Apple's Growth Scorecard: 63% average earnings growth over 16 quarters

In the last quarter Apple’s top line grew by 70% and the bottom line by 75%.

For a historical perspective, the following table shows year-on-year growth for products[1] and sales/earnings color coded with an arbitrary scoring range.

The major changes from the last quarter were the acceleration in software sales and the return to growth in iPod sales. iPod benefited from the continuing shift to iOS as the mix is now 50% touch in the portfolio.

Software growth reached a level not seen since 2008. It’s not clear to me yet  which products drove this increase.

Overall the growth is both wide and deep. I’m most impressed with the iPod as it was a surprise to hear such a high mix of touch.

The following chart shows the top and bottom lines plotted over time with color bands corresponding to the score system in the table above.

Note how earnings growth has been in the high or very high or exceptional range for all but one quarter over in the last four years[2].

Apple transcends the mythical “rule of large numbers”[3]. It’s not only a mega-cap, but the second largest company in the world by market cap. Not only has this enormously valuable asset just grown in intrinsic value creation by 75% but it has maintained a growth of 70% for the last five quarters.

If that weren’t enough, the average earnings growth has been 63% for the last sixteen quarters.



  1. The iPad is not included since we don’t have more than one year of sales and this is year-on-year not sequential growth.
  2. The low growth for Q3 ’09 was due to the corresponding spike the year before when the iPhone 3G was launched. That launch quarter in 2008 was a seminal turning point in the history of the phone industry when it became clear that the iPhone was not a passing fad. Steve Jobs famously participated in the conference call calling attention to the data which was obfuscated by subscription accounting. Alas, the news was lost in a sea of credit crunch panic.
  3. I have an aversion to this rule as “large” is never defined except in relative terms. For example a $1 trillion market cap may be large because it’s unprecedented, but it may be a trifle if the company is priced at book value.
  • Rob Scott

    This is an amazing growth story. Some people are arguing that Apple's best days are over, but looking at these numbers and the trends, it looks like Apple is just starting.

    Apple's low share in PCs used to be used as snide remark against the company, but now it is a massive opportunity. Mac growth might be moderate by Apple’s standard but its multiple times higher (8X last quarter) than the PC industry. Apple at 4% in 2010 and has 96% to grab going forwad, who know maybe they will have 25 – 30% share by 2020. Times, they are changing.

    Apple also has low share in total mobile phones also around 4%, a gigantic opportunity. Mobile phones at 1 billion handsets a year, Apple is just warming up!

    And then the iPad, this segment will probably be as big if not bigger than the PC industry, and Apple is there leading. Again just starting out.

    Apple TV, 1 million sold and it is just a hobby for now.

    These are existing product, what about products that are still to be introduced.

    This growth story, this Apple story is just beginning and asymco is recording everything. I am just glad I am here to enjoy, not only the products but the company and the community of users who use the products and the excellent analysis from these “amateur” analysts. Thanks for the great work. Amazing work about an amazing company.

    • dms

      The amazing thing about Apple is they are able to introduce new products that no one thought they needed but once introduced becomes must-haves.

      While the iPad, iPhone, and Mac each have enormous growth opportunities, these aren't the end of story for Apple.

    • dchu220

      Hey Rob. The interesting thing about the first generation AppleTV is that Apple made almost no money on it. The hardware BOM came in at around $230 for a $250 unit. It shows that they were interested enough about this market that they were willing to experiment… hence a hobby.

  • dchu220

    When I look at the growth of the Mac, I always wonder, "Are PCs slowly becoming not good enough?" Are the needs of the market slowly inching past the performance of Windows?

    I know Horace has argued that mobility is an important trend that Apple realized early on. Can you think of any others?

  • timnash

    Judging by the iPod ASP and the growth reported in the conference calls, the Touch was over 40% and probably close to 50% of iPod unit sales during FY 2010. I suspect a reason for emphasising the number now (and Jobs pointing out that the Touch was selling as many as the Nintendo DS and Sony PSP combined) is to diminish interest in the 3DS which at $249 will be selling for $20 more than the entry level Touch.

    • asymco

      Tim Cook stated touch was over 50% in units which, given pricing, I think guarantees well over 50% in sales.

      • timnash

        My suggestion is that the dominance of the Touch had already occurred in FY2010. Tim Cook's remarks only seemed to refer to Q1 FY2011.

    • dchu220

      That's amazing. I can't think of another company or product category where the premium product outsells the entry level products.

      • Iosweekly

        I don't think we can honestly say the iPod touch is just a premium iPod, it's so far removed from the iPod classic, nano & shuffle as to be a completely separate thing in all but name. I presume internally the iPod touch is designed by much the same team that handles the other iOS devices rather than the iPod.

