Estimates for Apple's second fiscal 2012 quarter

As the chart below shows, the last quarter (fourth calendar 2011, first fiscal 2012) was robust with 116% earnings growth and 73% net sales growth. I’ve heard many superlatives used to describe it. It is certainly exceptional but it was not as good as the second calendar quarter of 2011.

Sales grew faster both in CQ1 and CQ2 of 2011 and earnings grew faster in CQ2. It was in many ways a return to normality due to the iPhone returning to 133% revenue growth after the lull of the transitional third quarter.

Now it’s time to consider the current quarter. It’s already quite late in the quarter to make predictions, but I waited to hear some data about the iPad. The iPad remains a difficult product to forecast. Mainly because it is a new category and the pattern of growth takes a long time to establish. We’ve only had three quarters where y/y growth could be measured. Sales growth has been 180%, 146% and 99%. Unit growth has been 183%, 166% and 110%.

These rates have been higher than the average iPhone growth rates (average of which was 100% in units and 108% in revenues over the calendar 2011). Indeed, the average iPad growth rate so far seems to be 150%.

Is it sustainable?

The answer from this latest launch seems to be yes. The following chart shows the launch performance of the various iOS devices whose launch performance has been announced.

The growth in launch performance between iPad 1 and iPad 3 is a factor of 28. iPad third generation had broader distribution but the volume boost from first generation is enormous. This implies a vastly improved production ramp. As the product remains supply constrained, the most important indicator of performance is production throughput.

So given this data on the iPad and the ongoing broadening of the iPhone distribution network, here are my first quarter estimates (with y/y growth in parentheses):

  • iPhone units: 37.3 million (100%)
  • Macs: 4.7 million (25%)
  • iPads: 12.2 million (160%)
  • iPods: 7 million (-22%)
  • Music (incl. app) rev. growth: 40%
  • Peripherals rev. growth: 25%
  • Software rev. growth: 10%
  • Total revenues: $42.7 billion (growth: 73%)
  • GM: 44.7%
  • EPS: $12.0 (88%)

This earnings value would imply a trailing twelve months’ EPS of about $40.7. At $600/share the P/E would be 14.7. Cash and equivalents will probably increase to $108 billion.


  • APERE006

    Don’t you think the gross margin is a little high. Apple made it clear that last quarter was an exception. Also, the margins on the new iPad can not be great.

    • Apple says that every quarter’s margin was an exception.

      • Ronin48


        Your track record is great but Apple typically beats their own guidance by about 12%-18% if I remember correctly.

        Using 18% guidance beat I calculate:

        Rev. $38.35 billion
        EPS:  $10.05

        Wall St. Analyst Consensus (as of today): 

        Rev.  $35.74 billion avg. (41.09 high)
        EPS:  $9.7 avg. ($11.8 high)

        Do you really think Apple will beat their own revenue guidance by 30% and their EPS guidance by 40%?  

        P.S.  I hope they do.  But wouldn’t that be among their biggest beats ever?

      • Guest

        You should have checked your facts before posting Ronin48.

      • Ronin48

        What did I get wrong?  All the numbers are from Apple’s filings and Horace’s work.

        And for the record, my money is with Horace.  I just want to make sure he predicting an earnings blowout that could match the one we saw in January.

      • Robert Schoen+disqus

        Ronin48 has it right. If Horace’s forecasts are correct, this would be one of Apple’s biggest guidance beats. The revenue guidance beat would be especially large relative to history. They only beat revenue guidance last quarter by 25% last quarter. Horace’s gross margin forecast seems reasonable, since they usually beat by at least 2%.

      • ronin48

        Thanks for the confirmation Robert.  A bigger beat than last quarter will be jaw-dropping.

      • I don’t know where the 18% figure comes from. Here are the amounts I calculated (actual-guidance)/actual for last eight quarters.

        My forecast comes in at 29%.

      • ronin48

        Here’s where I saw it.  It’s for revenues. Bullish Cross:

      • I see. I track EPS not revenues. I’ll have to look at those stats as well.

