Estimates for Apple's third fiscal 2012 quarter

As the chart below shows, the last quarter (first calendar 2012, second fiscal 2012) was robust with 94% earnings growth and 59% net sales growth. Subject to the usual superlatives, the performance was, again, unexpected by many.

Much of that surprise was due to the underestimation of iPhone sales in China during what is a holiday quarter in that nation. Growth this quarter will be more difficult to estimate. The iPhone is still the most important component but the iPad is becoming increasingly decisive in overall performance. In fact, I’m projecting that the iPad will have the equivalent of 73% of the iPhone revenues this quarter.

In this quarter the iPhone is reaching a late stage in its launch cycle but it continues to reach more points of purchase through distribution agreements and it also has a “portfolio” in terms of multiple price points and models available.

The iPad was supply constrained last quarter and may be in balance this quarter. Management has very clearly and repeatedly signaled that the iPad will have a very strong quarter.

So with these clues, here are my estimates for the quarter (with y/y growth in parentheses):

  • iPhone units: 28.5 million (40%)
  • Macs: 4.5 million (15%)
  • iPads: 24 million (160%)
  • iPods: 6 million (-20%)
  • Music (incl. app) rev. growth: 35%
  • Peripherals rev. growth: 20%
  • Software rev. growth: 15%
  • Total revenues: $41.9 billion (46%)
  • GM: 44.8%
  • EPS: $11.54 (48%)

This earnings value would imply a trailing twelve months’ EPS of about $44.8. At the current price of $571/share the P/E would be 12.7[1]. Cash and equivalents will probably increase to $118 billion.

  1. Apple’s P/E also dropped to 12.7 around Christmas 2008. I did a search for some headlines to recall that time and came across one that seems appropriate: “Unrest Caused By Bad Economy May Require [domestic] Military Action, Says US Report”.
  • Assuming you have this number in your model, how big will the whole smartphone industry be (in shipments) during the quarter?

  • Ilari Scheinin

    Here are my estimates. I’m also expecting a shift of weight from iPhone to iPad, but to a slightly smaller degree. Which also translates into a slightly higher GM estimate:

    Mac refreshes are (supposedly) coming quite late in the quarter possibly putting some pressure there, and currency rates might also have an adverse effect on GM.

  • I think the iPhone-figure is a bit low. Yes, we are at the end of a product-cycle, but we were at the end a year ago as well. My prediction: 35 million iPhones in third fiscal quarter.

    • nuttmedia

      There seems to be much more chatter and “intel” about the upcoming iPhone than in past updates that I would not be surprised to see demand pushed into the launch quarter. Even my dad, who is in perpetual contention for luddite-of-the-year, is aware of rumors of a larger iPhone with LTE.

      • Well, there was a lot of chatter last year as well, and people were anxiously waiting for the new phone, and were surprised when the release was pushed back to october. This year people are expecting new iPhone at around october, so there are still plenty of people buying the phone, since the release is months away. Last year this time they were expecting a new phone in the immediate near future.

      • Gregg Thurman Thurman

        I think Apple is going to announce the new iPhone soon after WWDC, with a launch in late July. This will give Apple the time to ramp production BEFORE the December quarter.

    • Henry

      Janne, how would 35 be possible? There isn’t the channel sales bump from last quarter (~4), and sales everywhere, with the possible exception of China (though perhaps even there), may be lower than last quarter. So even 28.5 may be high.

      • 35 would basically be repeat of the previous quarter, and it seems to be how sales of iPhones have went of for the last few year. Release of new model is still months away, so people are still buying the old version.

        But, we will know for sure when Apple announces their results.

      • Henry

        Since Apple ended the Dec quarter significantly below target inventory and the March quarter at target inventory, one should think of December quarter iPhone sales as effectively being 41M and March quarter sales as 31M. Perhaps channel sales wasn’t the right way to put it in my previous response, but the point is 4M Dec quarter iPhone sales essentially appeared in March due to factors related to production/accounting.

        So your effectively projecting a large sequential increase in iPhone sales at the same time that word is spreading about the release of the next-gen iphone (see nuttmedia’s comment above).

        I suppose the two non-subsidized Sprint deals (Virgin and Cricket) may slightly help iPhone sales this quarter, since those channel sales may show up in the last week of June….

      • To add: third quarter year ago Apple sold about ~20 million million iPhones, representing 142% increase from previous year. 35 million now would be an increase of 75%. Perfecty doable, IMO.

  • KirkBurgess

    Great looking estimates as always Horace. I think the biggest unknown n your list is GM% which could be higher (those aging Macs must be getting rather cheap to produce).

    Interesting to see apples “stool” going from one ridiculous tall leg and 3 smaller legs to 2 of the legs approaching a similar length (for this quarter at least). Let’s just roll up all other apple products into one leg and call it a moderately uneven tripod.

