Apple Q4 FY 2014 Fiscal Results - 21% Mac Growth And Strong iPhone Sales
by Brett Howse on October 20, 2014 7:30 PM EST
This afternoon, Apple released their financial results for Q4 2014, which ended September 27, 2014. Strong iPhone sales, as well as a resurgence in Mac sales, boosted the company’s revenue above the $40 billion USD guidance to $42.1 billion. Operating income came in at $11.165 billion, with a net income of $8.467 billion for the quarter. This resulted in an earnings per share of $1.43, which beat analysts’ expectations of $1.31 per share. Gross margin was a respectable 38% for the quarter, compared to 37% in Q4 2013.
Apple declared a cash dividend of $0.47 per share which will be paid out to all shareholders of record as of November 10th, on November 13th. Over $20 billion was returned to shareholders in Q4 as part of the share buyback program and other market transactions.
| Apple Q4 2014 Financial Results (GAAP) | |||||
| Q4'2014 | Q3'2014 | Q4'2013 | |||
| Revenue (in Billions USD) | $42.123 | $37.432 | $37.472 | ||
| Operating Income (in Billions USD) | $11.165 | $10.282 | $10.030 | ||
| Gross Margin (in Billions USD) | $16.009 | $14.735 | $13.871 | ||
| Net Income (in Billions USD) | $8.467 | $7.748 | $7.512 | ||
| Margins | 38.0% | 39.4% | 37.0% | ||
| Earnings per Share (in USD) | $1.43 | $1.28 | $1.19 | ||
As is the norm, the iPhone was the star of the show. In September, Apple of course launched two new iPhone models which brought the total volume of devices sold to 39.272 million for the quarter, which is up 11.5% from the previous quarter and 16.2% from the same quarter a year ago. The iPhone 6 and 6+ are apparently selling very well, with Apple selling all of the units they are making at the moment. iPhones accounted for 56% of Apple’s revenue this quarter. With the iPhone 6 only being available for a couple of weeks this quarter, expect the units to jump significantly for Q1 2015, which began September 28.
The surprise for this quarter was Mac sales, which grew an astonishing 21% year-over-year, and 25% sequentially. It is even more amazing when you consider that the MacBook Pro line only got a slight refresh last quarter, and the iMac, Mac Mini, and MacBook Air got no significant updates at all. Apple said that they “won back to school” and they certainly did as a percentage increase. Overall Mac sales were 5.52 million, as compared to 4.413 million last quarter and 4.574 million at the same time last year. With this increase, Apple stated that they have the highest PC sales percentage since 1995. Revenue for the Mac was also big, as would be expected with the gain in sales. Mac revenue is now back to number two overall for the company with $6.625 billion for Q4.
| Apple Q4 2014 Device Sales (thousands) | |||||
| Q4'2014 | Q3'2014 | Q4'2013 | Seq Change | Year/Year Change | |
| iPhone | 39,272 | 35,203 | 33,797 | +12% | +16% |
| iPad | 12,316 | 13,276 | 14,079 | -7% | -13% |
| Mac | 5,520 | 4,413 | 4,574 | +25% | +21% |
| iPod | 2,641 | 2,926 | 3,498 | -10% | -24% |
iPad sales continue to be the thorn in Apple’s side these days, with a sales decrease for the third consecutive quarter. iPad sales fell to just 12.3 million, down from 14.1 million last year, which is a 13% drop. Clearly they are not giving up on the market, and the two new devices launched last week as well as the holiday season should put an end to the decline in sales for Q1. Apple said that iPad sales were ahead of iPhone sales over the same initial four years, so they are happy with where it is at, but still three straight quarters of sales decline is not what they would have been hoping for.
The venerable iPod likely got the final unit and revenue breakdown, with the iPod going to be rolled into the new Other category, with the iPod being joined by Accessories, Beats, Apple TV, and other products in the new reporting category such as watches when they are released. iPod sales fell 24% from last year, with 2.6 million devices sold. Revenue came in at just $410 million (just!) for the quarter.