  • The $12 EPS would be 40% above Apple’s guide of $8.50.  It would an outstanding, blow-the-doors off quarter.  It would likely push the stock towards $700 

    On Macs, I think there may be some softness as folks wait for the new models.  It would be very impressive if they hit 25% growth with the product about to hit the shelves.  And, it would bod very well for the Mac sales growth for the rest of the year   

    Your iPhone estimates look very aggressive.  But this quarter includes the China and other big international expansion.  I think this is the most suspect assumption 

    The iPad units look doable.  But as said above, the new iPad margins may be as much as 10% lower.  Not sure if you calculated any impact in your overall GM % estimate  


  • Bigsam

    Do you think the latest heat gate will cause a slow down in sales?
    I bought the new pad, and since I always use a cover, it has no effect.

    • No.

    • disposableidentity

      The sad fact is from now to the end of time whenever Apple launches a new model, there will be someone trying to attach the word “gate” to it.

      • Yes, like massivesalesgate.

      • demodave

         Or HaterGate.

    • r.d

      heat only comes in play when you play AAA games while plugged in.
      you have to play like an hour to get the number people are reporting on
      the web.  a typical macbook pro starts at 100º and goes to 140º and
      higher with flash.

      real problem is that Apple couldn’t use 32nm process tech
      because of yield and new product so is forced to use 45nm.
      They were even forced to move the RAM outside the SOC.

      • The A5X is not the source of all the extra heat. It’s the 36 additional LEDs in the backlight.

      • demodave

         Let’s coin a new phrase for the new millennium: “It’s the battery, stupid!”

    • Ronin48

      There’s no “heatgate”

    • Sharon Sharalike

      This time of year here in Thailand 33 degrees C is not much more than room temperature. It’s also cooler than the hand with which you’re holding it.

    • JohnDoey

      Only 0.0000001% of iPad shoppers will ever know that anyone ever questioned the heat dissipation, and even fewer will call it Heatgate. That is a term from nerd soap operas.

    • Dondi

      I agree with JohnDoey – it’s a non-issue.  I’ve used my 64MB LTE for hours every day since it arrived the 16th, and it’s never even been warm to the touch.  They achieved heat by playing cpu-intensive games while charging it.  Tests by Wired show that it’s not uncomfortable, and while it’s warmer under those circumstances than the iPad 2, it actually peaks a couple of degrees lower than competitive tablets.

      “Heatgate” is just an army of web reporters (including Consumer Reports) competing for page views.

  • Apple Fanboy

    All seems very reasonable and well thought out. For this quarter I think the margins may be a tad high, with iPad launch. Looking for more of 42-42.5.

  • r.d

    Gene Munster said 12 million ipads for the quarter.

    Shaw WU said run rate of 750,000 new ipads per day = 12 million not counting ipad2.

    25 more countries this friday.

    Macs will be lower because everyone is waiting for retina display ivy bridge.

    • JohnDoey

      Yeah, we need Retina Macs to make content on-the-go for iPads.

      A Retina version of iBooks Author should be able to run on a Mac notebook screen.

  • Brian Loftus

    You have predicted a weekly sales rate of iPhones to be above last quarters (last quarter had an extra week).  Apple actually produced a few more phones than they could sell by mid-March.  I therefore expect iPhone sales to be down a few million – 34 million (still a blow out).

    • studuncan

      Last quarter didn’t include China.

      • Brian Loftus

        This quarter includes China and lots of other places.  It does not change the fact that by March 15 you could walk into an Apple store in China, Hong Kong, and everywhere else the iPhone 4s is on sale and buy one.  No waiting required.  Therefore, Apple actually had matched supply to demand.  It took 9 months last year – 5.5 months this year (with some minor countries still without iPhone 4s).  For Apple to meet 37 million, they had to increase their production rate by more than 6%.  This is possible but I think it is more likely that they fell a few million short of last quarter.  We will see.

  • David Avraamides

    Why didn’t you show iPad 2 launch numbers in the chart? Are they not available? I’m curious how the iPad (3) numbers compare to the iPad 2.

