Apple Reports Profit of $3.25 Billion in Q3 2010 on Record $15.7 Billion Revenue

152527 apple logo

Apple today announced financial results for the second calendar quarter and third fiscal quarter of 2010. For the quarter, Apple posted revenue of $15.7 billion and net quarterly profit of $3.25 billion, or $3.51 per diluted share, compared to revenue of $9.73 billion and net quarterly profit of $1.83 billion, or $2.01 per diluted share, in the year-ago quarter. Gross margin was 39.1 percent, compared to 40.9 percent in the year-ago quarter, and international sales accounted for 52 percent of the quarter's revenue.

Apple shipped 3.47 million Macintosh computers during the quarter, a unit increase of 33 percent over the year-ago quarter. Quarterly iPhone unit sales reached 8.4 million, up 61 percent from the year-ago quarter, and the company also sold 9.41 million iPods during the quarter, representing 8 percent unit decline over the year-ago quarter. The company also sold 3.27 million iPads during the product's launch quarter.

"It was a phenomenal quarter that exceeded our expectations all around, including the most successful product launch in Apple's history with iPhone 4," said Steve Jobs, Apple's CEO. "iPad is off to a terrific start, more people are buying Macs than ever before, and we have amazing new products still to come this year."

Apple's guidance for the fourth quarter of fiscal 2010 includes expected revenue of $18 billion and earnings per diluted share of $3.44.

Apple will provide live streaming of its Q3 2010 financial results conference call at 2:00 PM Pacific, and MacRumors will update this story with coverage of the conference call highlights.

Conference Call Highlights
- CFO Peter Oppenheimer going over quarterly results: highest quarterly revenue ever, surpassing most recent holiday quarter.
- Driven by iPad launch, as well as strong iPhone and Mac sales.
- Detailing Mac sales: Record of 3.47 million beats last holiday quarter by over 100,000; outgrew market in both desktop and portable segments.
- iPod sales down slightly, but iPod touch up 48% year-over-year. MP3 player market share still over 70%.
- iTunes Store revenue over $1 billion in revenue this quarter.
- iPhone: Over 1.7 million iPhone 4s sold in five launch countries, iPhone average selling price of $595.
- Passed cumulative sales of 100 million iOS device sales during the quarter.
- 3.27 million iPads sold in 10 countries during the quarter, average selling price of $640.
- Retail revenue up 73%. Mac sales units up 38%, half sold to new-to-Mac customers. Opened four U.S. stores, 2 in Australia, and 1 in Canada during the quarter. Record 60.5 million customers served.
- Gross margin of 39.1, well above guidance. Strong performance due in part to smaller-than-anticipated effect of iPad and iPhone margins.
- Cash and marketable securities up to $45.8 billion.

Q&A
Q: Enterprise adoption of Mac, iPhone, and iPad?
A: iPhone at 80% of Fortune 100 companies. 60% of Fortune 500. 400 educational institutions have approved iPhone for usage by faculty/staff/students. Macs still principally to consumer and education, but definite interest from corporate. iPad at 50% of Fortune 100 companies.

Q: More details on gross margin performance?
A: Higher iPhone and accessory sales than expected enhanced gross margin.

Q: Supply-demand for each product line? Any constraints?
A: On Mac and iPod, no supply-demand issues during quarter or currently. iPad and iPhone are backlogged. Selling as fast as we can make them...quoting longer lead times than we'd like. Working around the clock to get things balanced. iPad supply constrained by our initial "bold" assumption of 1 million per month for sales. We're already selling at that level and trying to increase capacity to support demand beyond that. iPhone 4 still ramping...no specific constraint there, just getting up to speed.

Q: Adjustments to gross margin related to iPhone?
A: We had some adjustments in our iPhone supply chain that benefited us in this quarter, but now fully into iPhone 4 with a higher cost structure will impact future margins.

Q: Dynamics of iPhone shipments at the transition?
A: Greatly reduced shipments of old 3GS around start of WWDC. Significant vacuum between June 7th and June 24th launch of iPhone 4...90% lower sales during that window than last year. Complete channel restructuring to switch to iPhone 4. We drew down inventory by 250,000 over the quarter with the new quarter.

Q: iPhone shortages...shouldn't you be prepared for the demand?
A: We do not purposely create shortages for buzz. Demand for iPhone 4 is absolutely stunning. Working very hard to catch up, but I can't predict when that will occur.

Q: Any changes in iPhone 4 demand since antenna issues?
A: Let me be very clear: We are selling every unit we can make.

Q: More clarification on effect of antenna issues? More complaints and returns?
A: My phone is ringing off the hook with people asking for more demand. So hard to say. Returns are less than for iPhone 3GS, and the ones for this specific issue are extremely small.

