Today Apple released their earnings for Q3 of fiscal year 2015, which ended June 27th. In what seems to be a never-ending sequence of records, once again, Apple posted a record third quarter. Revenue for the quarter came in at $49.6 billion, up 33% from a year ago. Gross margin was $19.7 billion, also up 33% from Q3 2014. Operating income was up almost 37% to $14.1 billion, and net income was $10.7 billion for the quarter, a gain of 37.8% year-over-year. Earnings per share was $1.85, up from $1.28 in Q3 2014.

Apple Q3 2015 Financial Results (GAAP)
  Q3'2015 Q2'2015 Q3'2014
Revenue (in Billions USD) $49.605 >$58.010 $37.432
Gross Margin (in Billions USD) $19.681 $23.656 $14.735
Operating Income (in Billions USD) $14.083 $18.278 $10.282
Net Income (in Billions USD) $10.677 $13.569 $7.748
Margins 39.7% 40.8% 39.4%
Earnings per Share (in USD) $1.85 $2.33 $1.28

Apple’s iPhone business has been the primary factor in these record breaking quarters, and the iPhone 6 and 6+ sales continued to be strong. For the quarter, Apple sold 47.5 million iPhones, which is a gain of 35% in units. Even more impressive is that these 35% more units resulted in 59% more revenue, with iPhone sales totalling $31.4 billion for this quarter alone.

Mac sales have also been strong, and while Apple has generally outpaced the PC market in sales growth for a while, Apple saw an additional 5% in Mac unit sales for Q4 compared to Q3, and 9% from a year ago. This is at a time where the rest of the PC market is contracting, so Mac sales were an impressive 4.8 million units, with revenue of just over $6 billion for the quarter. The resurgence of the Mac has been quite the rise, with Mac revenue being eclipsed quite a bit by the iPad not very long ago. Times have changed though and Apple’s PC business is currently the only one that has seen an increase in sales according to the reports floated around in the last couple of weeks.

iPad sales though are not so rosy. The iPad sales were very strong, and while sales are not exactly terrible, the number of units being sold has been dropping for some time. Much debate has been about why this is, but certainly owners of the iPad have not felt the need to refresh their devices anywhere nearly as quickly as phones. For the quarter, there were 10.9 million iPads sold, which resulted in revenue of $4.5 billion. The number of units sold is down 13% from Q2, and down 18% year-over year.

Apple Q4 2014 Device Sales (thousands)
  Q3'2015 Q2'2015 Q3'2014 Seq Change Year/Year Change
iPhone 47,534 61,170 35,203 -22% +59%
iPad 10,931 12,623 13,276 -13% -18%
Mac 4,796 4,563 4,413 +5% +9%

Services, which include iTunes sales, AppleCare, Apple Pay, and will include Apple Music in the future, saw a nice jump as well with just over $5 billion in revenue for the quarter. This is up 1% from last quarter, and up 12% from last year.

“Other Products” which is Apple TV, Apple Watch, Beats, iPods, and accessories had a big quarter, and while individual numbers were not announced, it is likely due to initial sales of the Apple Watch which came out in the quarter. For Q3, this group had sales of $2.6 billion, up 56% from last quarter and up 49% year-over-year. Likely most of the increase can be attributed to the Watch, but without knowing average selling price, it would be pretty difficult to try and extrapolate unit sales without more information.

Apple Q2 2015 Revenue by Product (billions)
  Q3'2015 Q2'2015 Q3'2014 Revenue for current quarter
iPhone $31.368 $40.282 $19.751 63.2%
iPad $4.538 $5.428 $5.889 9.1%
Mac $6.030 $5.615 $5.540 12.2%
iTunes/Software/Services $5.028 $4.996 $4.485 10.1%
Other Products $2.641 $1.689 $1.767 5.3%

This pipeline post is quite a bit shorter than the Microsoft earnings, but for all of the right reasons. There is less to say when things are going as well as they are for Apple right now. iPhone sales are still a huge part of their balance sheet, and seem to have no sign of slowing down. People obviously wanted a larger iPhone and sales have skyrocketed since the iPhone 6 and 6+ were launched. But I think we were all expecting this based on past performance. I think what is most interesting is how much of the PC market Apple has managed to chip away with Mac sales, which are up an amazing 9% when the rest of the market contracted.

For Q4, Apple is expecting revenue of $49 to $51 billion, with a gross margin of 38.5 to 39.5%.

