Apple posted a better than expected profit for the third quarter, but overall revenue and iPad sales came in a bit light, raising concerns among analysts.
Apple reported earnings of $1.28 per share on revenue of $37.4 billion for the June quarter, beating Wall Street estimates for earnings of $1.23 per share.
The company sold 35.2 million iPhones during the quarter, up from 31.2 million the same quarter a year earlier and roughly matching analyst estimates. That’s particularly impressive considering that Apple is expected to launch the next iPhone model in a couple months. The company credited the increase in part to a 55% year-over-year increase in sales in Brazil, Russia, India and China.
While Apple impressed with the iPhone, it however disappointed with the iPad. Apple sold 13.27 million iPads during the third quarter, coming in below analyst estimates for about 14 million. In fact, iPad sales were down from both the previous quarter and year over year.
“iPad sales met our expectations, but we realize they didn’t meet many of yours,” Tim Cook, Apple’s CEO, admitted on the company’s earnings call Tuesday.
He attributed the weaker sales to a reduction in channel inventory and “market softness” in Western Europe and the United States, but he stressed that Apple remains “very bullish” on the tablet market. Cook added that Apple has sold 225 million iPads since the device launched four years ago.
During the earnings call, Cook talked up Apple’s software announcements at its Worldwide Developers Conference in June as well as its recent partnership with IBM.
“This is a radical step for enterprise and opens up a large market opportunity for Apple,” Cook said of the IBM partnership. He also noted that the IBM deal could be a boon for iPad sales in the future, presumably by making the devices more appealing to the enterprise market.
Cook revealed that Apple has acquired 29 companies since the beginning of the 2014 fiscal year and five acquisitions since the end of March, not counting its $3 billion deal to buy Beats, which it expects to close later in the fourth quarter.
“We’re always looking in the acquisition space,” Cook said in response to a question about making more big acquisitions like Beats. “But we don’t let our money burn a hole in our pocket.”
Apple stock has rallied in recent months thanks to an unusual 7-1 stock split, increased buybacks and a wave of reports about the company’s upcoming products in the fall, including rumors of two larger iPhone models and the so-called iWatch.
On Monday night, less than a day before the earnings report, The Wall Street Journal hyped expectations even more with a report that Apple is asking suppliers to manufacture as many as 80 million new iPhone models for the fall, much higher than the previous year.
The company’s stock was down by about 1% in after hours trading following the earnings release.
