Apple (NASDAQ:AAPL) shares were largely unchanged in after-hours trading on Tuesday and up less than 3% just after the market opened Wednesday, following the release of its fiscal-fourth-quarter earnings report. Apple's results exceeded expectations for both earnings and revenue, but iPhone and iPad sales fell short. In total, Apple earned an adjusted $1.96 per share on revenue of $51.5 billion. Wall Street analysts had expected the Cupertino tech giant to earn around $1.88 per share on revenue of around $51 billion. Apple's gross margin was 39.9%, slightly better than the 39.3% consensus estimate.
Let's take a closer look at Apple's quarter.
iPhone remains Apple's dominant business
Apple continues to derive the overwhelming majority of its revenue from the iPhone. Apple sold 48.04 million smartphones during its fourth quarter, generating $32.2 billion in the process -- about 63% of its revenue. The average iPhone sold for just over $670, which is up sequentially, but not a record high. iPhone unit sales rose 22% on an annual basis while revenue jumped 36%. Analysts had been slightly more bullish on iPhone unit sales; consensus estimates called for the company to sell around 48.5 million phones.
The Mac generated the second-highest revenue number for Apple, accounting for about 13% of its sales. During the quarter, Apple sold 5.7 million Macs, bringing in $6.9 billion. This is one category where Apple exceeded expectations, as analysts had the company selling around 5.6 million. The average Mac sold for just over $1,200. Mac unit sales rose 3% on an annual basis, while Mac revenue rose 4%.
The iPad remains a sore spot for the company, as its sales continue to decline. It was once the company's second-largest segment but has fallen to fourth place, and if its rate of decline continues, it could soon become Apple's smallest segment. Apple sold 9.9 million tablets, generating $4.28 billion. Analysts had been more optimistic, looking for Apple to sell around 10.2 million iPads. Unit sales and revenue fell 20% on an annual basis, and the average iPad sold for around $433. The iPad mini 4 made its debut late in the quarter, but the forthcoming iPad Pro hasn't yet arrived in stores.
Apple's other two segments -- services and other products -- experienced a fair amount of growth. Services, which notably includes the iTunes app store, saw its revenue rise 10% on an annual basis to $5.09 billion. The other products segment includes both the Apple Watch and Apple TV. The upcoming Apple TV 4, however, wasn't included in the quarter. Instead, most of that segment's growth likely came from the Apple Watch. In total, other products generated just over $3 billion, which is up 61% on an annual basis and 15% sequentially, making it Apple's fastest-growing segment.
Chinese growth continues to surge
Apple's sales in all regions rose on an annual basis, but Chinese demand remained particularly strong. Apple's sales in Greater China rose 99% on an annual basis. Europe, in contrast, was Apple's slowest-growing segment, enjoying only 2% annual revenue growth. Japanese sales rose 9% on an annual basis, while the Americas grew 10%. The Rest of Asia Pacific rose 27%. Almost two-thirds of Apple's revenue came from international markets.
Guidance is in line with expectations
For the December quarter, Apple expects to generate around $75.5 billion to $77.5 billion in revenue, with a gross margin between 39% and 40%. Analysts had anticipated revenue of around $77 billion.
That quarter, including the crucial holiday shopping season, will likely be more significant. Given Apple's fourth-quarter results, it's not surprising that its shares are little changed.