Apple earnings: 74.5M iPhones sold, record-breaking $18B profit

There was a lot going for Apple in its most recent holiday quarter. As the first quarter with the popular iPhone 6 on sale for the entire period, many expected Apple to boast eye-popping earnings, and Apple’s first fiscal quarter has traditionally been its best. Expectations were surpassed: Apple on Tuesday reported first quarter earning results of $74.6 billion in revenue and net profit of $18 billion.

In terms of device sales, that breaks down to:

  • 74.5 million iPhones, up from the 51 million sold a year ago.
  • 21.4 million iPads, down from the 26 million a year ago.
  • 5.5 million Macs, up from the 4.8 million a year ago.

Apple’s earnings beat Wall Street’s already-lofty expectations. Analysts were generally expecting total revenue around $69 billion, and Apple’s own guidance was in the range of $63.5 billion to $66.5 billion. It’s also a big increase over last year’s holiday quarter, in which Apple reported $57.59 billion in revenue.

Earnings per share works out to $3.06. Apple declared a cash dividend of 47 cents per share.

The 74.5 million iPhones sold are a record for Apple, nearly 46 percent higher than the previous quarterly record set last December. Fortune-polled analysts predicted 66.5 million iPhones sold.

“This volume was hard to comprehend,” CEO Tim Cook said during a conference call to discuss the earnings. “34,000 iPhones sold per hour, 24 hours a day, every day of the quarter.”

Clearly, the iPhone is a juggernaut, and the new models with larger screens have only increased demand for it. Cook mentioned that he believes the number of switchers from Android to an iPhone 6 were as high as they’ve been for the previous three years. The proportion of Apple’s revenue coming from the iPhone has also never been higher:

A key number to watch is Apple’s gross margins, or the proportion of revenue after manufacturing costs. Apple reported that its gross margins were 39.9 percent, which is up from 37.9 percent in the same quarter last year. It’s difficult to tell if the larger margins are due to the more expensive iPhone 6 Plus or the newly less-expensive 64 GB storage upgrade, but the average selling price for the iPhone was $687, which is nearly $50 more than last year’s holiday quarter. Cook didn’t elaborate on the sales mix between iPhone 6 and iPhone 6 Plus beyond broad strokes.

“iPhone 6 was the most popular iPhone last quarter,” Cook said. “But to sell 74.5 million they were all popular. There is clearly a geographic preference, some [regions] skew much higher on their preference to iPhone 6 plus to other [regions], it’s something that’s not consistent around the world.”

It’s no secret that iPad sales have been dropping year-over-year for the past few quarters, but this earnings report reflects a full quarter selling new models released in October, including the iPad Air 2 and the iPad Mini 3, but total unit sales were still down nearly 17 percent from the year-ago period. Cook has previously said that the lagging iPad sales were due to a longer upgrade cycle, and he reiterated that point on Tuesday.

Apple reported 5.5 million Macs sold this quarter, a 14 percent increase over the year-ago period despite the two newest Mac models released in October — the iMac with Retina Display and the Mac Mini — being niche products. However, it wasn’t a big jump from the prior quarter, which also saw 5.5 million Macs sold thanks to the back-to-school bump.

However, the average selling price for Macs was up $58, thanks to the new iMac with Retina Display which retails for $2500 or more.

We expected sales in China to make an impact in these earnings. Apple reported that revenue in the Greater China region, which includes Taiwan, was $16.1 billion, or up 70 percent from the year-ago period. CFO Luca Maestri partially attributed the “particularly impressive” Greater China revenue to the strong dollar.

Maestri said Apple would reconsider its capital return program in April, which has included $57 billion in share repurchases in the past year. Apple still holds $178 billion in cash.

Apple also issued guidance for next quarter. It expects revenue to be between $52 billion and $55 billion, a “significant revenue increase despite foreign exchange headwinds” over the $46 billion in revenue Apple posted in the year-ago period. Next quarter will see the launch of Apple’s first wearable computer, Apple Watch. “Apple Watch will ship in April, right on schedule,” Cook said.

This post was updated several times as more information became available.