    • Joe_Winfield_IL

      Apple didn’t release opening weekend sales statistics regarding iPad2, likely because of production constraints.  They didn’t want to do a press release that would imply weak demand if the issue was weak supply.

      • JohnDoey

        The $99 iPhone 4 sold really well, but iPhone 4S sold so much better, it was a much bigger story. Might be the case here as well. If 9 out of 10 iPads sold is a 3, they are just not going to be that excited about 2.

    • Apple did not report that data.

  • Pingback: Wednesday links: indexing ignorance | Abnormal Returns()

  • vatdoro

    To everyone who keeps bringing up the iPads low margins…

    I’m not sure if this is Horace’s train of thought, but this is how I think about the iPad margins. The entry level iPad (3) does have lower margins than the entry level iPad 2 had. But, the higher priced iPads have much better margins. I think Apple is going to sell many more of the high end new iPads then they did with previous models.

    With the maturity of the platform, the increased size of Retina apps, video editing (iMovie), photo editing (iPhoto), larger 1080p movies … all these things make it much more likely that people will opt for larger capacity iPads.
    My first iPad was the entry level 16GB wi-fi model.
    My second iPad was the 32 GB wi-fi model.
    I felt compelled on the new iPad to go “all in”. 64GB LTE

    That brings me to LTE. I believe LTE is going to be a big selling point in the US, but globally it’s not as compelling. Still, people can use HSPA+ practically anywhere.

    In summary, I believe the high end (higher margin) new iPads will sell in much higher quantities than previous iPads, keeping the overall iPad margins about the same.

    • These are really good points.  I also am going “all in” in the next model, having started with the 16 GB WiFi 

  • If Apple sold 37.5 million iPhones (and I’m not doubting they will) that would be a remarkable achievment. Attributable to China, I suppose.

    All my focus is now on the iPad. I think that the tablet sector is going mainstream this year. In 2010, the chatter was: “It’ll never sell”. In 2011, the chatter was: “It’s a niche product”. In 2012, the chatter has turned to: “Of course it will eventually outsell traditional PCs.”

    That “eventually” may be sooner than we think. 2015 at the latest. Christmas 2013 at the earliest.

    Horace is predicting sales this quarter of 12.2 million. That’s year-over-year growth of 160%. It seems that every quarter the iPad has year-over-year growth in the triple digits. Yet every day I see people predicting Apple will sell only 50 to 60 million iPads in all of 2012. That’s barely more than the 47.5 million they sold last year. Ludicrous.

    Barring something unforeseen, the iPad is going to INCREASE momentum in 2012. 80 million iPad’s sold is not unreasonable. More if Apple can make them fast enough.

    To paraphrase Winston Churchill, 2012 will not be the end for the traditional PC. It will not even be the beginning of the end.  But it will mark the end of the beginning for tablets. From 2012 on, tablets will stop being viewed as the upstart challenger and start being viewed as the heir apparent.

    • demodave

      Is the enemy of my enemy my friend, or the enemy of my friend my enemy?


      Or enemy of my enemy my enemy?

      What’d he say?

      The enemy of my enemy is my enemy.

      He said the enemy of his enemy is his enemy.


      FalKirk, you got me all Dick Tracy’d up in here.

  • Z Kariv

    Horace, you predictions, it seems, is based on a full calander year. Did you adjusted it to a seasonal calander? If not, maybe you can give us your thoughts?

  • I will take Horace´s word on the quarter numbers with EPS at $12.  The question is, how will people take the news?  What will the perception be on future growth?  I ask this because AAPL  has a current P/E (trailing) of 17.27 (Google finance) and the new results would take the current price of the stock ($607) to under 15 P/E again.  This is important because P/E at 20 would move the stock to $815.

    See the new P/E to price relationship after the results announcement (if Horace is right):
    15 – $611.02
    16 – $651.75
    17 – $692.49
    18 – $733.22
    19 – $773.96
    20 – $814.69

    AAPL is getting a lot of attention lately and results like Horace’s estimates could charge Apple to new horizons.  Will the P/E stay at 17 levels?  will it grow?  will it go back to under 15 again? These results are being announced in about 30 days.  What will it be?

