Inside Apple’s record-setting profit report

October 28, 2015 08:03 AM

Apple stock (AAPL) was on the move Wednesday morning after the company reported the single-largest annual profit report in corporate history. The technology giant and maker of the iPhone announced it had made $53.4 billion over the last 12 months.

The announcement shatters the previous record held by global oil-and-gas giant Exxon Mobil Corporation (XOM), which reported revenues of $45.2 billion in 2008.

On an earnings-per-share (EPS) basis, Apple reported $1.96, besting Wall Street expectations of $1.88 and Estimize forecasts of $1.92. Total quarterly profits hit $11.1 billion on top of $51.5 billion of revenue. The firm reported a net income of $11.1 billion for the September-ending quarter. That represents a 30% jump from last year. Sales also increased by 22%.

The latest generation of iPhones propelled this staggering growth growth, a surprise that defied skeptics. The firm announced it had sold roughly 48.05 million iPhone units around the globe last quarter.  However, expectations were even higher, as a survey of analysts by Fortune magazine suggested sales of 48.72 million units.

Now, investors are wondering what’s under the cover of this earnings report and what’s in store next for the company as it heads into its most important quarter of the year.

China: Are Expectations Realistic?

Following the recent bout of volatility on the Chinese stock markets, concerns rose over Apple’s exposure to the world’s second-largest economy. The tech giant is extremely reliant on China for sales of its technologies.

Last quarter, a little less than 25% of all revenue came from China, or roughly $12.5 billion. And while that figure represents a 99% jump from last year’s revenue figure, it still represented a 5.4% decline quarter over quarter, suggesting that both the strong dollar and economic concerns in China could threaten future growth.

Holiday Stock-ing Stuffers

Heading into the December-ending quarter, the holiday season will likely be Apple’s biggest ever. However, the growth level might not be as robust as in past years, particularly as the firm relies more on iPhone sales and less on iPad sales, which fell to their lowest level last quarter since 2011.

Apple issued a warning that investors could witness a cool down in growth during this critical Holiday season. The firm set guidance between $75.5 billion and $77.5 billion for the fiscal fourth quarter. That represents growth of roughly 1% over the same period last year. While a stronger U.S. dollar may be to blame, as forex concerns are weighing down U.S. companies in global markets, companies are not expecting significant growth in sales this coming holiday season.

The company expects to remain a central focus on consumers minds, and said it will maintain an emphasis on selling iPhones during this season. For the December-ending quarter, the company expects to beat its quarterly record of 74.5 million iPhone units sold.

Apple Buyback a Success

The tech giant also announced strong progress to the largest open market stock buyback program in its history. Is more on the way?

According to Apple Insider, the firm spent $17 billion in the fourth quarter in an effort to boost shareholder value. The company spent $14 billion in direct buybacks and another $3 billion fulfilling dividend payments. The firm began its program just three years ago.

If concerns about growth in China or over-reliance on one gadget to generate revenues remains a concern, the company has the option to boost this program in order to boost the stock price.

According to its balance sheet, Apple has now accumulated roughly $205.7 billion of cash on hand.

What to Watch on Wednesday

Wednesday’s trading session should see significant volume for shares of Apple stock. Following the firm’s quarterly earnings report, shares had jumped by as much as 3%, but quickly faded in as investors focused on forward-guidance for the Holiday season.

Apple will remain the world’s largest company in the world by market cap, but its growth rate may be in a holding pattern.

About the Author

Garrett Baldwin is the Managing Editor of the Alpha Pages and the Features Editor of Modern Trader. An author and Baltimore native, he earned a BS in journalism from the Medill School at Northwestern University, an MA in Economic Policy (Security Studies) from The Johns Hopkins University, an MS in Agricultural Economics from Purdue University.