Apple's fiscal Q2: $43.6B in revenue, doubles capital return program, misses outlook

Apple's fiscal Q2: $43.6B in revenue, doubles capital return program, misses outlook

Summary: Apple's Q2 earnings report didn't disappoint, and the iPhone maker also gave its share buyback program a significant boost.

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All eyes were on Apple after the bell on Tuesday for the iPhone maker's second quarter earnings report.

The Cupertino, Calif.-based corporation reported second fiscal quarter earnings of $9.5 billion, or $10.09 a share (statement).

Non-GAAP earnings were $10.16 a share on a revenue of $43.6 billion.

Thomson Reuters had projected Apple earnings of $10 a share on a non-GAAP basis in the second quarter on revenue of $42.3 billion.

Just ahead of the earnings release, Apple shares gained by 1.9 percent to $406.13 per share. Shares were later halted at $406 flat.

Given the low expectations going into Apple's report, investors cheered the results in after hours trading. 

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As for the product portfolio, Apple's three core products held steady for the most part.

The iOS giant sold 37.4 million iPhones (compared to 35.1 million during the same period last year) as well as 19.5 million iPads (compared to 11.8 million during the same quarter last year).

But Apple sold "just under" four million Macs, compared to roughly four million flat during the second fiscal quarter of 2012.

Speaking on a conference call with analysts, CEO Tim Cook addressed the Wall Street confidence crisis and said:

Our revenue for the first half was over $98 billion. And our net income was over $22 billion. During that time we sold 85 million iPhones and 42 million iPads. These are very large numbers, unimaginable even to us just a few years ago. Despite producing results that met or beat our guidance as we have done consistently, we know they didn't meet everyone's expectations. And though we've achieved a credible scale and financial success we acknowledge that our growth rate has slowed and our margins have decreased from the exceptionally high level we experienced in 2012.

And.

The decline in Apple's stock price over the last couple of quarters has been very frustrating to all of us. But Apple remains very strong and we will continue to do what we do best---we can't control items such as exchange rates and world economies and even certain cost pressures---but the most important objective for Apple will always be creating innovative products. And that is directly within our control. We will continue to focus on the long-term and we remain very optimistic about our future.

And.

We see great opportunities in front of us particularly given the long-term prospects of smartphone and tablet markets the strength of our incredible ecosystem which we plan to continue to augment with new services, our plans for expanded distribution, and the potential of exciting new product categories.

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For the third quarter, Wall Street is looking for earnings of $8.81 a share (non-GAAP) on revenue of $38.26 billion.

But it looks like Apple missed the outlook with a revenue guidance range of $33.5 billion to $35.5 billion.

Apple also announced it is boosting the stock buyback program by using $100 billion total under the revised capital return program plan by the end of calendar year 2015.

That's a $55 billion increase from what has been previously announced, translating to an average rate of $30 billion per year between August 2012 through December 2015.

Cook added in a separate statement that Apple is "very fortunate to be in a position to more than double the size of the capital return program we announced last year."

Apple's Board of Directors also approved a 15 percent increase in quarterly dividend. Set now at $3.05 per common share, that amount will be payable on May 16 to shareholders of record as of the close of business on May 13.

Screenshot via Apple Investor Relations

Topics: Apple, iOS, Smartphones, Tablets, PCs

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20 comments
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  • Missing Expectations???

    How is that missing expectations? Apple still looks great to me.
    charles.hights@...
    • Easy

      They expected X and they didn't make X.
      ye
  • Their falling margins are more worrisome than the underwhelming projections

    for next quarter. Their margin hits so far will be amplified by their own canibalization rumored to start this year. And that's if the competition does nothing.
    Johnny Vegas
  • If this was your own private company...

    you would be extremely happy.
    lzcenter_z
    • If this were a private company

      no one would be talking about stock prices. And there would be no talk of dividends.
      jdm12@...
      • private company

        Dividends happen in private companies too, all the time.
        danbi
    • Re: If this was your own private company... you would be extremely happy.

      Not if I bought it a year ago.
      ldo17
  • Excellent results

    But I do see some signs of stagnation regarding iPhone - that I suppose it's expected.
    Profit margin would be "impossible" to keep, they were selling the same good old stuff, with increasing competition.
    Apple stills huge, it's amazing how a single brand can sell so many hardware.
    AleMartin
    • Because Apple markets quality products

      BTW, what signs of iPhone stagnation were reflected in there increased sales?
      kenosha77a
      • "Small increase in iPhone sales"

        6,5% yoy, iPad growth was 65%.
        I think iPhone sales growth were never this slow before, not even close.
        AleMartin
        • Everyone who can afford one

          has one. How often do they need to be replaced?
          jdm12@...
      • easy to understand

        Its easy to understand if you think about it logically.

        Lets say global smartphone sales go up 15% but Iphone sales only go up 10%, effectively you are losing market share, not growing it.

        Every year more and more smart phones are being sold and investors etc are worried that the iphone is losing appeal to people as its growth is slowing.
        danjames2012
  • "Just so we are clear though, Apple is doomed"

    Or maybe not.
    Smalahove
    • So rising revenues and falling profits are good?