  • AS always, thank you for your hard work. I agree with your EPS

  • Nobody know what the margins really are for the iPad. Do we know what price they really paid for each part, certainly much less than their competitors will. Plus, we don’t know if they pickup efficiencies elsewhere in the supply chain.

  • Ronin48

    Apple FYQ2 Guidance:
    ““We are very happy to have generated over $17.5 billion in cash flow from operations during the December quarter,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the second fiscal quarter of 2012, which will span 13 weeks, we expect revenue of about $32.5 billion and we expect diluted earnings per share of about $8.50.”   (From Jan 2012 earnings call)
    Apple guidance for FYQ2Rev. $32.5 billion
    EPS  $8.5

    Apple typically beats their own guidance by 12-18% so using 18%:

    Rev. $38.35 billion
    EPS:  $10.05

    Wall St. Analyst Consensus (as of today): 

    Rev.  $35.74 billion avg. (41.09 high)
    EPS:  $9.7 avg. ($11.8 high)

    Likely numbers (from Asymco which has a great track record):

    Rev. $42.7 billion
    EPS  $12.0

    Bottom line: 

    Expect another BLOWOUT for the FYQ2 earnings report if Horace hits his usual accuracy. If P/E just remains where it is AAPL will shoot to $700 after earnings.  Guidance will be huge for FYQ3 thanks to the new iPad.

    • jdsweet

      If you’re alluding to Andy Zaky’s excellent article (, his point was that $AAPL typically beats their *revenue* guidance by 12-18%.

      He said the EPS guidance they gave was utter and complete ca-ca, as it’s not an actual “prediction” like the revenue number, but the result spit out by a spreadsheet based on a lot of other (too-conservative) assumptions.

      So the $38.35B rev # may be a reasonable starting point, but the $10.05 would likely be higher.

      • Ronin48

        Yes.  I was just using the 12-18% as a starting point even though it had been mostly applicable to revenue and not EPS.  Zaky cites as a new discovery – even though it’s quite well-known – the fact that Apple’s EPS guidance has to be internally consistent with the other line item guidance numbers.

        But after last quarter, the 12-18% may not even work for revenue – not that he ever applied any statistical rigor to the claim that a 12-18% revenue beat was consistent over time and statistically significant.

        Again, the 12-18% was merely a starting point given the fact that Apple’s guidance is known to be conservative. 

        Zaky’s dismissal of others’ estimates may be valid in some cases but the fact is that his method no longer holds up either – despite his long-winded and somewhat simplistic explanation of it.

        And I guess the overall point is that Horace’s more rigorous approach and his numbers appear to point to another big blowout again making the 12-18% “typical” revenue beat incorrect on the low side once again and no longer even a valid starting point much less and accurate estimate.

  • JohnDoey

    I’m not sure which is most amazing: that there is a $499 computer with a 280 ppi screen or that Apple computers now start at $399 new. But I think both of those combined is what is going to drive iPad sales growth. People will buy iPads who were going to buy one anyway, but people who weren’t planning to buy one a month ago are going to get pulled in either for the screen of 3 or the cheaper price point of 2.

    And they not only have this market to themselves this year, but there won’t be another mobile PC that is even equivalent for many years, let alone better. We’re in that same place that iPod was at when Microsoft announced they would do Zune but had not shipped yet. The generic alternatives failed, the disintegrated alternatives failed, and so we got Zune and soon will get WOA.

  • Alberto

    I trust a lot your cash correlation, how do you see that? giving the lastest developments

    • You should not trust it. It should not be happening and the fact that it is happening implies an absurdity.

      • Alberto

        Thanks a lot from Spain, you have a lot of followers around! 🙂

  • echotoall

    The gm of 44.7% seems too generous this quarter. The increased cost of the new iPad should be seen this quarter. GM expansion should be reflected next quarter. Similar to what we saw with the 4s launch.

  • Sacto_Joe

    The minor detail that everyone (except Horace) is leaving out of their calculations is the move of the iPhone upgrade by three months. Everything now gets bumped by three months. Q2 becomes the quarter that Q1 was last year. Apple has brought production up a notch, and plenty of people are still buying. The iPhone will peg the needle on earnings this quarter. The successful iPad launch will help juice iPhone sales as well.

