This afternoon, Apple released their financial results for Q4 2014, which ended September 27, 2014. Strong iPhone sales, as well as a resurgence in Mac sales, boosted the company’s revenue above the $40 billion USD guidance to $42.1 billion. Operating income came in at $11.165 billion, with a net income of $8.467 billion for the quarter. This resulted in an earnings per share of $1.43, which beat analysts’ expectations of $1.31 per share. Gross margin was a respectable 38% for the quarter, compared to 37% in Q4 2013.

Apple declared a cash dividend of $0.47 per share which will be paid out to all shareholders of record as of November 10th, on November 13th. Over $20 billion was returned to shareholders in Q4 as part of the share buyback program and other market transactions.

Apple Q4 2014 Financial Results (GAAP)
  Q4'2014 Q3'2014 Q4'2013
Revenue (in Billions USD) $42.123 $37.432 $37.472
Operating Income (in Billions USD) $11.165 $10.282 $10.030
Gross Margin (in Billions USD) $16.009 $14.735 $13.871
Net Income (in Billions USD) $8.467 $7.748 $7.512
Margins 38.0% 39.4% 37.0%
Earnings per Share (in USD) $1.43 $1.28 $1.19

As is the norm, the iPhone was the star of the show. In September, Apple of course launched two new iPhone models which brought the total volume of devices sold to 39.272 million for the quarter, which is up 11.5% from the previous quarter and 16.2% from the same quarter a year ago. The iPhone 6 and 6+ are apparently selling very well, with Apple selling all of the units they are making at the moment. iPhones accounted for 56% of Apple’s revenue this quarter. With the iPhone 6 only being available for a couple of weeks this quarter, expect the units to jump significantly for Q1 2015, which began September 28.

The surprise for this quarter was Mac sales, which grew an astonishing 21% year-over-year, and 25% sequentially. It is even more amazing when you consider that the MacBook Pro line only got a slight refresh last quarter, and the iMac, Mac Mini, and MacBook Air got no significant updates at all. Apple said that they “won back to school” and they certainly did as a percentage increase. Overall Mac sales were 5.52 million, as compared to 4.413 million last quarter and 4.574 million at the same time last year. With this increase, Apple stated that they have the highest PC sales percentage since 1995. Revenue for the Mac was also big, as would be expected with the gain in sales. Mac revenue is now back to number two overall for the company with $6.625 billion for Q4.

Apple Q4 2014 Device Sales (thousands)
  Q4'2014 Q3'2014 Q4'2013 Seq Change Year/Year Change
iPhone 39,272 35,203 33,797 +12% +16%
iPad 12,316 13,276 14,079 -7% -13%
Mac 5,520 4,413 4,574 +25% +21%
iPod 2,641 2,926 3,498 -10% -24%
 

iPad sales continue to be the thorn in Apple’s side these days, with a sales decrease for the third consecutive quarter. iPad sales fell to just 12.3 million, down from 14.1 million last year, which is a 13% drop. Clearly they are not giving up on the market, and the two new devices launched last week as well as the holiday season should put an end to the decline in sales for Q1. Apple said that iPad sales were ahead of iPhone sales over the same initial four years, so they are happy with where it is at, but still three straight quarters of sales decline is not what they would have been hoping for.

The venerable iPod likely got the final unit and revenue breakdown, with the iPod going to be rolled into the new Other category, with the iPod being joined by Accessories, Beats, Apple TV, and other products in the new reporting category such as watches when they are released. iPod sales fell 24% from last year, with 2.6 million devices sold. Revenue came in at just $410 million (just!) for the quarter.

Finally, iTunes/Software/Services was up 8% year-over-year with $4.6 billion for the quarter, with the App Store continuing to drive revenues for the Apple ecosystem.

