Apple stock drops after it misses on revenue

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Apple stock dropped over 2% in after-market trading after Apple delievered its March-period earnings report on Tuesday.

Although Apple’s earnings per share beat Wall Street estimates, revenue missed Wall Street expectations.

Apple sold fewer iPads and Macs than it did a year ago, and iPhone sales were flat. However, Apple’s earnings per share were up 10% from the year-ago period.

Apple also announced on Tuesday that it planned to spend an additional $US50 billion to return capital to shareholders in the form of buybacks and dividends.

The $US50 billion will be spent on mainly share repurchases according to Apple CFO Luca Maestri. Apple’s quarterly dividend was also increased to $US0.63 per share.

In a question-and-answer session with analysts, Cook talked about the number of Apple customers who are waiting for the next iPhone, which is expected to be launched this fall. “We’re seeing what we believe to be a pause in purchases of iPhone which we believe are due to the earlier and much more frequent reports about future iPhones,” Cook said.

Here’s are the key numbers that Apple reported on Tuesday:

  • Q2 EPS (GAAP): $US2.10, up 10% year-over-year, vs expectations of $US2.02
  • Q2 revenue: $US52.9 billion, up 4% year-over-year, vs expectations of $US53.1 billion
  • Gross margin: 38.9%, down 0.1% year-over-year, vs expectations of 38.7%
  • iPhone unit sales: 50.76 million, flat year-over-year, vs expectations of 51.4 million
  • iPhone average selling price: $US655, up 2% year-over-year, vs expectations of $US666
  • iPad unit sales: 8.9 million, down 12% year-over-year
  • Mac unit sales: 4.1 million, down .01% year-over-year

Apple provided a forecast for next quarter:

  • 3Q quarter revenue guidance: Between $US43.5 billion and $US45.5 billion vs expectations of $US45.7 billion.
  • 3Q margin guidance: Between 37.5 per cent and 38.5 per cent vs expectations of 38.3%.

Notes from the call:

6:00: And we’re done here. Thanks for tuning in!

5:52: Apple saw greatest number of switchers outside of Greater China that we’ve ever seen during this period, Cook says.

5:48: Tim Cook on Qualcomm: “You can’t pay something when there’s a dispute about the amount.”

5:46:”We’re seeing what we believe to be a pause in purchases of iPhone which we believe are due to the earlier and much more frequent reports about future iPhones. That part is clearly going on and what’s going on behind the data. We are seeing that in full transparency,” Cook said.

5:45: Cook says that AirPods supply is still ramping up.

5:42: “We have seen the watches as a really key product category for us before we launched it, and we took our time to get it right,” Cook said. He seemed pretty upset that UBS analyst said that some people thought it was disappointing. “It’s already a big business,” he said.

5:41: “We think about pricing, we come up with a price that is a good value for the product we’re delivering, we do that on the hardware side, as well as on the services side. We’re not thinking about taking profits from one to subsidise the other,” Cook said.

5:38: Maestri says that Apple added 15 million subscriptions, most likely referring to Apple Music and iCloud, over the past three months.

5:35: Cook points out that the dollar devalued by 5% against the Yuan during the quarter, and that 7 out of 10 of Apple’s “most trafficked” stores are in “Greater China,” which includes Taiwan and Hong Kong.

5:33: Shannon Cross asks a question about China. Tim Cook points to strong iPhone 7 Plus sales, Mac sales.

5:33: Tim Cook: We did not get iPhone 7 and iPhone 7 Plus mix right.

5:29: On Qualcomm: “We didn’t get any benefit in our P&L in the March quarter or June quarter either,” Maestri said.

5:28: Now onto Q&A! First up, Morgan Stanley’s Katy Huberty. Question is about gross margin.

5:24: “We have now completed $US151 billion in share repurchases,” Maestri said.

5:23: Visitors to retail and online stores up 16% in the last year.

5:23: Maestri talking about Apple’s efforts in the enterprise.

5:20: Maestri says iPad actually grew in the US during the quarter.

5:19: Maestri says Apple’s App Store doubled the revenue of Google Play app store over the same time period.

5:18: Goal is to double size of services business by 2020, Maestri says.

5:15: Now CFO Luca Maestri is talking.

5:14: Tim Cook says Apple spent $US50 billion in the US economy last year.

5:14: “We’re exciting to move into our new corporate headquarters,” Cook says. Main building “fosters even greater collaboration.”

5:10: Tim Cook says “our wearables platform is the size of a Fortune 500 company.” Apple considers Apple Watch, Beats, and AirPods to be wearables.

5:09: Apple watch sales doubled year-over-year, Tim Cook says.

5:09: Apple gained market share in US, Australia, and other markets, Cook says.

5:08: Tim Cook says Apple’s new app, Clips, is off to a great start.

5:07: Apple Pay transaction volume up 450% over the last year, Tim Cook says.

5:05: “For the second quarter in a row, services revenue topped $US7 billion.”

5:03: Tim Cook says “we feel great about this performance.”

Here are the important tables from Apple:

And here are the charts:

We’ll be covering Apple’s results and its earnings conference call live, so click here to update this post with the latest info.

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