Today Apple announced its Q2 results, and sales of the iPhone continue to dominate revenue and earnings for the company.

Revenue for the quarter came in at $45.6B – a 4.7% increase year over year, and a down sequentially from the always strong holiday season.

Net profit came in at $10.2B for the quarter, resulting in Earnings per Share of $11.62 – beating the consensus of $10.41. This was an increase of 7.3% over Q2 last year.

Apple Q2 2014 Financial Results (Non-GAAP)
  Q2'2014 Q1'2014 Q2'2013
Revenue $45.646B $57.594B $43.603B
Net Income $10.2B $13.1B $9.5B
Margins 39.9% 37.9% 37.5%

iPhone is far and away the largest product at Apple, with unit sales of 43.7 million for the quarter. This is a 17% increase over the same time last year, and a 14% increase in revenue. iPhone sales accounted for 57% of Apple’s Q2 revenue. The large increase in iPhone sales can be at least partially attributed to increases in sales in both Japan and China, though revenue from the rest of the Asia Pacific region was down.

Software, Services, and App/Music store sales came in at $4.6B for the quarter – up both year over year (11%) and sequentially (4%).

Mac sales were up 5% year over year with 4.1 million Macs sold, but down from 4.8 million last quarter.

iPad sales were down 16% year over year, and 37% sequentially, tempering the increase in iPhone sales. Some of the drop was explained by channel inventory changes, but in the end Apple reports how many devices it sells to the channel every quarter so that is the number that matters. If there was a strong demand for the product, then it’s unlikely there would be a large number unsold in the channel to worry about.

Finally, iPod sales continued their decline with 2.761 million devices sold – down 51% year over year and 54% sequentially. iPod is no longer a billion dollar business for Apple, with only $461M in revenue from the once loved device.

Apple Q2 2014 Device Sales (millions)
  Q2'2014 Q1'2014 Q2'2013
iPhone 43.719 51.025 37.430
iPad 16.350 26.035 19.477
Mac 4.136 4.837 3.952
iPod 2.761 6.049 5.633


Apple Q2 2014 Revenue by Product (billions)
  Q2'2014 Q1'2014 Q2'2013 Revenue for current quarter
iPhone $26.064 $32.498 $22.955 57.1%
iPad $7.610 $11.468 $8.746 16.7%
Mac $5.519 $6.395 $5.447 12.1%
iPod $0.461 $0.973 $0.962 1%
iTunes/Software/Services $4.573 $4.397 $4.114 10%
Accessories $1.419 $1.863 $1.379 3.1%

Apple CEO Tim Cook also announced more changes to the Capital Return Program. From August 2012 to March 2014, Apple has given $66 billion back to shareholders through the program. As part of this program, Apple’s board has approved an increase in the share repurchasing program from $60B to $90B. On top of this, the quarterly dividend has increased by about 8%, and they have plans to increase the dividend annually going forward.

Finally, Apple announced a stock split of 7-1. Each Apple share at the close of business June 2, 2014 will receive six extra shares for each share held. Trading will begin again on June 9th, 2014.

Overall, it was another solid quarter for Apple. iPhone sales keep providing them strong revenue, but it is slightly worrisome that the iPad sales have not continued at the same pace. There are likely many reasons for this including strong competition in the space, and people less likely to upgrade their iPads annually or semi-annually like the phone market. It’s obviously too early to call any trends here though, so we’ll have to wait and see how the numbers look in a few months.

Source: Apple Inc

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  • Streamlined - Wednesday, April 23, 2014 - link

    Yeah, everyone is holding out for an A7 iPod Touch. I'd credit the iPod Touch for the single biggest reason that Apple OWNS the college group. These kids all grew up with iPods and continued right into an iphone.
  • gingofthesouth - Wednesday, April 23, 2014 - link

    Actually, iPad sell through was only down ~3%. ~18mil last year, ~17mil this year. All explained in the call afterwards.
  • MartinT - Thursday, April 24, 2014 - link

    Which I take means they stuffed the channel in Q4?

    Also interesting this distinction now emerges after years of claims that sales as reported by Apple were actually devices sold to end users.
  • gingofthesouth - Thursday, April 24, 2014 - link

    Which is all weird isn't it? Because they have said their numbers were sell through, not sold into inventory.... I would like some more info on that too tbh.
  • raulr - Thursday, April 24, 2014 - link

    It may be because not much inventory was left in the channel before, so most of it sold through to end users relatively quickly. iPad is relatively mature now and the upgrade cycle is much lower than for phones. It was bound to start peaking.
  • michael2k - Thursday, April 24, 2014 - link

    Apple averages a 5 day inventory. Taking their iPad numbers of 17m for a quarter translates to 1.3m sold per week. That means that instead of a 5 day inventory they had a 10 day inventory this time last year. Not exactly the end of the world unless the channel inventory keeps increasing and this number indicates it is decreasing.
  • darkich - Thursday, April 24, 2014 - link

    iPad yoy sales drop is an alarming sign, especially since the Air and Mini 2 offer a vastly better experience than predecessors.
    Seems like Android (and, recently, Windows tabs on BT Atoms) are getting too hard to ignore in terms of value for money
  • melgross - Thursday, April 24, 2014 - link

    The contention that it's sales to the channel that matters in the end is wrong. Many companies have high sales to the channel, but poor sell through. A very famous example of that was the Hp Touchpad. Sell through was just 5% of channel sales, and look what happened there. I could give examples from Samsung, and others too.

    In fact, quoting sales to the channel has been criticized by more than a few financial experts as being meaningless, because many devices can be returned.

    As it was cleared up during the call last night, we saw that sell through, which is the only number that matters, was down just 3% YOY, which isn't bad.
  • darkich - Thursday, April 24, 2014 - link

    Fair enough, and good info.
    It still isn't a good sign for the iPad though..with the latest iterations Apple tablets have reached a very satisfying level of polish and maturity.. I was expecting nothing else but increased sales
  • Flunk - Thursday, April 24, 2014 - link

    They're also facing new problems like market saturation and increasingly competent competitors. The first Android tablets were terrible but now they're fairly competitive with the iPad in most regards with each side having a few advantages.

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