Apple Q4 2014 Revenue by Product (billions)
  Q4'2014 Q3'2014 Q4'2013 Revenue for current quarter
iPhone $23.678 $19.751 $19.510 56.2%
iPad $5.316 $5.889 $6.186 12.6%
Mac $6.625 $5.540 $5.624 15.7%
iPod $0.410 $0.442 $0.573 1%
iTunes/Software/Services $4.608 $4.485 $4.260 10.9%
Accessories $1.486 $1.325 $1.319 3.5%

Outlook for Q1 2015 is a big boost for the holiday season. Revenue is expected to come between $63.5 and $66.5 billion with margins between 37.5 and 38.5 percent. Q1 will of course include more sales of the new iPhone, but also new product launches such as the iPads, and the Mac refresh we saw last week. Also new to the quarter will the Apple Pay, which was not available for Q4 2014. Apple divulged on the earnings call that it will not be charging anything to retailers or consumers for using the new pay system, but that they do have a financial arrangement with the financial institutions to earn money through the system. Details of those arrangements were kept confidential. In the end, if someone is paying, it will of course be the consumer even if it is just through product markups. We do not know though if the cost of the system will be any higher than the credit cards already charge, so it may amount to a zero anyway.

Apple has been a company which has been printing money for a long time, and with the latest product launches that does not seem to be ending anytime soon. The one key here is Mac sales, which were very high, especially when compared to the PC industry as a whole which has recovered somewhat, but is possibly still at small decline overall for the year.

Update: The story originally stated Software and Other would be a single category, but there will be two categories for Software and Other.

Source: Apple Investor Relations

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  • aryonoco - Monday, October 20, 2014 - link

    Build them well and they will come.

    Note to Google: There is a market for better Chromebooks. Someone needs to make a 13" Chromebook with a Core i3 and 1080p IPS display and 4GB of RAM and price it around $500. That thing will sell.
    Reply
  • chizow - Monday, October 20, 2014 - link

    Over the same exact device running free Win8 at the same price point? Not so sure about that.

    If Microsoft wanted to save its Surface (non-Pro) line they'd do exactly that, replace the Tegra with an Atom chip and bundle the free version of Win8 they've been giving to OEMS in the sub-$300 market.
    Reply
  • SpartanJet - Monday, October 20, 2014 - link

    Unless there is a paperweight market I doubt there is any market for a crapbook. Put Windows 8.1 on there plus as an added bonus you wont be harassed into using Ad+ or have your emails scanned and internet use tracked. Reply
  • melgross - Monday, October 20, 2014 - link

    Bing does that as well. Reply
  • ELPCU - Tuesday, October 21, 2014 - link

    I hope this dude understands high resolution display with Intel CPU other than Atom cost a lot more than that.

    There is similar shit already released one and half years ago, which is called 'Chromebook Pixel'.
    It has Core i5, 2560 x 1700 resolution 12.85 inch display, and 4 GB RAM.

    And how much does it cost? 1299 bucks, bro.
    Considering it was released 1.5 years ago with higher spec than u suggested, Chromebook with ur spec will be somewhat cheaper, but not around 500 bucks. I doubt it is possible to make any margin under 800 bucks at this point.
    Reply
  • ArthurG - Tuesday, October 21, 2014 - link

    Check the Acer chromebook 13 with Tegra K1, it has everyting your want, 1080P (not sure IPS), 4GB RAM, 32G SSD an even 802.11AC wifi for less than $400 !!! Its the best chromebook available now. Google it for many positive reviews, like the one below:
    http://www.notebookcheck.net/Acer-Chromebook-13-CB...
    Reply
  • Zap - Tuesday, October 21, 2014 - link

    I think something else is at play here rather than just "build them well."

    Make people desire your product, and they will come.

    Apple does not always have the best (technologically speaking) product on the market. However, they have market cachet. People want to have Apple products because they are Apple products.
    Reply
  • fade2blac - Tuesday, October 21, 2014 - link

    Dell has something pretty close. The screen isn't 13" 1080p IPS but then this Chromebook only costs about $380.
    http://liliputing.com/2014/10/dell-chromebook-11-c...
    Reply
  • Morawka - Tuesday, October 21, 2014 - link

    Acer already makes one with the Nvidia K1 SOC which is 75% of the performance of a i3 with vastly superior graphics. The screen is very nice at 1080p and it's $300 Reply
  • BrooksT - Monday, October 20, 2014 - link

    I think there's a mistake in the article: "iPod going to be rolled into the new Services category, with the iPod being joined by Apple Pay, iTunes, Software and Services, Accessories, Beats, Apple TV, and other products in the new reporting category."

    While iPod, Beats, and Apple Watch are going to be rolled into Accessories, I don't think Accessories is a subset of Services. I believe Services = iTunes, Apple Pay, SW/Services; Accessories = Apple Watch, Beats, iPod, AppleTV.
    Reply

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