  • Tshubaily

    IPhone rollout to new countries can be seen as a proxy for supply availability…

    If apple rolls out to new countries soon after launch of a new product then it means one of two things: either they bet too big or there is low demand.

    If they don’t tackle new geographies quickly, then it means there is demand they still can’t meet in current iPhone selling markets.

    Given there was massive demand for the 4s and that they rolled out to new countries well into the current quarter, I think iPhone sales will be larger than last quarter… Above 40M

  • Pingback: Can the iPad sustain its incredible yearly growth? « Mac City()

  • Intermedion

    Let’s not forget the peripherals for all those iPads: they have an obscenely high margin. What do you think is the cost of a $45 polyurethane smart cover to Apple? Let’s say $5 and assume only 50% of iPad buyers buy one. Do the math, pick your figure…  20-30 million smart covers … $35-$40 profit per unit…

  • Pingback: Can the iPad sustain its incredible yearly growth? | The iDoctor()

  • Pingback: likeithateitshareit » Can the iPad sustain its incredible yearly growth?()

  • Pingback: Can the iPad sustain its incredible yearly growth? | WebDev101 Technology Blogs()

  • Pingback: Can the iPad sustain its incredible yearly growth? | Brian's Blog Site()

  • liv88

    Does the announced 3 million iPads sold over opening weekend include the 8 day per-order period?  Thank you.

  • gbonzo

    You say that the third quarter was transitional and that the last quarter was “in many ways a return to normality”. This is somewhat misleading. They were both abnormal quarters because of the changed iPhone product cycle. Their year ago comparison quarters are not fully comparable. So, last quarter shows too high growth because it was a new product launch quarter whereas its year ago comparison quarter was not.

    Also, when I look at Google Insights data, I see iPhone demand growth slowing and Android platform demand still growing nicely. I do not know how badly the iPhone was supply constrained last year, so it is not easy to estimate the unit growth of this year. However, what can be said is that the supply constrained situation of iPhone is ending and turning into somewhat slower demand driven growth. If we assume that iPhone was badly supply constrained last year, then this year can still show good growth numbers because supply increases a lot versus last year.

    • The performance of the iPhone is no mystery. The historic performance is shown here: (first line in table) Apple’s Fourth quarter 2011 Growth Scorecard | asymco

      When I said there is a return to normality you can take it to mean a return to the colors seen in the past. I don’t know understand how that is misleading.

      • gbonzo

        Should we assume that the iPhone 4 to 4S transition moved some sales from the third quarter to the fourth? If so, wouldn’t it be correct to classify both the third quarter and the fourth quarter as “transitional” in some sense of the word?

        Because the numbers are not what interest me most, I want to look behind the numbers a bit. I am interested to know what is the “true” annual growth rate of iPhone at the moment. By this I mean to try to exclude the effects of certain one-time events. Launch of a new model is certainly not a one-time event, but the timing of the launch can be such. If (and that is a real if) it is the case that the new model launch moved some sales from the third to the fourth quarter, then it is not satisfactory for me to think that the low growth numbers of Q3 would be ignored and that the very high growth numbers (133%) of Q4 would be lifted to the status of “normality”.

        So, I calculated the iPhone sell-through using the channel inventory numbers that Apple provides us. Then I used two corrective numbers: one to correct the effect of iPhone 3G to 4 transition and one to correct the effect of iPhone 4 to 4S transition. Only a little bit of fine-tuning of these two logical corrections and the results amazed me completely. The last four quarters show exactly 94% demand growth for iPhone. Exactly. Mathematically precise exponential growth that shows no signs of slowing. I believe that this is the historical growth rate that I was searching for.

        If we estimate the current quarter channel inventory to grow to 7.5 million and the 94% demand growth to continue, Apple would sell 33 million iPhones this quarter. However, I see demand slowing, so I would estimate only 30 million. This brings the demand growth down to 77% from the historical 94%.

