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Apple Reports Third Quarter Results

iPhone, Mac & Services Growth Drive Record June Quarter Revenue & 20% EPS Growth  —  Apple® today announced financial results for its fiscal 2014 third quarter ended June 28, 2014.  The Company posted quarterly revenue of $37.4 billion …

Apple

Context & Ripple Effects

Apple's fiscal Q3 closes out a year in which the story has been rotation inside the portfolio: the April quarter report already showed the company leaning on iPhone and Services while iPad momentum faded, and today's numbers extend that split — iPhone up 12.7% year over year on demand from Brazil, Russia, India and China, iPad down 9.2%. A year ago the July 2013 quarter report set the baseline this beat against.

The breadth of pickup — Re/code, WSJ, MacRumors, TechCrunch, Business Insider among others — reflects two live questions: whether the iPad slide is cyclical (Tim Cook argues business adoption can revive it) and how the supply chain's reported order for 70M–80M of the coming 4.7-inch and 5.5-inch iPhones by December 30 will land against this quarter's 35.2M iPhone sales.

First-order effects

  • iPhone's 12.7% growth and iTunes' $4.5B quarter (billings up 25%) carry the P&L, offsetting the 9.2% iPad decline and delivering record June-quarter revenue of $37.4B with 20% EPS growth.
  • Apple enters the fall with its largest initial production run ever reportedly requested — 70M–80M large-screen iPhones by December 30 — making the holiday quarter a direct bet on bigger displays converting the demand shown this quarter.

Second-order effects

  • With iPad volumes shrinking, Cook's pitch that enterprise buyers could revive the tablet line puts pressure on Apple's business-sales channel to produce demand the consumer market no longer supplies.
  • The $20B cumulative paid to developers across 75B downloads raises the switching cost of leaving iOS precisely when larger screens make the platform more competitive at Android's traditional size points.

Third-order effects

  • If the pattern holds, Apple's growth engine structurally shifts from tablet unit growth to a combination of emerging-market iPhone demand and per-device services monetization — a mix where pricing power sits in the installed base rather than new categories.

The trend: Apple's quarterly results are rotating from iPad-led hardware expansion toward emerging-market iPhone growth plus services revenue, with screen-size enlargement as the next demand lever.

Related: Apple · iPhone · Revenue per active device · Apple Reports Second Quarter Results · Apple Reports Third Quarter Results (2013)

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