Apple Drops After Earnings Report

While the company beat expectations for revenue and earnings, iPhone sales were softer than expected, leading to stock falling over 7% in after hours trading, according to Business Insider.

Here are all the big numbers:

• Revenue: $49.6 billion, up 33% annually, versus analyst expectations of $49.4 billion
• iPhone units: 47.5 million, up 35%, versus analyst expectations of 48.8 million (the whisper number was 50 million)
• iPad units: 10.9 million, down 18%, versus analyst expectations of 10.9 million
• Mac units: 4.8 million versus 4.9 million
• Cash: $203 billion
• Revenue guidance: $49 billion-$51 billion versus $51.06 billion

Overall, the numbers are good. But, analysts were getting all geeked up for a monster iPhone number, which didn't happen.

On the call, CEO Tim Cook explained, in part, why iPhone sales were below analyst expectations.

He said the company had 600,000 fewer iPhones in channel inventory. If those phones had been in the channel, then Apple would not have missed on iPhone units as badly. It would have also led to an extra $396 million in revenue, since the average selling price of the iPhone is $660.

Cook said the company tries to avoid having unnecessary inventory when possible. If he wanted to smash expectations, he would have shipped the extra 600,00 units, but he doesn't run the company to the 90 day drumbeat of earnings expectations, he said on the call..

Despite iPhone sales coming in short of expectations, it was still a strong quarter, with sales up 35% year over year.

The other thing of note from the call was information on the Apple Watch. Apple didn't provide any specific numbers, but it did say that sales were above internal expectations. It said the watch sold better in its first 9 weeks than the iPad sold in its first 9 weeks.

As For Apple Music, Cook stated “We’re thrilled by the response to Apple Music, which launched in over 100 countries on June 30.

“Millions and millions of customers are already experiencing the new service using the three-month trial period, and the numbers are growing substantially every day.”

Apple Music launched on iOS devices on June 30 offering users a three-month free trial.