Breaking Down $AAPL Earnings

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After much anticipation, Apple released its first quarter earnings for FY 2013. As many of you know, this was a crucial earnings report following a 20% sell off over the last three months.

Apple announced that it had quarterly revenue and net profit of $54.5 billion and $13.1 billion, respectively or $13.81 per diluted share. These results can be compared to quarterly revenue and net profit of $46.3 billion and $13.1 billion a year ago, or $13.87 per diluted share. This is a 15.05 percent increase in revenue from a year ago, but a zero percent change in net profit. Furthermore, profit margin fell from 44.7 percent to 38.6 percent, yielding a 6.1 percent drop.

Despite narrowing margins, Apple sold a record 47.8 million iPhones. This can be compared to just 37 million iPhones sold in the year ago quarter. This is a almost a 30 percent increase in iPhone sales compared to the year ago quarter. Similarly, iPad sales increased from 15.4 million units to 22.9 million units, yielding a 49 percent increase. Sales of both mac and iPod fell modestly.

The tighter margins can be attributed to an increase in operating expenses compared to the year ago quarter. Specifically, spending in research and development increased 33 percent to $1.01 billion.

Sales in Europe, China and Japan increased 11, 67, and 25 percent respectively.  Currently, these three countries are supplying apple with 61 percent of its revenue.

Apple indicated that they expected revenue for the second quarter of FY2013 to be between $41 billion and $43 billion, with a gross margin between 37.5 percent and 38.5 percent. Furthermore, they expect gross expenses to be between $3.8 billion and $3.9 billion.

As we now await Q2 earnings for FY 2013, I expect international sales to increase and become an even bigger part of Apple’s revenue. The U.S. may not be saturated with regard to the entire mobile phone and tablet market, but it is saturated in the sense that people middle to upper class individuals who can afford Apple products can already afford them. On the contrary, international markets are largely untapped and whether it be through a cheaper iPhone or already existing products, I am expecting them to continue to tap these markets.

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