Apple earned $1.28 a share on revenue of $37.4 billion in the quarter, up from $1.07 a share and $35.3 billion in revenue last year. Analysts surveyed by Thomson Reuters expected earnings of $1.23 a share on revenue of $37.99 billion. Gross margin widened to 39.4% from 36.9%. The company sold 35.2 million iPhones, and 13.3 million iPads, and 4.4 million Macs this quarter, with iPad sales being the weakest: they saw a 19% drop in unit sales and a 23% year-over-year drop in revenue.
For the fourth quarter, Apple expects revenue between $37 billion and $40 billion, below analysts' estimates of $40.4 billion. Apple also announced a 47-cent per common-stock share dividend.
“Our record June quarter revenue was fueled by strong sales of iPhone and Mac and the continued growth of revenue from the Apple ecosystem, driving our highest EPS growth rate in seven quarters,” said Apple CEO Tim Cook in the press release. “We are incredibly excited about the upcoming releases of iOS 8 and OS X Yosemite, as well as other new products and services that we can’t wait to introduce.”
Analysts expect Apple’s largest-ever product launch this fall in the release of the new iPhone with a larger screen. Additionally, a new patent published by the U.S. Patent and Trademark Office for a device called the “iTime” (filed in 2011, but published yesterday) indicates that Apple is designing a wrist device that can connect to other Apple portables such as the iPhone and iPad.
Microsoft (MSFT) shares gained 1.2% to $45.35 following the release of quarterly results that beat expectations but missed the bottom line.
In its fiscal fourth quarter earnings report, released yesterday, Microsoft reported 55 cents per share on revenues of $23.4 billion, an 18% increase from a year earlier. Analysts polled by Thomson Reuters expected earnings of 60 cents per share on $22.99 billion in revenue. $2 billion in revenues came from the company’s Nokia acquisition. Revenues from the Bing search engine, which now holds 19% of the US market share, were up 40%. Microsoft’s net income fell 7% to $4.61 billion, or 55 cents per share, from $4.97 billion, or 59 cents per share, in the same quarter last year. Most importantly, Microsoft’s commercial cloud revenue grew 147% to over $4.4 billion.
Cloud success is one of the most important tenets of CEO Satya Nadella’s turnaround plans. “This quarter’s results demonstrate the strength of our business, as well as the opportunities we see in a mobile-first, cloud-first world,” Nadella said in the press release. “We are focused on executing rapidly and delivering bold, innovative products that people love to use.”
“We delivered solid, broad-based financial results driven by strong execution and continued cost discipline,” said Amy Hood, executive vice president and chief financial officer at Microsoft. “We are focusing our resources to drive growth and long-term shareholder value.”
These results come shortly after Microsoft laid off 18,000 employees, about 14% of its total workforce, as part of Nadella’s attempt to remake Microsoft into an enterprise and cloud services company.
Two analysts upgraded Microsoft after the earnings report. Bank of America's Kash Rangan raised the stock to "neutral" from "underperform," and Pacific Crest’s Brendan Barnicle raised the stock to "outperform" from "sector perform." Barnicle cited Microsoft’s “unprecedented financial discipline that it is applying to all of its businesses” and accelerating cloud computing business.
Xilinx (XLNX) shares plummeted 14.7% to $41.07 after reporting disappointing results for the quarter.
For its first quarter in the fiscal year 2015, Xilinx’s earnings and guidance were well below analyst expectations. The programmable chip maker’s earnings per share of 62 cents just exceeded the consensus estimate of 61cents, but its revenues of $612.6 million were far short the consensus estimate of $631.55. Xilinx’s second quarter guidance is 4% lower than this quarter, between $588 and $612.6 million; analysts expected $644.5 million.
"June quarter revenues were impacted by weaker than anticipated sales from our defense and wireless businesses," said CEO Moshe Gavrielov in the press release. " Looking ahead to the second half of our fiscal year, I believe Xilinx is positioned to benefit from a recovery in wireless and defense programs as well as improved business conditions in wired communications and industrial applications."
Several analysts downgraded the company in response. BMO Capital downgraded the stock to “market perform” from “outperform and lowered the price target to $42 from $60. Bank of America downgraded Xilinx to "neutral" and lowered the price target to $48 from $55. William Blair downgraded Xilinx to “market perform” from “outperform.” Analysts at Goldman Sachs downgraded the stock to “neutral” from “buy” and lowered the price target to $49 from $55.
Shares of iRobot (IRBT) tanked 9.2% to $35.22 after reporting earnings that were in line with estimates but fell short on revenues.
In its second quarter, iRobot earned 28 cents per share, about the same as its performance last year, beating the Capital IQ Consensus Estimate of 22 cents a share. Revenue grew 7.2% year-over-year to $139.8 million, short of analyst estimates of $142.5 million. The robotics company’s Home Robots segment generated revenues of $133.2 million, up 15.3% from the same quarter last year, while revenues in the Defense & Security segment were down to $5.1 million from $12.5 million a year ago.
"I am pleased to report a successful second quarter, with results that met our expectations," iRobot chairman and CEO Colin Angle said in a statement. "Our Home Robot business continues to deliver strong growth on an ever-increasing base in all three geographic regions while our Defense & Security business built a substantial order backlog for delivery in the second half of 2014."
Facebook (FB) shares rose 2.1% to $70.70 ahead of its earnings release this afternoon.
Analysts surveyed by Thomson Reuters expect Facebook to earn 32 cents a share on revenues of $2.81 billion, an increase of 55% from the same quarter last year. Last quarter, Facebook beat expectations of 24 cents a share with 34 cents a share. Facebook stock is up 16% in the last three months and 25% year-to-date.
Facebook will release its earnings report after the bell this afternoon.
--Written by Laura Berman in New York
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