Flat Profits and Lower Revenue Forecast for Apple in 2014

iPhone 5Despite record quarterly iPhone and iPad sales, along with its best-ever revenue figures, Apples profit has remained flat for its first quarter of the 2014 fiscal year, from October to January, with the news wiping eight per cent from its stock.

Apple sold 51m iPhones, compared to 47.8m in the same quarter last year, but missed analyst forecasts of around 55m for the festive period. It also shifted 26m iPads during the quarter, an extra 3.1m on last year, and even grew sales of Macs from 4.1m to 4.8m year-on-year.

While revenue was up slightly to a record $57.6bn, profits remained flat on its Q1 2013, and the companys gross margin reduced from 38.6 per cent to 37.9 per cent. International sales accounted for 63 per cent of this quarter’s revenue, but the promise of huge sales in China have not materialised, with Android found to be the top OS across Europe, the US, China, Australia and Latin America’s three biggest markets.

Digital goods and services

Apple revealed earlier this month that App Store revenues topped $10bn in 2013, $1bn in December alone, but did not give any more detail on the breakdown of digital service sales compared to hardware. The Wall Street Journal reported last week that Apple is exploring the potential to enable payments for physical goods and services using its devices, something CEO Tim Cook was asked about during the companys Q1 earnings call.

“We’re seeing that people love being able to buy content, whether it’s music or movies or books, from their iPhone, using Touch ID,” Cook said. “It’s incredibly simple and easy and elegant. And it’s clear that there’s a lot of opportunity there. The mobile payments area in general is one that we’ve been intrigued with and that was one of the thoughts behind the Touch ID.

“But we’re not limiting ourselves just to that. So I don’t have anything specific to announce today, but you can tell by looking at the demographics of our customers, and the amount of commerce that goes through iOS devices versus the competition, that it’s a big opportunity on the platform.”

The Q1 results follow a disappointing Q4 results announcement in October, where net profits stood at $7.5bn, down nine per cent year-on-year and 16 per cent quarter-on-quarter.

Apple has forecast revenues for its Q2 2014 of revenue between $42bn and $44bn, which is a downward revision on initial forecasts.