Apple reported earnings earlier today for fiscal Q3.
(The company reported) $37.4 billion in revenue, $7.7 billion in net profit representing $1.28 per share. Compared to the year-ago quarter, it corresponds to a growth of 5.9 percent in revenue, and 19.6 percent in EPS (adjusted for the7-for-1 split).
This was slightly below analysts’ expectations. From Re:code:
Analysts expected Apple to report earnings of $1.23 a share on revenue of $38 billion. Looking forward, Apple said to expect revenue of $37 billion to $40 billion for its July-to-September quarter. Analysts had been forecasting a revenue projection of around $40.4 billion, with per-share earnings pegged at $1.34. Apple didn’t give a per-share earnings forecast but did say to expect gross margins of 37 percent to 38 percent.
Of those numbers, the most strikingly off belonged to that of the iPad. It’s the second quarter in a row that iPad sales have taken a significant dip. Predictably, some are predicting gloom & doom punctuated from cannibalization by the smartphone: a threat some are certain to accelerate with the introduction of a larger iPhone 6 model in September.
The overall tablet market has been shaky, and many people think it’s because smartphones with more powerful processors and bigger, better screens make them seem less necessary. Whenever Apple does release its new iPhones, they will likely be both bigger and more powerful than the iPhone 5S. That’s likely to be good news for Apple as it tries to claw market share back from Samsung. It could also be bad news for the iPad, as it tries to sell iPads to people with big phones in their pockets. But Apple has never been shy of cannibalizing its own products, so the iPad’s loss could be the company’s gain.
Of course one thing that hasn’t been mentioned very much that may be contributing to the growth slowdown is that the product’s lifecycle may be more in line with that of the PC (or Mac) than the smartphone. Back in March, Fortune published information from a Consumer Intelligence Research Partners study that found that:
Replacement: Eight out of ten lost or broken iPhones are replaced within two days. Owners of a broken Mac or iPad may not get to it for a week or more.
Recycling: iPad owners are more than twice as likely as iPhone owners to give their old tablets to a friend or family member.
First-time buyers: Only 1-2% of iPhone buyers purchase their very first phone. By contrast, the percentage of first-time iPad buyers was 78% in December 2013, down only slightly from 84% in March 2013.
Even though people might not be buying as many new iPads as Apple might have originally hoped for, they continue to dominate the overall tablet market. So I don’t think there’s much to worry about. And while tablets may be in flux, iPhone sales jumped another 12.7% from the same time a year ago.
I know this is really going out on a limb but I think Apple’s going to be OK, despite what some alarmists (and Wall Street analysts) think.