Source: Apple Investor Relations

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  • ingwe - Wednesday, July 22, 2015 - link

    Also I hate the lack of an edit button...
  • name99 - Wednesday, July 22, 2015 - link

    I'm not going to address the mac foolishness, but how do you see the watch sales as a failure? They've ALREADY, in three months, and with limited world distribution, sold more smartwatches than the combined total of all previous attempts (720,000 for Android Wear, around a million for Pebble).

    You miss the significance of the "June was the strongest month" message. It means that the product did not simply burst out the gate to be sold to the true believers and then fizzle. Instead, as people who did not care enough to put in their internet order the day that went live, encounter the watch on their friends's wrists, they are deciding they like it enough to buy their own. In other words it has legs and is slowly growing momentum.

    Tim Cook said during the call something I independently thought a few days ago --- the watch fits in very well as a gift (for the sort of upper 15% Apple targets as customers). Which means it will continue with steady beat of sales for the rest of the year as birthdays unroll, a brief spurt as kids to to college, then a massive blowout over Christmas/Hannukah/Chinese New Year.

    I expect the sales for the first year to exceed 10 million.
  • RT81 - Wednesday, July 22, 2015 - link

    Thanks for your insightful analysis. What would I ever do without it? /s
  • hanssonrickard - Monday, July 27, 2015 - link

    "Mac sales are doing ok only because Apple had virtually no share and no presence outside the US and maybe a couple of other markets where they were not at 0"

    Say what?!
    Sounds like something coming from an American that does not know anything about the rest of the world?! It sounds like you think Mac:s only sell in US.
  • MacDaddy100 - Tuesday, August 4, 2015 - link

    "Apple buyer is by definition spending without thinking"?, That comment alone discredits your entire comment. As someone who owns, and have owned Macs AND PCs for a solid 20+ years, I have lived both sides of that argument. Yes some of my Macs can cost 20 to 30% more than my PCs, but they easily last twice as long as the PCs do, which if you're smart enough with a calculator its easy to see which is the better value.
    There's a reason Apple sticks with the same external Laptop housing for 5+ years without any external changes, just the internal upgrades once or twice a year, All Mac owners care about is performance, mean while, each PC manufacture come out with many different external laptop designs every year, all with the same basic internal, Thats what PC owners want, a shiny new external design, to hell with the performance specs.
    If you doubt anything I'm saying, just go find the bare facts, Use Google to find them, note how Apple seldom changes the outside of the laptops, They just constantly upgrade the internal, Now look at the PC laptops, Each model changes looks constantly, at the same time, YOU CAN STILL GET A FRICKEN PENTIUM processor in 2015 PC laptops, Damn sure won't see them in any Macs.
    Your comment holds NO water.
  • p1esk - Tuesday, July 21, 2015 - link

    With so much money Apple could create a new equivalent to Bell Labs, and do some serious innovation. They could easily spend several billions per year on blue sky research.
  • MikhailT - Tuesday, July 21, 2015 - link

    The difference is that Bell Labs were meant to focus on crazy ideas with a large R&D budget and the closest company is actually Google and its moonshot projects.

    Apple is focusing on the least amount of markets, working on controlling the overall experience with a refresh of existing ideas. There's a reason Apple is always late to the game with not a lot of new ideas but a better experience.
  • WinterCharm - Tuesday, July 21, 2015 - link

    You're right. Apple has never been one about CRAZY R&D Efforts with low chances to succeed. They've always steadily iterated, and occasionally entered new markets when the time is right.

    Wearables are still in their fledgeling stage. Apple Watch is already the most popular wearable, but it could be a lot better, and I think we'll see Version 2 sell like hotcakes!
  • p1esk - Tuesday, July 21, 2015 - link

    But innovation would actually help them sell more stuff. As is, iWatch is a pretty mediocre gadget. For example, it can't function without a phone, and even with a phone it does not offer anything groundbreaking. What if they invest $10B into R&D focused on crazy ideas that could produce a new type of a gadget? I'm talking about such inventions as radio, TV, lasers, transistors, holograms, computer mouse, touchscreen, etc. You get the idea. It's not like there's nothing left to invent. The only obstacle is pretty much just funding.
  • p1esk - Tuesday, July 21, 2015 - link

    I guess my point is, with so much cash in the bank, Apple can easily afford a large R&D budget. Even if they don't invent anything after spending $10B and 10 years, they're not going to go bankrupt. But the potential rewards are high. So why not do it?

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