1 Silver Lining in Apple's Disappointing Quarter

By Ashraf Eassa and Evan Niu, CFA – Jan 28, 2014 at 2:00AM

NASDAQ: AAPL

Apple

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Apple's latest earnings release may have disappointed investors, as shares promptly tanked, but there's at least one thing to be grateful for: Gross margin is stabilizing in a meaningful way.

Investors are obviously disappointed with Apple's (AAPL 1.27%) earnings release. iPhone unit sales missed the mark while revenue guidance also fell short of expectations. However, there is one silver lining that investors can take comfort in: gross margin. Over the past year, gross margin has been a particular cause for concern among investors, but profitability is definitely stabilizing.

Last quarter, Apple put up a 37.9% gross margin, a sequential increase of approximately 90 basis points. Apple already took a hit upfront with deferrals related to free software. After all is said and done, Apple still puts up enviable gross margins for a consumer electronics company. Even if Apple never gets back to its mouthwatering 47% level previously seen, it's hard to complain about 38% gross margins.

In the following video, Evan Niu discusses Apple's gross margins last quarter with Ashraf Eassa.

Ashraf Eassa has no position in any stocks mentioned. Evan Niu, CFA owns shares of Apple. The Motley Fool recommends and owns shares of Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.