Apple Reports 33% Surge In Q3 Profit, Stock Falters After Hours On iPhone Sales Miss

Wall Street is a fickle bunch; they build you up only to knock you down just as quickly. Such is the case for Apple, which this afternoon reported its fiscal Q3 2015 earnings. By almost any account, Apple had a stellar quarter, reporting revenue of $49.6 billion (a 33 percent increase year-over-year) and net profit of $10.7 billion ($1.85 per diluted share). Gross margin also was up slightly year-over-year, increasing from 39.4 percent to 39.7 percent.

In a telling reminder that Apple depends heavily on markets other than the U.S. for the bulk of its revenue, the company reported that an incredible 64 percent of its quarterly revenue came from international sales. China sales grew an astounding 112 percent YoY, with revenue for the country totaling $13 billion.

While all of that sounds good, Wall Street decided to ding Apple for not beating analysts’ estimates for iPhone sales. Apple sold 47.4 million iPhones during Q3, which was an incredible jump from the 35.2 million iPhones sold during the same period last year, but analysts were expecting sales of 50 million iPhones. AAPL closed today at 130.75, but is down to $121.13 in after hours trading.

Apple CEO Tim Cook

Mac sales rose slightly from 4.4 million units to 4.8 million units YoY, while iPads continue their downwards trajectory (despite steep discounts that have been available to customers for the past year), falling from 13.3 million units in Q3 2014 to 10.9 million units in Q3 2015 (an 18 percent decline).

“We had an amazing quarter, with iPhone revenue up 59 percent over last year, strong sales of Mac, all-time record revenue from services, driven by the App Store, and a great start for Apple Watch,” said Apple CEO Tim Cook. “The excitement for Apple Music has been incredible, and we’re looking forward to releasing iOS 9, OS X El Capitan and watchOS 2 to customers in the fall.”

Notes of interest from the earnings call include news that the average selling (ASP) for iPhones jumped a whopping $99 to $660 year-over-year, the company holds $202 billion in cash ($179 billion of which is held off shore), and that 94 percent of Apple Watch customers wear their devices regularly.

But of course the big question on everyone’s mind is how well the Apple Watch is actually selling. Apple isn’t giving any real specifics, but it does note that sales within its “Other” product category -- which includes the Apple Watch, iPod, and Apple TV -- increased 49 percent YoY. Apple CFO Luca Maestri, while speaking with the New York Times, gave a bit more clarity by indicating that Apple Watch sales during its first 9 weeks (63 days) of availability outpaced both the iPhone and the iPad during their opening acts. For comparison, Apple sold one million iPhones during its first 74 days of availability and two million iPads in its first 60 days on the market.