Q: When might we see supply-demand balance for iPad?
A: We honestly don't know. We have been pleasantly surprised at how fast this product as gotten out of the chute. Not following typical early-adopter market followed by gradual shift to mainstream...iPad went mainstream right away.

Q: Surprised at demand for 3G iPad? Balance with Wi-Fi models?
A: We won't disclose split between 3G and Wi-Fi-only. But all models selling extremely well. Overall average selling price at about $640.

Q: Updated thoughts on how iPad might cannibalize other product lines down the road?
A: Very good question and one we talk about internally. Real answer is that it's too early to tell. But we're thrilled that we had our best-ever Mac quarter during the same time we launched iPad. It's a jaw-dropper.

Q: iAds performance?
A: Just launched in early July. Building for the future, so no specifics today.

Q: North Carolina data center?
A: Everything is on schedule. Expect to complete it by the end of the year and begin to use it.

Q: What kind of impact did iPad have on gross margin?
A: Things were about what we thought they'd be. Most of the improvement over guidance was due to iPhone and accessory sales mix.

Q: Channel inventory of 16 GB and 32 GB iPhone 3GS?
A: We had about 1.4 million at the end of the quarter. We currently have materially less than that. Most of those are being sold in countries where we haven't launched iPhone 4 yet.

Q: Average selling price of iPods dropped sequentially. iPod touch being cannibalized by iPad?
A: Actually due to start of back-to-school promotion and stronger U.S. dollar.

Q: Will iPad margins increase over time?
A: We were purposely aggressive with pricing at launch. We always do everything we can to ride down the cost curves over time, and I don't see the iPad being any different.

Q: iPhone 4 bumpers impact?
A: We will need to defer revenue for iPhone 4s we sell where we haven't delivered bumpers or heard from the customers. That should be about $175 million in the September quarter, and that should show up as revenue in December quarter. We will expense cost of bumpers when we ship them to customers.

Q: Android shipments increasing and seeing lots of press. Thoughts on that?
A: I haven't seen the results since June, but iPhone sales were up 61% in the June quarter. That's against overall smartphone market sales in high 30s.

Q: Sustainability of iPad demand after early adopters? With subsidized 3G tablets coming this fall, how does that affect iPad?
A: We're selling every one we can. Anecdotally, it seems to me we're beyond an early-adopter stage already. It's the fastest for any product I've ever seen or been involved with. We don't know what others will do, but we're extremely happy with our competitive position. Users seems to desire low-cost, no-committment data plans, so we're not sure people will want another expensive data contract to subsidize device cost.

Q: App Store approval rules have been criticized as being arbitrary. Has anything changed?
A: We're thrilled to have recently passed $1 billion paid to developers with over 225,000 apps in the App Store. We care deeply about our developers and our success is unparalleled. The vast majority of apps are approved within 7 days of their submission, and many of the non-approvals are related to bugs that are fixed, resubmitted, and then approved. We value the input of every developer and modify our programs when appropriate.

Q: Desktop Mac trend is usually up between second and third quarters. Despite overall market trend, anything more to the drop this year than that?
A: Based very much on our product cycles, on top of general market trends.

Q: International growth exceeding domestic. Thoughts?
A: Not running up against a barrier domestically, but international sales just stellar. Still extraordinary opportunity left in all markets. In Asia-Pacific, Mac sales up 73%...China and Korea up nearly 200%. In iPhone space, doing well in all key markets. As far as expansion, we're moving Spain from exclusive carrier to three carriers. Still other countries to expand into as well. Biggest challenge is to decide which expansion ideas to pursue.

Q: Thoughts on possible iPad halo effect?
A: Outside observers concerned about cannibalization, but you're right, we see it from the opposite perspective. When iPod took off, Mac followed. Can that happen with iPhone and iPad? I don't want to predict, but the Mac has outgrown the market for 17 straight quarters. But market share still low, and thus tremendous opportunity still there. If iPad cannibalized PCs, that's fantastic for us, because there are a lot of PCs out there.

Q: Impact of possible wage hikes for manufacturing sub-contractors?
A: We don't want to get into our commercial agreements.

Q: Do you need to expand iPhone carrier relationships in U.S. to tap market expansion?
A: Don't want to get into it too much. We've been very happy with AT&T and they've really been a pioneer with smartphones in the U.S.

Q: Cost structure of iPhone 4 and relation to gross margin?
A: Don't put a lot of credence in third-party parts cost teardowns. iPhone 4 has higher cost structure than its predecessor, but I don't want to get into it more than that.

