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

Flat MacBook Air Feature

Bloomberg: Apple Working on 'Thinner and Lighter' High-End MacBook Air With MagSafe, Could Launch in Second Half of 2021

Friday January 22, 2021 3:34 am PST by
Apple is working on a "thinner and lighter" version of the MacBook Air that the company plans to release during the second half of this year at the earliest or in 2022, according to a new report by well-connected Bloomberg journalist Mark Gurman. It will include Apple's MagSafe charging technology and a next-generation version of the company's in-house Mac processors. Apple has discussed...
Top Stories 44 Feature

Top Stories: 'Thinner and Lighter' MacBook Air, Smaller iPhone 13 Notch, iOS 14.4 Incoming

Saturday January 23, 2021 6:00 am PST by
We continued to hear a lot more about Apple's plans for its Mac lineup this week, including word of a high-end redesigned MacBook Air and the return of an SD card slot as part of the upcoming MacBook Pro redesign. It also sounds like Apple has been working on Face ID for Mac, but it won't be appearing in a redesigned iMac this year as originally planned. This week also saw rumors about the...
Apple VR Feature

Bloomberg: Apple's First AR/VR Headset 'Pricey, Niche Precursor' to More Ambitious AR Glasses and Could Launch Next Year

Thursday January 21, 2021 3:27 am PST by
Apple's first virtual reality headset will be a "pricey, niche precursor" to a more ambitious augmented reality product, according to a new report from Bloomberg's Mark Gurman. As a mostly virtual reality device, it will display an all-encompassing 3-D digital environment for gaming, watching video and communicating. AR functionality, the ability to overlay images and information over a view...
iOS 15 icon mock banner

iOS 15 Rumored to Drop Support for iPhone 6s and 2016 iPhone SE

Thursday January 21, 2021 11:58 am PST by
Apple's upcoming iOS 15 operating system, which we expect to see unveiled in June, is rumored to be dropping support for a few of Apple's older iPhones. According to French site iPhoneSoft, iOS 15 will not be able to be installed on the iPhone 6s, the iPhone 6s Plus, or the 2016 iPhone SE, all of which have an A9 chip. The iPhone 6s and 6s Plus were introduced in 2015 and are now more...
2021 mbp sd slot feature2

Bloomberg: Next MacBook Pro to Feature SD Card Reader

Friday January 22, 2021 7:50 am PST by
Last week, reputable analyst Ming-Chi Kuo outlined his expectations for new 14-inch and 16-inch MacBook Pro models later this year, including the return of the MagSafe charging connector, the removal of the Touch Bar, a new flat-edged design, and the return of more ports built into the notebooks for expanded connectivity. A concept of a modern MacBook Pro with an SD card reader Kuo did not...
iPhone 13 Notch Feature

iPhone 13 Rumored to Feature Smaller Notch, Pro Model Cameras to Use Larger Image Sensor

Thursday January 21, 2021 1:38 am PST by
Apple's iPhone 13 series will feature a redesigned Face ID system that will allow for a smaller notch at the top of the screen, according to a new report today. The rumor comes via hit-and-miss Taiwanese industry publication DigiTimes, whose supply chain sources also claim that the ultra wide-angle lens in Apple's next-generation iPhones is due for an upgrade. The next-generation iPhones'...
airpods galaxy buds comparison

Samsung Galaxy Buds Pro vs. Apple AirPods Pro

Friday January 22, 2021 2:34 pm PST by
Samsung in January unveiled new flagship Galaxy S21 smartphones and alongside the new phones, introduced the $200 Galaxy Buds Pro, which are priced at $199 and offer Active Noise Cancellation. Subscribe to the MacRumors YouTube channel for more videos. These new Galaxy Buds Pro are clearly designed to compete with Apple's AirPods Pro, so we thought we'd compare the two sets of earbuds in our...
maxresdefault

Video Demos macOS Catalina Running on iPad Pro via x86 Emulation

Thursday January 21, 2021 11:36 am PST by
A video demonstrating macOS Catalina running on a current 2020 iPad Pro has been shared on YouTube, giving us a look at an interesting hack that has a Mac OS up and working on one of Apple's iPads. There's limited information about how the process of getting macOS Catalina on an iPad Pro works, but it uses x86 emulation and was done through the UTM software that allows virtual machines to...
2019 mac pro side and front

Tim Cook Gifted Donald Trump 'First' 2019 Mac Pro

Wednesday January 20, 2021 5:45 pm PST by
Apple CEO Tim Cook gifted former United States President Donald Trump with the first 2019 Mac Pro that came off of the assembly line in Austin, Texas, according to a financial disclosure report that was released today (via The Verge). "Mac Pro Computer, the first created at the Flex Factory in Austin, Texas," reads the entry, which values the machine at $5,999, the base price for a Mac Pro....
iOS 14

Apple Seeds iOS 14.4 and iPadOS 14.4 Release Candidate to Developers and Public Beta Testers

Thursday January 21, 2021 10:14 am PST by
Apple today seeded the RC version of upcoming iOS 14.4 and iPadOS 14.4 updates to developers for testing purposes, with the new betas coming a week after Apple released the second betas. iOS 14.4 and iPadOS 14.4 can be downloaded through the Apple Developer Center or over the air after the proper profile has been installed on an iPhone or iPad. Paired with the HomePod 14.4 beta that is...