Apple’s Q1 brought in record revenue and great iPad sales, but iPhone sales growth is slowing

Apple has just released its earnings report for the first quarter of this year. Most things are good, but there are some worrying signs, at least for investors.

Let’s start with sales. Apple moved 37.4 million iPhones in this quarter. This number compares favorably to the year-ago quarter when it only managed 35.1 million sales. However, the difference is quite small. Year-on-year growth here is just 6%, which, while still noteworthy, could signal a gradual slowdown of Apple smartphone sales growth. This trend may continue, and it may get even worse in Q2 if no new iPhone gets released before July 1 (because traditionally the quarter before a new launch sees the biggest drop in sales).

Compared to the last quarter of 2012, the Q1 2013 results look bad – but that’s usually how things are in the mobile world. Q4 is by far the biggest (Apple actually was an exception to this rule when it held its iPhone launches in the summer), and Q1 can be the worst for sales (again, Apple can be an exception here thanks to its one-year release cycle, which makes the last quarter before an announcement pretty bad too).

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Apple sold 19.5 million iPads in the first three months of this year, which is 65% more than in Q1 2012. This excellent growth was undoubtedly fueled in part by the iPad Mini, the smaller device that has so far managed to keep Apple comfortably in the No.1 spot in terms of tablet sales worldwide.

Revenue for the quarter was $43.6 billion, which is a record for Q1. It’s 11% more than last year. But profit fell. In fact, Apple reported its first profit slide in about a decade. The Q1 profit number was $9.5 billion. In Q1 2012 that number was $11.6 billion, so things aren’t looking good for Apple – at least from the perspective of people who care more about profit than sales.

Apple’s gross margin on its products fell dramatically too, as you’d expect given what happened to the profit. The margin was 47.4% a year ago, and it’s now 37.5%. This is bad, but it’s good to keep in mind that it’s still a lot.

Apparently these numbers are better than what most analysts expected, but don’t think a big surge in Apple shares will necessarily follow. People seem to have become a bit bored with the Cupertino company, despite it managing to keep growing sales quarter after quarter.

That said, the slowing of iPhone sales growth is probably the most important takeaway from these results. Obviously though, when (or if) a new and improved (and successful) new model arrives, we should see it promptly pick up again.

Author: Vlad Bobleanta

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