Apple earnings: $46B in revenue, 43 million iPhones sold

Apple had a very good second quarter. The company reported earnings Wednesday that surpassed both Wall Street expectations and Apple’s internal guidance, thanks to stronger than expected iPhone sales. Apple sold 6.3 million more iPhones than it did in the same period last year, but it sold 2 million fewer iPads.

Apple on Wednesday reported second-quarter revenue of $45.6 billion and net income of $10.2 billion, which works out to $11.62 per share. The revenue figure is higher than Apple’s results from the second quarter in 2013, and profits continued to rise year over year. Analysts were expecting earnings per share of $10.19 on sales of $43.5 billion.

Apple’s gross margins are always an important number to watch. Gross margin was up at 39.3 percent compared to 36.7 percent in the first quarter and 37.5 percent at this time last year.

Here are the device sales numbers:

  • 44 million iPhones, as compared to 37.4 million sold a year ago.
  • 16 million iPads, down from 18.1 million sold a year ago.
  • 4 million Macs, which is about the same as last year’s reported figure of 4 million Macs sold in the 2nd quarter.

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The surprisingly good quarter was driven by the iPhone. In a conference call with analysts and investors Wednesday afternoon, Apple CEO Tim Cook noted this was partially due to sales in markets outside the U.S., highlighting increased market share in both developing markets and emerging markets. Surprisingly, most of the discussion was not about the iPhone 5c, which was assumed to be the low-cost phone targeted at emerging markets. Instead, both Cook and CFO Luca Maestri spent time lauding the iPhone 4s as a major product for first-time iPhone buyers.
During the conference call, Maestri preemptively acknowledged the disappointing number of iPads sold by noting the year over year decrease was not as drastic as it seemed. Maestri explained that year over year sell-through decline was only 3 percent when taking into account channel inventory differences. Cook encouraged investors to take a long view of the tablet market, noting the iPad has already sold more than 210 million units.
“When I back up from the iPad, I see the iPad has absolutely been the fastest growing product in Apple’s history,” Cook said. “That doesn’t mean every quarter, every 90 days is going to be a number everybody’s thrilled with.”
One of the major topics of discussion was Apple’s international efforts, particularly in the greater China region, which includes Taiwan and Hong Kong. Apple saw sales in China rise from $1 billion to $9.3 billion, partially driven by the availability of the iPhone on China Mobile. However, Cook also pointed out that the Mac had double-digit growth and iTunes revenue more than doubled.
“It wasn’t just because we were able to come to an agreement with the world’s largest carrier,” Cook said. “That was certainly the key but as you can tell from the rest of these numbers, there are other things going on.” Apple plans to triple its number of retail stores in China.
Although Apple no longer refers to the Apple TV as a hobby, it still does not break out Apple TV sales numbers in the quarterly results. Cook noted that the company has sold about 20 million units. “The reason why I stripped off the hobby label is when you look at sales and content bought directly off Apple TV for 2013 that number is over a billion dollars,” Cook said.
Apple’s board of directors also announced a stock split: Apple shareholders will receive six additional shares for every share held on the June 2nd. Split adjusted trading will begin on June 9th. CEO Tim Cook said this was to make shares more accessible to small investors.
Apple also expanded its cash capital return program to over $130 billion. What else is Apple going to do with its extra cash? “We’ve made 24 acquisitions in 18 months,” Cook said. “We’re on the prowl.”
Unsurprisingly, investors liked that news. Apple’s shares rose more than eight percent in after-hours trading, to $565, a gain of around $41 or 7.75 percent.

This story is developing and was updated several times Wednesday as more information became available.