  • aharon

    Im predicting almost identical revenues and GM (although a difente Iphone/Ipad ratio)

    However my EPS est. is 12.4 (tax 15% , Opex/Rev 8.2)

    It seems to me you are predicting an HUGE jump in Opex that will bring it to Q32010 levels.

    • nuttmedia

      If I’m not mistaken, that’s based on company guidance

      • aharon

        That’s not accurate. The guidance is 3,300 which is usually 3% or 4% less than the real number. That’s is why I’m predicting $3,440

        Horace seem to be predicting $4,500

      • my apologies, you are correct. interestingly, his estimates get to a NI DOLLAR figure in the $11.54b neighborhood with a marginally higher opex than your number… so perhaps it’s labeling?

        just curious, why so light on your effective tax rate?

  • RJ

    The new iPad has yet to sell officially in China. Does this concern you / haircutted in your estimates?

    • r.d

      new ipad went on Sale in Hong Kong on 2012-03-16.
      new ipad went of Sale in Macau on 2012-03-23.

      new iPad also is not available in Russian and Indonesia.

    • I think they planned for a staggered launch world-wide. I think management had a lot of channel to fill and it’s still getting broader all the time.

  • ronin48

    Here are Apple’s CQ2 guidance/Horace’s estimates/current street consensus estimates/percentage beat over guidance for Horace’s numbers.

    Rev: $34bil/$41.9bil/$37.4bil/23%
    EPS: $8.68/$11.54/$10.31/33%
    GM: 41.5%/44.8%/N/A/8%

    Great work as usual Horace. Thanks a lot!

  • Henry

    Thanks for your hard work.

    Regarding your Macs estimate, would you mind providing some thoughts about how many of the new Macs you expect for immediate channel supply (current quarter)? Also what about the margins on Macs? The leaked prices on the new MBPs are quite high (entry price of around $2500). The MBA prices may have also increased a bit (at least in Australian dollars).

    The estimates for the other categories seem very reasonable.

    • I did not expect a lot of new Macs in the channel given essentially two weeks in the quarter in which to deliver them and the potential draw-down of inventory leading into launch. However, I’m prepared to be surprised. The ramps Apple is able to achieve these days are astonishing.

      • Jason

        Any thought on Apple’s immediate availability of their new lineup altering your projections?

      • It’s a mixed bag. There will be more Mac growth but the new model is already sold out implying limited supply in the quarter.
        Overall the Mac is small enough that it won’t move the bottom line much.

      • Henry

        I have no idea how many new MBPs could have be produced for June quarter availability. But let’s be a little crazy and say sales are about 1 million. The Intel processors will have been around, and Apple suppliers have been producing retina glass, for some time. A lot of the supply may have been sent to Apple stores and other retail outlets (like my university store, which is receiving a shipment next week). So perhaps the limited supply at isn’t totally representative of June quarter sales.

        Also suppose average selling price is around $2400 and margins are around 33%. That would add 75 cents or more to EPS.

        More realistically, maybe 400,000 new Macs sell in June, and an additional 1 million MBAs and MBPs sell in June compared to a late June Mac release (which might have been expected). That still increases EPS by 75 cents or more.

        I don’t know much about Mac production and Mac margins (which maybe is obvious), but I’m wondering if June quarter Mac sales can be so easily dismissed.

  • Adam Thompson

    iPhone, iPad, gross margin, and EPS don’t sync very well with Apple’s guidance in my opinion. GM guidance is down 50 basis points sequentially. 45%+ is an absolute lock and guidance suggests 46%+ is a lock too. I suspect your GM% is so “low” because you have iPad so high and iPhone so low. Sure, Apple said iPad will be up sequentially, but to think it will roughly double sequentially seems way outside the realm of possibility. I’m at 20M iPad with iPhone at just over 30M.

    EPS wil also be roughly $13.00. The last two quarters’ EPS guidance beat was 49% and 45%. Your EPS estimate implies an EPS guidance beat of approximately 33%. Is it possible? I guess so, but it sure isn’t even close to in line with Apple’s recent beats and, historically speaking, Apple’s EPS beats typically are similar every quarter of each fiscal year.

    I suspect this could be Horace’s worst quarter yet in estimating AAPL. No knock on Horace’s work, though, as he is super smart so it’s always best to consider his estimates. I just don’t see how the estimates match Apple’s own guidance.

    • Gregg Thurman Thurman

      Ignoring how Horace got there, I’m in agreement with you concerning EPS. I’m at $12.75, and had difficulty keeping it that low.

  • Jimmy

    It looks like the iPad is really catching up with the iPhone in terms of volumes – assuming the growth rates listed here continue, the iPad will pass the iPhone in less than 6 months. Is anyone actually expecting this to happen or do we anticipate the growth rates to change dramitically?