Finally, iTunes/Software/Services was up 8% year-over-year with $4.6 billion for the quarter, with the App Store continuing to drive revenues for the Apple ecosystem.
| Apple Q4 2014 Revenue by Product (billions) | |||||
| Q4'2014 | Q3'2014 | Q4'2013 | Revenue for current quarter | ||
| iPhone | $23.678 | $19.751 | $19.510 | 56.2% | |
| iPad | $5.316 | $5.889 | $6.186 | 12.6% | |
| Mac | $6.625 | $5.540 | $5.624 | 15.7% | |
| iPod | $0.410 | $0.442 | $0.573 | 1% | |
| iTunes/Software/Services | $4.608 | $4.485 | $4.260 | 10.9% | |
| Accessories | $1.486 | $1.325 | $1.319 | 3.5% | |
Outlook for Q1 2015 is a big boost for the holiday season. Revenue is expected to come between $63.5 and $66.5 billion with margins between 37.5 and 38.5 percent. Q1 will of course include more sales of the new iPhone, but also new product launches such as the iPads, and the Mac refresh we saw last week. Also new to the quarter will the Apple Pay, which was not available for Q4 2014. Apple divulged on the earnings call that it will not be charging anything to retailers or consumers for using the new pay system, but that they do have a financial arrangement with the financial institutions to earn money through the system. Details of those arrangements were kept confidential. In the end, if someone is paying, it will of course be the consumer even if it is just through product markups. We do not know though if the cost of the system will be any higher than the credit cards already charge, so it may amount to a zero anyway.
Apple has been a company which has been printing money for a long time, and with the latest product launches that does not seem to be ending anytime soon. The one key here is Mac sales, which were very high, especially when compared to the PC industry as a whole which has recovered somewhat, but is possibly still at small decline overall for the year.
Update: The story originally stated Software and Other would be a single category, but there will be two categories for Software and Other.
Source: Apple Investor Relations
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DarkXale - Tuesday, October 21, 2014 - link
The problem with Google's suites in particular is that they are so limited that they rarely support any standardised ISO layouts, and reference management is a pain.robinthakur - Thursday, October 23, 2014 - link
Yer, definitely seen a big uptake in Macbook Airs/Pro popping up in business, people seem to like them too. As busiensses, especially start ups, just tend to use cloud services, the old compatibility with MS Office becomes less important and web standards compliance becomes more important. I've seen less interest in Chromebooks however, I think the fact that they are basically useless without internet connectivity (and Google) makes people in business very waryname99 - Tuesday, October 21, 2014 - link
"so they are happy with where it is at, but still three straight quarters of sales decline is not what they would have been hoping for"Uhh, it is probably EXACTLY what they expected. iPads sell like a rocket in their launch quarter and then slow down. The same thing happened in 2013 --- "three straight quarters of sales decline" after the launch at the end of 2012. The same thing will probably happen in 2015. The pattern before 2013 is less obvious because Apple did some "catchup" launches that were not in October --- the iPad4 only six months after the iPad3, and the iPad mini --- but again dropoffs after the launch quarter.
Phones are subject to the same sort of dynamic, but not quite as strong, partially because of the phased launched across countries, partially because many buyers are locked into n-year contracts, and every year (for various reasons) they slide their update by a week or a month or whatever, so that over time their upgrade eligibility drifts ever further from the exact launch date.
It's not clear that this is an optimal strategy for Apple (but they know better than me!). It gets them great press, but it's obviously a bitch to manage, and very risky. One wonders if something like "launch in Q2, then refresh in Q4" would be a less risky strategy. Q2 would pick up all the people who buy for themselves, the Q4 press would pick all the people who buy as gifts, and overall the monthly sales profile would be flatter.
Ktracho - Tuesday, October 21, 2014 - link
I'm not sure how long they can continue making their tablets relevant. Sure, some growth can come from selling in some markets they weren't in before, but if you have a year to work on innovating or improving a product like iPad mini, and all you can come up with is a different color and adding a sensor that has been in use in previous products, and then you tell people, "If you're not happy with all the extra value, just go buy the old version at a discount!", what does that say about your prospects to increase sales/relevance?Deelron - Tuesday, October 21, 2014 - link
Conversely the new Air appears to be quite a beast, particularly with the benchmarks today showing it's a 3 core machinerobinthakur - Thursday, October 23, 2014 - link
Yes, but the majority of people with the money and inclination to buy don't know or care, they just see the 3 and assume it is better than the 2. I wouldn't expect very many (any?) people to upgrade from a mini retina to a 3.Calista - Tuesday, October 21, 2014 - link
Can't say I'm surprised, earlier many of their laptops was good but quite frankly rather overpriced. Nowadays the price are more or less on par with any high quality PC while having few of quirks. Not saying the MPB is the best thing since sliced bread, but it's a very well-rounded product that have have stood the test of time. And with more and more services and applications moving to the cloud the cons of not having Windows are almost completely removed.zorroog - Wednesday, October 22, 2014 - link
Interesting way to depict a +21% growth by putting a ' - ' in front of the line describing the growth number.Desperately trying to get rid of that pro Apple image?