iPhone sales push Apple revenue up almost 50 percent

Apple posts revenue that's 49 percent better than a year ago, in its strongest non-holiday quarter yet.

Erica Ogg Former Staff writer, CNET News
Erica Ogg is a CNET News reporter who covers Apple, HP, Dell, and other PC makers, as well as the consumer electronics industry. She's also one of the hosts of CNET News' Daily Podcast. In her non-work life, she's a history geek, a loyal Dodgers fan, and a mac-and-cheese connoisseur.
Erica Ogg
4 min read

Thanks in part to the increasing momentum of the iPhone, Apple has bested Wall Street's predictions again, this time for its second quarter 2010 earnings.

Apple on Tuesday reported revenue of $13.5 billion and profits of $3.07 billion, or $3.33 earnings per share. That's a 49-percent increase from the $9.08 billion in revenue reported in the same quarter a year ago.

Analysts had been expecting revenue between $11.2 billion and $13.25 billion, and earnings per share between $1.93 and $2.72.

Mac and iPhone sales were up, by 33 and 131 percent, respectively: Apple says it sold 2.9 million Macs, 8.75 million iPhones, and 10.89 million iPods during the quarter. The surprise is that iPod sales did as well as they did, declining only 1 percent from the second quarter of 2009. On a call with analysts, Apple CFO Peter Oppenheimer said this was due to growing sales of the iPod Touch, which grew 63 percent from the same quarter a year ago. The high price tag of the touch-screen iPod pushed the category's overall revenue up 12 percent.

In a press release accompanying the earnings, Apple CEO Steve Jobs is quoted as saying this is the "best non-holiday quarter ever," and makes reference to "several more extraordinary products in the pipeline for this year."

We can easily assume he's speaking of the next-generation iPhone, which the public got a glimpse of yesterday thanks to Gizmodo's posting pictures of a prototype iPhone 4G that apparently was lost by an Apple employee last month.

Chief Operating Officer Tim Cook later appeared to confirm new iPhone hardware on the call with analysts. In answering a question about how Apple uses innovation to drive sales of the iPhone, he mentioned iPhone OS 4.0 for "the new iPhone coming this summer." And as if that weren't enough, when discussing factors that will impact the next quarter's results, Oppenheimer listed a number of things including "a future product transition."

The currently available iPhone models saw increased sales in every geographic region for Apple for the quarter, helped in part by adding eight new carriers to reach a total of 151 worldwide. Including hardware, accessories, and payments from carriers, Apple made $5.3 billion off of its smartphone.

Growth of the iPhone in Asia Pacific and China (including Hong Kong and Taiwan) was "staggering" to Apple, according to Cook. Asia Pacific was up 474 percent, Japan 183 percent, Europe 133 percent. But China is a relatively new market for Apple, and Cook said revenue from the region for the past six months was $1.3 billion, a increase of 200 percent.

Apple sounds eager to capitalize on the iPhone's growing popularity in China. It's planning two new stores for Shanghai this summer, and a total of 25 for the greater China region by the end of fiscal year 2011, according to Oppenheimer.

While none of the analysts asked directly about the "lost" iPhone 4G, several tried a few different ways to figure out how the iPad will impact Apple's bottom line next quarter. Since the iPad didn't hit stores until after the second quarter ended, many asked Cook and Oppenheimer what insights they had gained in the first few weeks of sales.

They didn't have a lot to add, saying that it was still to early to glean much. Cook did, however, explain why iPad international sales were pushed back. "Demand in the U.S. was much, much stronger than we predicted," he said. "So we had to push out the international launch."

Regarding possible new carrier partners in the U.S., Cook reiterated Apple's position he laid out during last quarter's earnings call. He didn't attribute a significant amount of the 131 percent growth in iPhone sales to the eight new iPhone wireless carriers added during the quarter. 

"Over past year we've moved a number of markets from exclusive to nonexclusive. In each case we've done that, we've seen unit growth accelerate and market share improve," he said. "But that doesn't mean we view that formula works in every single case. That's our learning so far, but we think very carefully at the country level to conclude what's in our best interest." Translation: he's not giving any hints about whether Verizon will be getting the iPhone in the U.S.

Apple guided typically conservatively for the next quarter, saying it expects third-quarter 2010 revenues to be between $13 billion and $13.4 billion, and earnings per share between $2.28 and $2.39.

Some additional numbers:

  • iTunes Store sales for the quarter hit $1.1 billion.

  • Apple retail stores pulled in $1.68 billion, or about $5.9 million per store. (There were 284 stores open during the second quarter.) Those stores sold 606,000 Macs, and half of those were to new Mac users, according to Oppenheimer. 
  • 47 million people filed through the doors of Apple Stores worldwide, which is 20 percent better than the same quarter a year ago.
  • The company continues to add to its pile of cash: It now has $41.7 billion, adding $1.9 billion since the end of the first quarter of 2010.
  • Apple shares were up 5.68 percent to $258.49 in after-hours trading on the news.

    This post was updated at 3:35 p.m. PDT with information from the earnings call.