        But your point probably applies to macs rather well – I'm sure the iMacs sell much better than the Mac minis.

      • dchu220

        You are right. The Touch is more like an entry level iPhone.

  • Jon T

    It's just possible that Apple, leading in mobile computing over the next few years, will make the MSFT growth story of the 90's look mediocre. You cannot but feel that Apple is only just overcoming the massive resistance to change (to everything Microsoft/Motorola/Nokia/Sony) and as widespread acceptance become the norm, that its growth will skyrocket.

  • dchu220 wonders "Are PCs not good enough?" I see it slightly differently.

    PC's were originally intended as a cheap version of the Mac just as Android is a cheap version of the iPhone. The idea is that they are "good enough" to do the job they are hired for (as Horace would say) not the "best" at doing that job. Apple has always been about making the products the "best" at doing a job.

    Why are they doing well now when the weren't just a decade ago?

    Obviously there are many factors (Steve being the biggest) but there is one factor that never seems to get pointed out.

    When PC's we're starting out it mattered about features and price. Can I use a word processor? Can I print? Can I do spreadsheets? They we're all new things back then so "Good enough" but cheap was a far better choice than "best" and expensive.

    Now that everyone has a PC (the market has been saturated) every PC manufacturer (including Apple) is standing on even ground. They all have feature parity.

    At this point (and this is my contention) user experience matters more now than it ever did. There are people out there now who have a PC who are now desperate for one that works better. Consumers have become more discerning. This has played to Apple's strengths in a way that has not been at any point in time.

    This is partly why I think we're seeing this meteoric rise now not three or five years ago.

    • asymco

      Maybe this is redundant, but here are some thoughts on why the Mac keeps growing:

      • dchu220

        It's a good refresher.

        "(The laptop) was not easily serviced by end users. It was, in a word, re-integrated."

    • dchu220

      Thanks for responding Chris.

      I agree that usability/accessibility is going to play a major role. You also made me think of trust as a factor. People just don't trust their PCs.

    • Joe_Winfield_IL

      I was going to reply directly to @dchu220, but it seems the thread has picked up here. I would suggest that the increased importance of mobile (phones & tablets, not laptops) plays very well for the Apple PC lineup in comparison with Windows based PCs.

      The more I think about it, the more I like Jobs' simple trucks vs. cars metaphor. Sticking with the metaphor, trucks are used less often than cars, and by fewer users. They do fewer tasks (because most common tasks can be done better in the car), but they have to do a very good job when called upon. Most importantly, they need to last a very long time to justify ownership.

      Microsoft does not seem to agree with this vision, and is continuing to build ever greater functionality into its OS. Windows 8 will be a "luxury car" upgrade to Windows 7, with lots of new bells and whistles. The PCs put out by OEMs will do lots of things well, and many things that a typical consumer will never use. The upgrade cycle is what drives revenue in a licensing model; MS would prefer that we upgrade frequently, similar to car leases. In order to entice software upgrades, new features must constantly be added, independent of the hardware.

      Meanwhile, in Cupertino, the R&D is being focused on the tasks that still belong on trucks, and handing off the rest to cars as easily as possible. Max OSX will focus on enhancing the strengths of the truck for a long lifetime of ownership – photo editing, data entry, media management, file conversion, etc. Most of these are optimized so that the content may be best consumed outside the PC itself, either on mobile devices or in the living room. The upgrades to key software are free or carry only a nominal cost, akin to routine maintenance on a vehicle. Apple’s revenue is generated with hardware sales, so they want to produce trucks with good fuel economy, simple engines with minimal and standard parts, lots of horsepower, and so on. This is manifested with extremely long lasting batteries, good displays, quick startup time, flash storage, etc.

      In short, Apple is building computers optimized for the required functions, with a focus on longevity. This seems like a solid strategy to compete with a bloated OS and widely varied hardware OEMs.

      • dchu220

        Here's what I took away from your post. Even with Microsoft's obsession with the consumer space, their primary customer still remains the Enterprise for whom productivity features and customization are the most important features. In comparison, Apple is able to focus on consumer needs.

        Also, Apple forces you into buying better hardware so they can sell you on OS upgrades over the lifespan of the hardware. In some ways, Snow Leopard was all about extending the lifespan of your hardware with a more efficient OS.

