Apple Inc. (NASDAQ: AAPL) Q2 Earnings: iPhone Carries the Day

Thanks to booming sales of the iPhone, Apple Inc. (NASDAQ: AAPL) Q2 earnings far outpaced Wall Street expectations.

Apple earned $12.30 a share on revenue of $39.2 billion, compared to analyst expectations of $9.99 a share on $36.6 billion. In the year-ago quarter Apple earned $6.40 a share on revenue of $26.67 billion.

Apple sold 35.1 million iPhones in the quarter, well beyond the 30.5 million analysts had projected.

AAPL stock had fallen in recent days when U.S. carriers AT&T Inc. (NYSE: T) and Verizon Communications (NYSE: VZ) both reported significant declines in their quarterly iPhone sales. The reports raised concerns, unfounded as it turned out, that iPhone sales would miss.

That's one reason why the news was greeted enthusiastically in after-hours trading. AAPL was up $41, or 7.29%, within 30 minutes of the earnings announcement.

The iPhone was able to carry Apple's earning because it has substantially higher profit margins - over 70% -- than the Cupertino, CA, company's other products, and contributes more than half of its revenue.

The strong performance of the iPhone disguised weakness in Apple's other product lines.

Despite a strong debut for the third generation iPad late in the quarter, Apple's tablet sold 11.8 million units. While a 151% increase year over year, the number fell short of the expected 12 to 13 million units.

The 4 million Macs sold also fell short of expectations, as analysts were looking for 4.4 million. While 6.4% higher than the year ago number, Mac sales were growing at double-digit rates last year.

More troubling was the weak guidance Apple gave for the June quarter. It projects earnings of $8.68 a share on revenue of $34 billion. Analysts see $9.93 a share on revenue of $37.4 billion.

While the company is known for lowballing is guidance, the numbers seemed pessimistic even by Apple standards.

With the introduction of the iPhone 5 not expected until October, it's possible that Apple expects a lull in earnings next quarter.

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About the Author

David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.

Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.

Dave has a BA in English and Mass Communications from Loyola University Maryland.

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