent higher and profit is 11.6 percent higher than Q3 of 2013, in which the company earned $6.9 billion of profit on $35.3 billion of revenue.

The company's gross margin was considerably higher than the estimate, at 39.4 percent compared to 36.9 percent a year ago, an increase of 6.8 percent.

iPhone and Mac sales were both up over the year-ago quarter—Apple sold 35.2 million iPhones (compared to 31.24 million) and 4.41 million Macs (compared to 3.75 million) this quarter, despite the fact that most of its products are either mid-cycle or nearing the end of their refresh cycles. The delay of Intel's next-generation Broadwell CPUs has kept Apple from making more than minor tweaks to its Mac lineup this year.

Andrew Cunningham

iPads were down a bit this quarter, dropping from 14.62 million units a year ago to 13.28 million units this quarter. That 9.2 percent drop isn't as significant as the 16.1 percent drop last quarter, but it does indicate that iPad sales have leveled off and that the tablet market won't quite match the size of the smartphone market. iPods also continue their long-running tumble—the lineup was last refreshed in late 2012, and in many cases they've been replaced by more capable smartphones and tablets.

The iPhone continues to account for a little over half of Apple's revenue, while the Mac and the iPad together make up another 30 percent. The remainder is split between iTunes, software, and services at about 12 percent; accessories (including the Apple TV and the company's AirPort routers) at around 3.5 percent, and the iPod at 1.2 percent.

Andrew Cunningham

For Q4 of 2014, Apple predicts it will hit profit margins of between 37 and 38 percent on revenue of between $37 and $40 billion. In 2013, the company had profit margins of 37 percent on revenue of $36 billion, resulting in a profit of $8.2 billion.

Post-earnings call update: Apple CEO Tim Cook and CFO Luca Maestri gave a little more information to analysts in today's earnings call, mostly responding to questions about the iPad slowdown and the contrast between established and developing markets.

Maestri mentioned that while iPad sales were actually growing at a steady clip in developing markets like China, India, and the Middle East, slowdown in more saturated markets like the US and western Europe was enough to cancel out that growth. Cook seemed optimistic about the tablet's future potential, though, pointing out that the segment (as defined by the first iPad) was only about four years old but had already hit lifetime sales of 225 million units.

Cook spent a lot of time talking about the recently minted IBM agreement specifically. According to Cook, while Apple's enterprise tablet marketshare sits at about 76 percent, its market penetration is only about 20 percent. Notebooks, on the other hand, have a penetration of roughly 60 percent. Apple hopes that IBM's new enterprise-focused apps, services, and support options will help to drive iPad growth in the enterprise, helping sales to clamber over the wall they've hit in the last two quarters.

For more from today's call, our liveblog of the call is here, and Apple will post a recording of the call to iTunes by 5pm Pacific time today.

Channel Ars Technica