10-QPeriod: Q3 FY2017

Apple Inc. Quarterly Report for Q3 Ended Apr 1, 2017

Filed May 3, 2017For Securities:AAPL

Summary

Apple Inc.'s Q2 2017 earnings report (filed May 2, 2017) showed a solid increase in net sales for the quarter, reaching $52.9 billion, a 5% rise year-over-year, driven by growth in Services, Mac, and Other Products. This growth was partially offset by foreign currency headwinds. Diluted Earnings Per Share (EPS) stood at $2.10. The company demonstrated strong operational execution with increased revenue across most geographic segments, with the exception of Greater China which saw a decline. Financially, Apple maintained a robust cash position and continued its aggressive capital return program. The company utilized $7.0 billion for share repurchases and paid $3.0 billion in dividends during the quarter. Furthermore, Apple issued $11.0 billion in long-term debt, suggesting a strategy to fund its capital return initiatives and potentially future investments. While gross margin saw a slight decrease, this was attributed to product cost structures and currency effects, with management forecasting continued pressure on margins due to competitive factors.

Financial Highlights

57 data points
Beta

Revenue

$52.90B

38.9% Gross Margin

Net Income

$11.03B

20.9% Net Margin

EPS (Diluted)

$0.53

Total Assets

$334.53B

Cash & Equivalents

$15.16B

Free Cash Flow

$9.60B

Financial Statements
Beta
Revenue$52.90B
Cost of Revenue$32.30B
Gross Profit$20.59B
R&D Expenses$2.78B
SG&A Expenses$3.72B
Operating Expenses$6.49B
Operating Income$14.10B
Interest Expense$530.00M
Net Income$11.03B
EPS (Basic)$0.53
EPS (Diluted)$0.53
Shares Outstanding (Basic)20.90B
Shares Outstanding (Diluted)21.05B

Key Highlights

  • 1Net sales increased by 5% to $52.9 billion for the second quarter of fiscal 2017 compared to the prior year.
  • 2Diluted earnings per share (EPS) were $2.10 for the quarter, up from $1.90 in the prior year period.
  • 3Services revenue grew by a strong 18% year-over-year, becoming an increasingly significant contributor to overall sales.
  • 4Mac sales showed a healthy 14% increase, driven by product mix and new MacBook Pro introductions.
  • 5Greater China segment experienced a significant 14% year-over-year decline in net sales.
  • 6Apple returned $10.1 billion to shareholders in Q2 2017 through share repurchases ($7.0 billion) and dividends ($3.0 billion).
  • 7The company issued $11.0 billion of long-term debt, indicating active capital management and funding strategies.

Frequently Asked Questions

Apple reported net sales of $52.9 billion for the second quarter of fiscal 2017, an increase of 5% or $2.3 billion compared to the same quarter in 2016. This growth was primarily attributed to strong performance in Services, Mac, and Other Products, though partially offset by foreign currency exchange rate fluctuations.

The Services segment demonstrated robust growth, with net sales increasing by 18% year-over-year for both the second quarter and the first six months of 2017. This growth was mainly driven by the App Store and licensing sales, highlighting the increasing importance of Apple's services ecosystem.

Apple continued its significant capital return program. In the second quarter of 2017, the company utilized $7.0 billion for share repurchases and paid $3.0 billion in dividends and dividend equivalents. The company also announced an increase in its total capital return program to $300 billion and raised its quarterly cash dividend by 10.5%.

The Americas and Europe segments showed solid year-over-year net sales growth (11% and 10% respectively for Q2). Japan and Rest of Asia Pacific also reported increases (5% and 20% respectively for Q2). However, the Greater China segment experienced a notable decline of 14% in net sales for the quarter.