Apple Reports $3.07 Billion Profit for Q2 2010, Best Non-Holiday Quarter Ever

Apple today announced financial results for the first calendar quarter and second fiscal quarter of 2010. For the quarter, Apple posted revenue of $13.50 billion and net quarterly profit of $3.07 billion, or $3.33 per diluted share, compared to revenue of $9.08 billion and net quarterly profit of $1.62 billion, or $1.79 per diluted share, in the year-ago quarter. Gross margin was 41.7 percent, compared to 39.9 percent in the year-ago quarter, and international sales accounted for 58 percent of the quarter's revenue. The numbers represent the best non-holiday quarterly revenue and earnings in Apple history.

Apple shipped 2.94 million Macintosh computers during the quarter, a unit increase of 33 percent over the year-ago quarter. Quarterly iPhone unit sales reached 8.75 million, up 131 percent from the year-ago quarter, and the company also sold 10.89 million iPods during the quarter, representing 1 percent unit decline over the year-ago quarter.

"We're thrilled to report our best non-holiday quarter ever, with revenues up 49 percent and profits up 90 percent," said Steve Jobs, Apple's CEO. "We've launched our revolutionary new iPad and users are loving it, and we have several more extraordinary products in the pipeline for this year."

Apple's guidance for the third quarter of fiscal 2010 includes expected revenue of $13.0 billion to $13.4 billion and earnings per diluted share of $2.28 to $2.39.

Apple will provide live streaming of its Q2 2010 financial results conference call at 2:00 PM Pacific, and GeekWebGuides will update this story with coverage of the conference call highlights.

Update: Apple's stock, trading of which was temporarily halted for the earnings release, immediately leapt by over $19.00 (~8%) per share upon the resumption of trading, and is currently up approximately $17.00 (7%).

Conference Call Highlights:
- CFO Peter Oppenheimer giving overview of quarterly results, notes that PC industry grew 24% year-over-year, while Mac grew 33%.
- Breaking out iPod results, iPod touch grew 63% year-over-year, with iPod revenue up 12%. Apple maintains over 70% share of MP3 player market.
- iTunes Store brought in $1.1 billion, with over 4 billion App Store downloads so far.
- Thrilled with iPhone sales, 8.75 million is most ever. Growing at three times the overall market rate.
- Very happy with iPad sales so far. 3G on track for April 30th in U.S. Nine more countries coming in late May.
- Retail store sales up 22%, and 50% of retail store Mac purchasers continue to be new to Mac.
- Apple on track to open 40-50 new stores this fiscal year.

Q&A
Q: What insights have you gained in the U.S. market in terms of iPad cannibalization of Mac sales.
A: In our view, for last quarter, there was no obvious impact on the iPod or Mac sales from the iPad. We're thrilled with the sales of the iPad. An overall great start.

Q: iPad 3G vs Wi-Fi breakdown?
A: Too early to tell, since they haven't both been available.

Q: Why were the iPhone sales so good?
A: We had staggering growth rates in some areas. Asia, Japan, Europe growth rates were enormous. Some of this was adding additional carriers in some key countries. Also some other carries in key countries in Asia. But also had strong performance with existing carriers.

Q: Production problems with iPad?
A: No production issues. Demand simply much larger in U.S. than expected. We're adding capability, and we'll see where this thing goes.

Q: Thoughts on potential for iAd profitability?
A: Don't expect much from us this calendar year. We're building a foundation for the future.

Q: Thoughts about iPhone distribution?
A: Three main markets where still exclusive: U.S., Germany, Spain. We've moved a number of markets to non-exclusive and seen unit sales and market share improve. Can't say that will work everywhere though.

Q: iPad's effect on gross margin?
A: We priced it very aggressively at first to appeal to what is expected to be a huge market. Costs will come down over time.

Q: Plans for retail stores in China?
A: Very excited about China. Planning 25 stores there by end of 2011, starting with two in Shanghai this summer.

Q: Legal costs seem to be escalating with patent disputes. Any effect on bottom line?
A: We've taken it into account.

Q: Any plans for Apple TV?
A: Units were up 34%, but absolute number of units still small. Still a hobby. Comparing the Apple TV's small market to that of Mac, iPhone, iPod.

Q: Does the iPad compete with netbooks?
A: It's a no-brainer that someone would opt for the iPad over the netbook. The netbook doesn't do anything well.

Q: Any planned drop in iPhone service plan prices?
A: Apple always works to get the best deal for consumers, but price isn't everything. When we dropped iPhone 3G to $99, we still saw demand skewing toward iPhone 3GS starting at $199.

Q: How about accessories and their effect on gross margin?
A: Our portfolio of accessories is good and more coming for iPad. Devs are rallying around them, and more good stuff will probably be coming.

Q: Retail growth driven by new store openings?
A: Revenue per store up 8%. Same-store Mac sales up 20%. We think iPad is great opportunity for retail store sales.

Q: How will iPad be reflected in financial reports?
A: Will be a separate line item like the iPhone.

Q: How many iPad customers are new to Apple?
A: It's still early, and we don't really trust the data yet.

Q: Education sales outlook?
A: We're holding up in market share and ready to compete, but budgets are difficult right now.

-End of call