Apple Earnings Report Q3 2016

Apple earnings report for Q3, 2016 was released today. Unlike the last few years of exponential growth in almost all areas, this past quarter saw sales falling across the product lines. But even then, surprise surprise, the Apple stock (AAPL) jumped up in after market hours significantly. To an reader unfamiliar with the way stock market generally works, this might be a surprise as to how the stocks can rise when the Apple earnings report for the quarter was so bad. But to a trained eye, this tells a different story.

The stock market works on perception and expectations. For this quarter there was literally nothing great expected of Apple (via WSJ via 9to5mac) or in other words every one expected Apple's sales to fall this quarter. Also when Apple released the numbers today their actual sales numbers fell right in the guidance range that the company had offered last quarter. In short though today's results were not that great, they were as predicted. And the Wall Street loves when their predictions come true (as they rarely ever do that!).

Another aspect to the stock price increasing was the future guidance. Every quarter all companies are expected to throw numbers at the analysts that they expect to see/achieve the next quarter. The stock price falls if those number are either too pessimistic or too optimistic. But apparently this time, Apple's guidance for Q4, 2016 was right in line with what the analysts think is practical for Apple to achieve. Hence a culmination of these complex expectations/perceptions resulted in the Apple stock rising by almost 7% after market today after the seemingly disappointing results! 

AAPL jumped up after Apple Earnings Report Q3 2016 (Source: Yahoo Finance)

AAPL jumped up after Apple Earnings Report Q3 2016 (Source: Yahoo Finance)

Here is the summary of results from todays's Apple Earnings Report (via 9to5mac and Apple.com).

  • $42.4 billion in revenue (Apple's guidance last quarter: $41 - 43 billion, Analysts' expectation: ~$42 billion)
  • $7.8 billion in profit
  • $1.42 earnings per share (Analysts' expectation: $1.39) 
  • Gross margin of 38% (down from ~40% last quarter)
  • iPhone: 40.4 million units (Analysts' expectation: 40 million)
  • iPad: 9.9 million units
  • Mac: 4.2 million units

Also here are the numbers offered by Apple as guidance for the next quarter

  • Revenue: $45.5 - $47.5 billion
  • Gross margin: 37.5 - 38%