For what generally amounts to Apple's (AAPL 0.03%) most boring quarter seasonally, the Mac maker delivered. That's not to say it was a bad quarter, but rather that the fiscal fourth quarter is always at the end of the iPhone product cycle and is more like a preview for the feature presentation that is the fiscal first quarter.
Revenue rose 22% to $51.5 billion, gross margin was stable at 39.9%, and Apple continued to face significant foreign exchange headwinds. Net income was $11.1 billion, or $1.96 per share. The company sold a solid 48 million iPhones during the quarter, along with 9.9 million iPads and 5.7 million Macs. That last figure represents an all-time record for Macs sold in a quarter, and Apple said demand for the new MacBook helped drive sales.
Here are the rest of the details about how Apple finished off its fiscal 2015.
Apple enjoyed continued strength in Greater China, with iPhone unit sales nearly doubling. Greater China revenue doubled to $12.5 billion, and Apple is still on track to reach 40 retail stores by mid-2016.
Remember when I told you to stop worrying about China's macro slowdown, since there's no measurable correlation with Apple's business? Tim Cook again reiterated that despite all of the headlines and media frenzy, there's been no meaningful impact to Apple in terms of sales, foot traffic to its stores, or any other area of the business. There's really no way to tell at the consumer level, according to Cook.
The iPhone performed well, with unit sales inching higher modestly on a sequential basis. The iPhone 6s and 6s Plus launched with just two days left in the quarter. Average selling prices rose to $670, the highest they've been in years thanks to an improving product mix. Which is also another way of saying that the whole new upsell pricing structure is working swimmingly.
Apple was able to put up the highest Android switcher rate (again) since it began measuring this figure three years ago. Approximately 30% of iPhone buyers during the quarter that were upgrading a smartphone were switching from Android. At the same time, only 30% of the iPhone install base has upgraded to the iPhone 6 or newer, which Cook views as evidence of how much headroom there still is.
iPad sales continued to trend lower, but surprisingly this was of little concern to analysts. Cook sounded legitimately surprised that no one was grilling him about the tablet business. Unit sales fell below 10 million for the first time since 2011, so you'd think that analysts would be more worried.
But iPad Pro is about to ship, which will hopefully fare well in the enterprise and professional markets that it's intended for. Seeing as how the iPad upgrades have been relatively modest over the past two years, it makes some sense that sales are slowing. iPad Air and Air 2 are standing pat at their respective specs and price points, almost as if they're testing the market.
Currency headwinds remain, and CFO Luca Maestri said that revenue growth would be 800 basis points higher if measured in constant currency. That's a major hit to sales, to the tune of $3.25 billion to be precise. Apple has been forced to adjust prices in certain markets to accommodate, but the good news is that the company is "encouraged" by how resilient demand has proven in the face of price increases.
Going forward, Apple expects for next quarter's revenue to be hurt by 700 basis points (this is already factored into its guidance).
On capital returns
Apple repurchased over $13 billion in shares last quarter, all of it in open market transactions (as opposed to an accelerated share repurchase program). That's a hefty amount and an increase from the $10 billion that it repurchased the prior quarter. To date, the Mac maker has now repurchased over $103 billion in stock over the past three years.
This activity is what's driving EPS gains. The EPS growth of 38% easily outpaced the top line jump of 22%. Apple also declared a dividend of $0.52 per share, representing a 26.5% payout ratio.
On next quarter
Revenue next quarter is expected in the range of $75.5 billion to $77.5 billion, which means that Apple should put up positive sales growth even at the low end of guidance. Importantly, Cook expects both iPhone units and revenue to grow, despite some market speculation to the contrary. Gross margin should be between 39% and 40%, as the commodity pricing environment continues to be favorable.
Stay tuned for Apple's feature presentation.