10-QPeriod: Q3 FY2015

Apple Inc. Quarterly Report for Q3 Ended Jun 27, 2015

Filed July 22, 2015For Securities:AAPL

Summary

Apple Inc.'s Q3 2015 results, as filed on July 22, 2015, show a robust performance driven by strong iPhone sales, which accounted for 63% of total net sales. Total net sales for the quarter increased by a significant 33% year-over-year to $49.6 billion, with a notable 112% surge in Greater China reflecting the strong adoption of iPhone 6 and 6 Plus in the region. This growth was partially offset by a decline in iPad sales, attributed to a longer repurchase cycle and potential cannibalization. The company also saw growth in its Services segment and a modest increase in Mac sales. Financially, Apple reported a net income of $10.7 billion, or $1.85 per diluted share, a substantial increase from the prior year. The company continued its aggressive capital return program, repurchasing $10 billion in stock and paying $3.1 billion in dividends during the quarter. Despite a strengthening U.S. dollar impacting international sales, Apple's gross margin percentage improved slightly to 39.7% due to a favorable product mix and better leverage on fixed costs. The company ended the quarter with a strong cash position of $15.3 billion and total cash, cash equivalents, and marketable securities exceeding $200 billion.

Financial Statements
Beta
Revenue$49.60B
Cost of Revenue$29.92B
Gross Profit$19.68B
R&D Expenses$2.03B
SG&A Expenses$3.56B
Operating Expenses$5.60B
Operating Income$14.08B
Interest Expense$201.00M
Net Income$10.68B
EPS (Basic)$0.47
EPS (Diluted)$0.46
Shares Outstanding (Basic)22.92B
Shares Outstanding (Diluted)23.09B

Key Highlights

  • 1Net sales surged 33% year-over-year to $49.6 billion, driven by a 59% increase in iPhone sales.
  • 2Greater China emerged as a significant growth driver, with net sales in the region increasing by 112% year-over-year.
  • 3Net income rose to $10.7 billion, or $1.85 per diluted share, demonstrating strong profitability.
  • 4Apple continued its substantial capital return program, repurchasing $10 billion in common stock and paying $3.1 billion in dividends during the quarter.
  • 5Gross margin percentage improved to 39.7% due to a favorable product mix and improved leverage, despite foreign currency headwinds.
  • 6iPad sales experienced a 23% decline in net sales and an 18% decline in unit sales, indicating market challenges for the product.
  • 7The company maintained a strong liquidity position with $15.3 billion in cash and cash equivalents and over $200 billion in total cash, cash equivalents, and marketable securities.

Frequently Asked Questions

The primary driver of Apple's revenue growth was the significant increase in iPhone sales, which saw a 59% year-over-year jump in net sales, largely due to the strong reception of the iPhone 6 and 6 Plus models.

The Greater China region showed exceptional performance, with net sales increasing by 112% year-over-year. This was significantly higher than the overall company growth and was attributed to strong iPhone sales.

Apple is actively returning capital to shareholders through a substantial share repurchase program, which saw $10 billion in stock repurchased during the quarter, and by paying quarterly cash dividends, totaling $3.1 billion in Q3 2015. The company has a large ongoing authorization for these programs.

Apple faced challenges including a decline in iPad sales, attributed to longer repurchase cycles and potential cannibalization. Additionally, the strengthening U.S. dollar negatively impacted international sales and profitability, though this was partially offset by hedging and favorable product mix.