-End of call

Top Stories

siir apple event april 20

Siri Reveals Apple Event Planned for Tuesday, April 20

Tuesday April 13, 2021 12:04 am PDT by
Siri has apparently prematurely revealed that Apple plans to hold an event on Tuesday, April 20, where the company is expected to reveal brand new iPad Pro models and possibly its long-awaited AirTags trackers. Subscribe to the MacRumors YouTube channel for more videos. Upon being asked "When is the next Apple Event," Siri is currently responding with, "The special event is on Tuesday, April...
apple event spring loaded

Apple's 'Spring Loaded' Event Officially Announced for Tuesday, April 20

Tuesday April 13, 2021 9:04 am PDT by
Following an overnight leak by Siri, Apple today officially announced that it will be holding a special "Spring Loaded" event on Tuesday, April 20 at 10:00 a.m. Pacific Time at the Steve Jobs Theater on the Apple Park campus in Cupertino, California. As with all of Apple's 2020 events, the April 2021 event will be a digital-only gathering with no members of the media invited to attend in...
pixel watch prosser leak

Google Pixel Watch Allegedly Leaks with Circular Design, Rumored to Launch in October

Monday April 12, 2021 2:49 am PDT by
Renders of Google's first smartwatch, codenamed "Rohan," have been shared by Jon Prosser, showing that Google plans to adopt a circular design for its flagship wearable watch. Prosser shared the renders in an episode of his YouTube show "Front Page Tech," in which he claims they were made based on marketing material he had seen from a source within Google. The renders show that the Pixel...
Google maps feaure green

Google Maps App for iOS Finally Updated After Four Months

Monday April 12, 2021 10:03 am PDT by
Following the completed rollout of App Privacy labels for its App Store apps, Google today updated the Google Maps app for the first time in four months. Apple in December began requiring all new app submissions and app updates to include App Privacy labels, detailing the data that is collected by the app so consumers know what they're sharing. Google didn't begin implementing App Privacy ...
AppleTV and HomePod Feature

Bloomberg: Apple Working on New Apple TV With Integrated HomePod Speaker and FaceTime Camera

Monday April 12, 2021 3:32 am PDT by
Apple is working on a combined Apple TV with HomePod speaker that has a camera for video calls through a connected television set, according to Bloomberg's Mark Gurman. From the report: The company is working on a product that would combine an Apple TV set-top box with a HomePod speaker and include a camera for video conferencing through a connected TV and other smart-home functions,...
samsung experience 1

Samsung's 'iTest' Lets You Try a Galaxy Device on Your iPhone

Thursday April 8, 2021 12:42 pm PDT by
Samsung has launched "iTest," an interactive website experience that's designed to allow iPhone users to test out Android on a Galaxy device, or "sample the other side," as Samsung puts it. Subscribe to the MacRumors YouTube channel for more videos. The iTest website is being advertised in New Zealand, according to a MacRumors reader who came across the feature. Visiting the iTest website on...
epic iap feature 3

Tim Cook Says App Store Would Become a 'Flea Market' if Third-Party Payment Systems Were Allowed

Monday April 12, 2021 9:41 am PDT by
In a recent interview with the Toronto Star, Apple CEO Tim Cook spoke about a wide variety of topics, ranging from App Tracking Transparency to Apple's ongoing legal battle over App Store policies with Fortnite creator Epic Games. Notably, Cook said that Epic Games' desire for Apple to let developers offer their own payment systems in apps "would make the App Store a flea market":At the...
tim cook toronto star

Tim Cook Says Apple is 'Not Against Digital Advertising' Ahead of iOS 14.5 Launch With App Tracking Transparency

Monday April 12, 2021 8:00 am PDT by
Starting with iOS 14.5, iPadOS 14.5, and tvOS 14.5, Apple will be requiring apps to receive a user's permission to track their activity for targeted advertising purposes, as part of a privacy measure known as App Tracking Transparency. Ahead of App Tracking Transparency being enforced, Apple CEO Tim Cook has participated in a privacy-focused interview with the Toronto Star, telling the...
a13 bionic mockup

Apple Made Sudden Security Changes to its Chips in Fall 2020

Monday April 12, 2021 8:15 am PDT by
Apple made unusual mid-production hardware changes to the A12, A13, and S5 processors in its devices in the fall of 2020 to update the Secure Storage Component, according to Apple Support documents. According to an Apple Support page, spotted by Twitter user Andrew Pantyukhin, Apple changed the Secure Enclave in a number of products in the fall of 2020:Note: A12, A13, S4, and S5 products...
HomePod G4 Feature

Bloomberg: Future HomePod May Feature iPad Connected Via Robotic Arm to Track Users Around The Room During FaceTime Calls

Monday April 12, 2021 3:50 am PDT by
In a report outlining a possible Apple TV with a combined HomePod and camera, Bloomberg's Mark Gurman says that Apple is exploring a future high-end HomePod speaker that could include an iPad connected via a robotic arm that tracks and follows users around a room. From the report: The Cupertino, California-based technology giant, is also mulling the launch of a high-end speaker with a touch ...