Apple, Inc. Earnings: More Proof We Need the iPhone 6

Macs were a source of strength for Apple, in fiscal Q3. Credit: The Motley Fool.

So much for starting a winning streak. Apple, Inc. (NASDAQ: AAPL  ) earnings came in $0.05 ahead of estimates, but revenue fell more than a half-billion short of Wall Street's targets. Specifically, Apple reported $1.28 a share in profits on $37.43 billion in revenue. Analysts were expecting $1.23 a share and $37.99 billion, respectively, according to Yahoo! Finance.

Yet it's what drove the revenue miss that initially pushed the stock down about 1% in after-hours trading. Apple's iPhone and iPad sales fell short of targets -- and, in the case of the iPad, well short of analysts' consensus view:

Product
Actual
Median Projected
Last Year
Y-o-Y Growth

iPhones sold

35.203 million

35.78 million

31.241 million

13%

iPads sold

13.276 million

14.43 million

14.617 million

(9%)

Macs sold

4.413 million

3.93 million

3.754 million

18%

Sources: Fortune, Apple press release.

Maybe we should have seen this coming? NPD says that worldwide tablet shipments declined in the calendar first quarter. Presuming Apple would buck the trend as it has in years past turned out to be too optimistic a view.

Regionally, China delivered the most growth year-over-year (up 28%) but accounted for a smaller portion of overall revenue than in Q2. Most analysts expect continued growth in the region as partner China Mobile (NYSE: CHL  ) expands its 4G infrastructure to serve advanced handsets such as the iPhone 6.

Looking ahead, Apple expects to generate between $37 billion and $40 billion in fiscal Q4 revenue while targeting a 37% to 38% gross margin. In Q3, gross margin improved to 39.4% from 36.9% in the year-ago quarter.

On the balance sheet, Apple now has $135.5 billion in net cash and investments after subtracting $29 billion worth of debt. That's up from $129.8 billion after debt in the year-ago quarter.

For Apple and investors, it was a decent but unspectacular quarter in which the Mac maker produced healthy profits while suffering mild, top-line hiccups. Nothing to get too concerned about, and certainly nothing a good dose of iPhone 6 sales won't cure.

Do you agree? What did you think of Apple's fiscal third-quarter report and lagging iPad sales? Leave a comment below to let us know where you stand.

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Read/Post Comments (3) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 23, 2014, at 3:27 AM, McBobb wrote:

    I don't get it.

    Already massive profits up by 13%! Miss, but only a slight one, on revenue, which is hardly a disappointment. Cold hard cash huge and increasing despite sizeable share buybacks. So naturally the shares go down. What?

    What's not to like about this company? If they keep doing what they're doing they can buy the world in a few years.

    I'm still in.

  • Report this Comment On July 23, 2014, at 9:06 AM, Mathman6577 wrote:

    Good article, Tim.

    I believe the CFO said on the call that it is difficult to discern whether users have held off on buying until the new iPhone is released in the fall. "Missing" by a few million is not a concern to Apple.

    I think the professional Apple analysts need to stop obsessing over a few decimal points. I'm just waiting for Gene Munster to "fall out of his chair" when Apple releases the new devices and reports a huge increase in sales.

  • Report this Comment On July 23, 2014, at 4:34 PM, ConstableOdo wrote:

    Doesn't anyone comprehend the logistics of producing 80 million iPhone 6 devices which also requires extra components for damages and returns? It takes a lot more than simply sitting in an armchair and BS'ing about how some person can run Apple better than Tim Cook. Those damn analysts don't do a damn thing except criticize about how Tim Cook and Apple aren't doing things properly. At least investors do have risks if they're using their own money. Apple may not be the perfect company like Wall Street claims Google is but Apple is doing quite satisfactory as far as I'm concerned.

    Gene Munster is ridiculous in thinking he can run Apple better than Tim Cook. He needs to start his own company and see how hard it actually is to say something and then actually carry it out. It takes a lot more than snapping your fingers and saying "abra-cadabra" to hold the loyalty of tens of millions of customers like Apple has over the years.

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