Apple Inc. (AAPL) Earnings Beat Despite Missing Sales, iPhone Expectations; U.S. Revenues Decline

apple buzzTyler Durden:  Expectations were hardly sky high for Apple Inc. (NASDAQ:AAPL) heading into a quarter in which most of its suppliers had already announced iPhone sales would be disappointing, and moments ago AAPL validated many of these concerns when while beating on the bottom line, with an EPS of $3.28 compared to expectations of a $3.22 print, it missed not only on the top line, with revenue coming shy of the $76.5 billion expected at $75.9 billion, but across every single product line, most notably iPhones, of which AAPL sold 74.78 million in the quarter, below the 75 million expected.

iPad and Mac sales also came in below expectations, at 16.12mm vs Exp. 17.3mm, and 5.31mm vs 5.8mm expected.

Also of note: US sales of $29.3 billion were an actual decline of 4% compared to the $30.6 billion in US revenue one year ago.

The good news, as little as it may be is that AAPL did not post a year over year decline in revenue as some had feared, with the top line printing a little over $1.2 billion higher compared to a year ago, while the margins of 40.1% also beat the 39.9% expected, and reported one year ago.

There was some more bad news, however, in the company’s guidance which came as follows:

  • revenue between $50 billion and $53 billion, below the consensus estimate of $55.5 billion, and a steep drop compared to $58 billion the quarter prior suggesting a dramatic slowdown in iPhone sales.
  • gross margin between 39 percent and 39.5 percent, below the estimate of 40%
  • tax rate of 25.5 percent

Worse, as the FT notes, Apple signalled that the iPhone would see its first ever decline in sales in the current quarter, as a slowing smartphone market and wider economic pressures finally began to take their toll after almost a decade of expansion.

So overall a muted quarter, with perhaps the last saving grace being China’s sales of $18.4 billion, an increase of 14% y/y which at least superficially confirms that China sales are not crashing.

A breakdown by some of the key charts:



Gross Margin:


Sales by product line: each one missed expectations:


Sales by geography: China stepped up to compensate for the US sales decline:


And finally, AAPL’s cash rose to $215.7 billion in the quarter on a gross basis:


While cash net of debt remains virtually unchanged for the past three years:

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