        There are now rumors that Apple is already starting the production of a larger screened new iPhone. The unveiling would be in June. This makes a lot of sense in many ways. iPhone 4S demand starts to lack thrust. (Only 77% in my books. That is huge growth for christ’s sake! Much larger than market growth.) A larger, better and more expensive screen will enable Apple to continue to charge $600 prices.

        Some commentators seem to believe that Apple can insert cheaper and cheaper internals each year in the future while still charging $600. Like the same screen year after year. In my opinion, something does not match here. In order to keep the ASP, the internals have to keep their bill of materials too, like they have so far. Large screen? Yes, Apple please, go all the way!

      • Sharon Sharalike

        Not everyone would consider a larger screen to be an improvement. Many people think the current size is ideal, as it fits comfortably in pockets and the user’s thumb can reach the entire screen.

        Also a larger screen with the same pixel count would lose “retina” status, so a density increase would have to happen as well. Unfortunately, nothing less than doubling will do. Otherwise applications will not properly “fit,” and scaling would not suffice.

        A higher pixel count means significantly reduced battery life and more heat. It also requires a more powerful graphics unit, so not all the extra size can go towards extra battery capacity.

        The “retina” iPad has a *lot* more battery in it than the iPad 2. That’s not practical with the phone.

      • gbonzo

        There was a small error in my spreadsheet formulas, so I correct this one paragraph:

        If we estimate the current quarter channel inventory to grow to 7.5 million and the 94% demand growth to continue, Apple would sell 34.5 million iPhones this quarter. However, I see demand slowing, so I would estimate only 32 million. This brings the demand growth down to 79% from the historical 94%.

      • The growth on the fourth quarter of 133% is not extraordinary. As the growth table shows, there were nine quarters of growth above 100% and six quarters below 100%. There were only two quarters where the growth was below 75%. One was the third quarter last year and the other was the y/y after a 800% growth rate (i.e. comparable was 3GS launch). If you consider Q1 to be a “soft” quarter in terms of demand, you can look back to q109 at 123% unit/197% revenues, Q110 at 131%/124% and Q111 at 113%/126%. Q1 has been sequentially higher than Q4 for two years running. Your estimate of 30 million would imply 60% unit growth. That would be extraordinary.

      • gbonzo

        I discovered a “new model launch independent” (or “true”) annual growth rate of 94% from history (running 4 straight quarters now) and I see relatively weak current demand from Google Insights. Therefore I estimate 32 million and you estimate 37 million. We’ll see which number is closer.

        In my calculations, 37 million would mean that the “true” growth is actually accelerating.

      • Does Google Insights reflect demand in China where Baidu holds the majority of search market share?

      • gbonzo

        Good point. I had not thought of that. China is probably underrepresented in Google Insights, but I still believe it measures overall global interest rather well. As an indicator, it has worked in the past for Apple and Nokia.

  • Pingback: Making a Last Minute Dash for Idiot of the Week — The Brooks Review()

  • markrogo

    So just how undervalued is Apple? Using Horace’s guesstimated EPS growth for the coming quarter, the >averagelousy< comps and is not forecast to grow faster than Apple next year.

    So-called Wall Street experts are apoplectic about Apple's recent "rally" and how it has "gotten ahead of itself", but the latest move has only served to restore Apple's position as ridiculously undervalued instead of moving it into the single-digit P/E category. For example, Microsoft, which has a past-5-years EPS growth of 14%, no expectation of acceleration, etc. trades at about 11x earnings.

    Apple is at 66% over the past 5 years and nearly twice MSFT's expectation for the next 5 years and only trades at 17x currently. 

    The "Apple $1000" case doesn't require any dramatic series of events. Analysts are estimating $44/share and have been dead wrong every year for the past many. If the final number ends up at $50 per share after fiscal Q4 (calendar Q3), with a brand new design LTE iPhone queued up for calendar Q4, it would probably not even take an expansion of P/E to 20 to achieve this. If the stock actually traded at a premium multiple, it would already be a 25-30 P/E stock and north of $1000/share.

