Apple beats Q2 earning expectations

Apple (AAPL) posted strong Q2 earnings driven by strong iPhone 4 and iPad 2 sales with revenue of $28.6 billion and pro-forma EPS of $7.79. These numbers were well above Canaccord Genuity Technology Analyst Heath Terry’s estimates of $25.2 billion and $5.73 respectively, as well as the consensus expectation of $24.9 billion and $5.85. This was fuelled especially by strong sales of iPhones (20.3 million units vs. Terry’s 16.8 million estimate) and iPads (9.3 million vs. 7.9 million estimate). Terry believes demand will remain very strong for the iPhone and iPad, and anticipates solid sales in the second half of 2011 as Apple ramps production of iPad 2 and iPhone 5. With the upcoming launch of the iPhone 5 and iCloud service, Terry is raising his full-year 2011 pro-forma EPS estimate from $24.62 to $26.35 and F12 estimate from $29.30 to $30.04.

Terry anticipates strong earnings growth longer-term for Apple based on longer-term trends in iPhone and iPad sales as well as Apple’s industry leading software ecosystem.

In addition to solid growth for the iPhone is developed smartphone markets such as the United States, Terry was impressed by the iPhone’s rapid growth in China. Management indicated China accounted for roughly 10% of total Apple sales in H1/11, and Terry believes China and other emerging markets such as India, Vietnam and Indonesia could drive a multi-year product cycle for Apple with the iPhone and also the iPad in these fast growth markets.

Apple (AAPL : NASDAQ : US$386.90), Net Change: 10.05, % Change: 2.67%, Volume: 33,525,387

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