      Microsoft will be happy to hear that.
      toddbottom3
      • Who said falling profits are good?

        I didn't. But is Apple doomed?
        Smalahove
      • failing profits?

        Reading comprehension problems?

        Margins are lower, profits still rise.
        danbi
        • Looking at the numbres, net income dropped in the first six months

          of the year, as opposed to last year's first six months.

          Apple still had good sales and a healthy net balance, but, net income dropping is never a good sign.
          adornoe
  • The end of an era.

    The "unlimited" growth at Apple is over. But, the real question is what will limited growth be like? I proposed that Apple will come up with a few more interesting ideas based on the R&D budget. I think that old iPhones will need replaced.... and most iPhone users aren't going to switch to Android just to replace the apps they use with Android versions. Because the typical life of an Android phone is 18 months and there are still plenty of 4+ year old iPhone 3Gs and 4 phones still in service, working just fine, using the latest iOS software, but at some point the iPhone 5s or 6 will be a compelling upgrade and the masses of those older iPhones will create a sustaining base of users who will continue to be iPhone customers. You can think of this as the rabbit and the hare. Here, as Apple continues to grow its base and has more users who will update the infrastructure is slow and steady. But, like compound interest time is on Apple's side. They will continue to profit and gain users, because of the quality of there products and over time that growth will outperform the recent 18-month leader in the Android market. Notice that HTC is starting to push "quality" metal cases. better sound in their phones? Who does that sound like? I think you can expect Apple to have a long slow run from here on and in 20 years we will look back and say, "Oh yea, I saw that coming!"
    rickbarretttx
  • But I could be wrong

    The iPhone 7 will have direct neural audio and the iPhone 9 direct visual overlay through the new iNeural interface that allows complete neural control over the device and the ability to capture "memories" through the neural interface....

    Predictions are so much fun....
    rickbarretttx
  • It's a great time for Apple

    to buy back stock. Which is a considerable silver lining to the large gray cloud of Apple's falling stock prices. No doubt this has a lot to do with the decision to enhance their buy-back program. What's more, it shows confidence in their own future, which should send a strong signal to the market. Nevertheless, since no one, not even at Apple, seems to have any idea why their stock has been declining, it's anybody's guess whether this confidence will be rewarded.

    In my opinion, for whatever that may be worth, the ghost of Steve Jobs has finally moved on. Without his supposed magic touch Apple is just another (big) company that will fail or succeed according to standard, non-magical, business principles. If they continue to innovate, and come up with products the buying public likes, they will continue to be successful - though that success may need to be redefined post Jobs. Unfortunately, though expected, such successful innovation is not a foregone conclusion. Since Steve Jobs passed they have tinkered with the iPad, the iMac and Mac mini, with mixed results. Some of that seems to be change for its own sake, rather than real innovation, particularly in respect to the iMac. I think it will take more than a new version of the iPhone or the iPad to improve Apple's fortunes. The iPhone 5 has done well enough, but no one thinks its actually anything new. The same for the iPad mini - it's a logical step, given market trends, but still, it's not new. It's possible the iPhone and iPad have reached a plateau, where future change will be incremental rather than revolutionary.

    Unfortunately for Apple, they have a reputation for creating new, exciting products. And people are impatient for them to do so again. But new products, to Apple's standards of quality, are not developed on demand. They take time. Both the iPhone and the iPad were incubated at Apple for years before they became overnight successes. Too many people seem to forget that. In my opinion - again - Apple does well to take their time and not let public pressure force them to release a product before its time. They've been precipitous in the past and lived to regret it. The Apple Maps app for iOS is the most recent example, but it's far from the only one. Siri was somewhat less spectacular than advertised when it came out, but at least Apple had the good sense to acknowledge it was beta software. Some disappointment was inevitable. But Siri and Maps were merely product components. Their weaknesses did not take much away from the overall iOS experience.

    A new, standalone product is another matter altogether. An inferior release version could kill it before it has time to mature. Therefore, it must be nurtured to maturity in house before it's released to the public, as were the iPhone and iPad. An Apple flatscreen TV that runs on iOS, as some others run on Android, might be a winner. Imagine Siri on a TV in a version customized for program search and DVR operation - perhaps with a decent game console so you don't have to buy an XBox in order to get decent game play. I suspect the race is already on to see who can come out first with a voice activated TV. In such a case, given the cost of flatscreen TVs, any successful product will have to work well and be relatively free of flaws. That will take time, whoever pulls it off. In such a case, getting it out first will not as important as getting it right. That goes as much for Apple as it does for anyone else.

    On the other hand, good flat screen TVs are still relatively expensive - though you can get them cheap if quality doesn't matter to you - as with, say, cheap PCs. Apple may need a new product that hits a lower, more affordable price point to generate the kind of volume sales that really pad the bottom line - and the reputation. What that product may be, it it exists at all, is still a mystery - unlike the Apple TV, which seems to be inevitable. As always with Apple, though, much of the fun is in anticipating a product release. That much, at least, has not changed. Who sits around wondering what the next big thing from Samsung will be?
    thewhitedog