  • Camden1

    Horace, Your studies have shown a strong direct coorelation between Apple’s capex and sales when time shifted two quarters. If I recall, that suggests this coming report may be less of a blowout and next quarter should be a huge blowout in terms of revenue and earnings. Yet with $12 you estimate what most would consider another monster, not the 116% of last quarter, but a huge beat of expectation none the less. Did I miss something in your recent talk about the importance of capex or am I simply reading too much into it?

    • amit

      I think on the podcast, he said the two quarter shift is becoming a one quarter shift

    • The capex study shows a rough correlation between spending and output. However, there are significant anomalous periods when they are not coupled. The strongest relationship is when measuring yearly. Fourth quarter was indeed very low in capex but I’m betting that there were some unique circumstances during that quarter which caused some delay in spending to later quarters in the fiscal year.

      • gbonzo

        It is possible that Apple plans to do three major ramp-ups this fiscal year: iPhone 4S, third gen iPad and sixth gen iPhone. I mean that IF they go back to the old iPhone release cycle. If that is the case, it would somewhat complicate the full year capex budgeting as an indicator, right?

  • Ozzie903

    I noticed this sentence in the article, which deserves emphasis:  “As the product remains supply constrained, the most important indicator of performance is production throughput.”

    This is exactly right.  Apple sells virtually everything it produces. Thus Apple’s sales revenue equals average selling price per unit (ASP) multiplied by the number of units Apple can produce with its factories and related facilities.  When supply is constrained, it is not possible to accurately forecast sales revenues using demand-side information, since not all demand is being fulfilled. Quantity sold is determined by the supply side. 

    Thus, the launch/early sales data referred to in this article is *not* useful for forecasting Apple’s annual (or even quarterly) sales revenues.  There is little or no supply constraint during the launch, and demand calls the tune; but over longer period the supply constraint is (at least to date) is binding and demand is less relevant. 

    In other words, it doesn’t matter whether Apple sold 3 million iPad 3’s in the launch week or 4 million  … at the end of the year, iPad sales will amount to (say) 65 million units because that’s all the company can produce.  That’s all the displays Apple ordered from Samsung, Sharp and LG, so iPad sales won’t equal 80 million regardless of the strength of demand. 

    Knowing that Apple is supply-constrained should cause Horace and other experts to base their Apple sales forecasts — at least in the foreseeable future — on supply-side variables such as: displays ordered from vendors, the number of Foxconn employees available for manufacturing Apple products, etc..  

    This article doesn’t do that, but instead relies on demand-side data. So the forecast is unlikely to contribute much to the conversation.

  • Pingback: Apple Announces Q2 2012 Conference Call For April 24 | AVORAH - Geek Lifestyle Reviews And Views - TECH, GADGETS, STYLE.()

  • Pingback: Analysts predict another record-breaking quarter for Apple « « Fix-Singh - Gadget RepairsFix-Singh – Gadget Repairs()

  • Chris

    Horace, do you have any opinion on VZW’s recent IPhone volumes
    announcement and what it implies for Apple’s upcoming quarter? There has
    been a lot of weakness seemingly tied to week IPhone sentiment. It
    seems silly given the growth is coming from Int’l markets.  

    • Growth at Verizon was 45% y/y but last year’s Q1 was the first when the iPhone was available. Q1 is usually strong in China because of Chinese New Year and we’ve seen sequential growth into the first quarter for the iPhone in the last two years. I don’t see any reason to expect a change this year.

  • Horace, your revenue estimate of $42.7B is 31% above APPL’s guidance of $32.5B.  Last quarter’s 25% revenue blow-out was a record 25%.  I know you do a bottoms-up estimate, but do you go back and compare your estimate to historical guidance deviations?

    You are not alone.  PEDs post shows most indies way above historical comparisons to AAPL’s guidance.  This happened Q4 2011 when indies (including myself) were somewhere in excess of 70% above AAPL’s EPS guidance.  This should have been a warning flag.

    Appreciate any comments on this.


  • Pretty much nailed it, Horace.  Kudos.

  • Pingback: What did I get right and wrong about the first quarter? | asymco()

  • Pingback: Interview with Bruno Ferrari of Exame magazine Brazil | asymco()