      • Joe_Winfield_IL

        Largely, that was the gist of my rambling. Often on this site, the commentary turns to the contrasting objectives of Android and iOS (user as product vs. user as customer). I think that the in the PC business, Mac and Windows have equally disparate objectives. Apple uses Mac OS as a means to sell computers at a hefty profit. Microsoft has a strong incentive to shorten the useful lifespan of a Windows PC, as the per unit profit is small on Windows licenses. They thrive on churn, and for years this has been successful due to rapidly improving functionality expected from PCs. It is my opinion that, as users spend more of their disposable income on mobile computing devices, there is less left over for PCs. There is also less need to have the latest and greatest PC.

        Because Mac's share of the PC market is very small, Apple can grow rapidly through new customer acquisition rather than churn of existing customers. Apple is free to think about the user experience, and sell on the basis of lifetime cost of ownership. Rather than discounting the retail price to drive sales, the ASP remains high, and margins are well above industry norms. With such a high market share ceiling, the primary means to lowering the cost of ownership is to extend the useful life of a typical Mac. Apple can do this through enhancements to OSX, and by making the updates very backwards compatible with older devices.

        Apple is now primarily a mobile computing company. This is a much faster growing market than PC overall, and the trend is overwhelmingly in Apple's favor as compared with Microsoft. Users are spending an ever larger percentage of their time in front of small screens, and PCs are utility devices. Realizing this, Apple is designing computers that interface well with the mobile devices that users care about. The whole "back to the Mac" presentation for Lion was based on creating synergies between mobile devices and Mac PCs. This is asymmetric to the strategy that has fueled Windows' success over the years, and Microsoft will continue to lose share as a result. Also, a two percent swing in overall OS market share would lead to a huge revenue gain for Apple and a minor loss for Microsoft. As a result, Microsoft has more to lose than to gain by chasing Apple's PC strategy.

        Apple computers are uniquely positioned, as Microsoft is fairly inept at mobile and Google does not have a credible PC segment. This, combined with low current share, is driving Apple's tremendous success in computers.

    • GeorgeS

      "PC's were originally intended as a cheap version of the Mac …"

      Not really. PCs preceded Macs by several years. The first "PCs" (i.e., "IBM compatible") were sold in 1981. The Mac didn't come out until 1984. Don't confuse "PC" with "Windows."

  • kevin

    I would think the software increase is due to iLife '11, and to a lesser extent, Apple's paid apps on iOS (iMovie, Pages, Numbers). The developer's 70% share for iOS apps is probably recorded under software.

    • chano

      Unlikely. I think it would be removed directly as a cost of sale.

      • kevin

        Apple is the developer of its own iOS apps. It pays itself the 70%. Where does it record that? Under the iTunes line or under the Software line?

  • edbog

    Mr. Dediu:

    Interesting article but you must improve on your earnings, etc. predictions. If not, how can one have faith in the accuracy of your price targets.

    • Horace the Grump

      Well indeed… as if forecasting the future was just a trifling exercise…

      How do you propose then that anyone generate accurate projections for Apple's next new product? As has been posted about the projections for the iPad it was nothing more than a guessing game… Everyone was searching around in the dark any everyone called it wrong…

      So "shame on you" Mr Dediu for being so thick as to be wrong… Get into you time machine and travel forward 2 years and then come back and redo your forecasts…

    • asymco

      I've never set a price target.

  • ChuckO

    The iPod touch growth makes perfect sense if you have a kid. You could buy an iPod, a Nintendo DS, a computer or you could buy them an iPod touch. Does the iPod Touch seem expensive now?

    • Iosweeky

      Yes, it's amazing how versatile it is. Not just for kids either.

      I had a work colleague who was heading to London for 2 years for her big OE. She had saved all her money and didn't want to waste any on a notebook to take with her, so I gave her my old 1st generation iPod touch, and she has been happily been using that for all her email and facebook use for the last 9 months. She started plying games on it too now.

  • davel

    These numbers are just stunning.

    The thing is in all markets but music players Apple does not have a dominant share.

    • FalKirk

      Great point. Apple has massive "headroom" in iPod Touches, iPhones, iPads and Macs. They either own only a small percentage of the product category or the product category is so new that the ceiling has not yet been defined.

      And look at the levels of competition. They've got virtually no competitors to their iPods, iPod touches or iPads (although competition is coming). They have heavy competition in iPhones* and Macs. How many companies make billions upon billions of dollars virtually unopposed?

      *One could make a good case that Apple has no competitor in the phone space either since Apple sells every phone that they make. Right now, no company is hindering the sale of iPhones. The only thing stopping the sale of iPhones is Apple's inability to make iPhones fast enough.

      • GeorgeS

        "Apple has massive "headroom" in iPod Touches,…"

        No one has made anything like the iPod touch (no capital) until recently.

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