  • Igor

    I have the same concerns shared by some in the comments. I think that the iPad estimates are too high, considering that the supply/demand balance was not reached early in the quarter and it’s still not selling in China. On the other hand, I think that the iPhone will exceed 30 mil. Yes, it’s relatively late in the cycle, but it’s not that late. In many countries, including China, they probably won’t see the next iPhone for another 7 months from now, and in April the 4S was only 3 months old for them. Last year Q3 was very strong in terms of the iPhone shipments, even though it was almost 1 year old. Although, a lot of it had to do with the fact that they added many new carriers during the quarter. Is there any data on how many have been added so far this quarter? Also, last year during the quarter it was still debated whether Apple will delay the new iPhone. Some still hoped it would be announced during the WWDC, whereas nobody expects it to happen this year. Q4 will definitely be light in terms of the iPhone shipments, but I don’t think it will be as pronounced this quarter.

  • Igor

    Another thing I wanted to add. Apple’s P/E already dropped to around 12.7 following the Q1 release in January. It stayed there for only a few days, before beginning its epic rally that took the stock above 600 a couple of months later.

  • Rob Scott

    These numbers are on the low side.

    This is what I expect:

    38 million – iPhone
    18 million – iPad
    06 million – iPod and
    05 million – Macs

    $46 Billion revenue and an
    $13 EPS

    Bullish? Yes. Possible given past trends, absolutely.
    There is no historic nor anecdotal data that support such depressed June quarter numbers for the iPhone.
    The only number I’m conscious about its Macs, the delayed lauch could negatively affect the number.

    • Adam Thompson

      Except management told us iPhone will be down sequentially.

  • westech


    Wow! But how did you get to 24 million iPads?

    • I got to 24 million by assuming 160% growth y/y. It hunk that’s sustainable.

      • mieswall

        Somewhere it was mentioned that iPad supply capacity was about 20m/Q. It seems you estimate a larger production number?

      • Production can vary.

  • r.d

    8.6 million iphones in supply channel already from previous quarter.
    26 million would be the guess if sales rate is the same.

    ipad 21-22 million is my guess. you ipad numbers
    in the past have been too optimistic.

    • Henry

      Agreed. iphone sales in the US and Europe may be down sequentially, plus the supply channel factor. My sense is that China Telecom is the only hope (since sales only began in March). So much lower iPhone sales seems likely.

      ipad is tricky, but it should fall between 20 and 25, perhaps at the lower end. Depends on channel sales, since Apple ended very significantly in deficit last quarter.

      I haven’t thought carefully about this, so I’m interested in hearing about other important factors.

    • Igor

      Last year they ended Q2 with 5.2 million in channel inventory, which as they said, was within their target of 4 to 6 weeks. They ended up selling 20.3 million iPhones in Q3. That’s about 20% more than the rate at the lower end of their suggested target. If the current sell-in rate is 8.6 mil in 4 weeks, that’s almost exactly 28 million phones for the quarter. However, I wouldn’t be shocked if they beat it by the same margin as last year. The 28.5 mil estimate implies that the sales will decline 19% sequentially. We didn’t see that even in Q4 2011, when the decline was only 15%, despite the fact that the iPhone 4 was over a year old at the time and the imminent launch of the 4S. I’m surprised at how many are talking about the 4S being “late in the cycle”. It feels as if we were in Q4 already with the iPhone 5 just around the corner. That’s just not the case! In fact, let me say that if we see a number below 30, it will be one of the first signs that the iPhone growth rate is slowing. So far we haven’t seen any. Sure, it has to slow someday, just a question of when.

      • Gregg Thurman

        Ending inventory for product Apple provides guidance is actually 3 weeks or less. In typical Apple fashion they guide inventory to sales conservatively.

      • r.d

        last may Apple introduced the White iphone.

      • Igor

        That’s true, so why would we see a substantially larger decline from Q2 to Q3 this year, than from Q3 to Q4 last year? If Q3 2011 was such a high base, why would the number decline only by 15% in Q4, with no apparent catalysts during the quarter. 26 million this quarter would be, for lack of a better word, a disaster.

  • vladiim

    Given your estimates, do you think their PE will move? I really enjoyed your discussion of Apple v Amazon PE on the last Critical Path… would be good to hear you hypothesis market perception of Apple’s future worth at some point.

    • The market does not price according to the P/E. It prices according to sentiment and perception. Apple is still not seen as a dependable company. It’s seen as a lucky company. I don’t know when that might change.

      • vladiim

        Is lucky a term you’re hearing in analyst circles? Given market anticipation for any of their new products and consistent disruption in various markets over many years now “lucky” seems like an odd evaluation.

      • Professional analysts avoid the use of phrases that contain meaning. Lucky is my interpretation of perception.

      • Professional analysts avoid the use of phrases that contain meaning. Lucky is my interpretation of perception.

      • Professional analysts avoid the use of phrases that contain meaning. Lucky is my interpretation of perception.

      • Professional analysts avoid the use of phrases that contain meaning. Lucky is my interpretation of perception.

      • Professional analysts avoid the use of phrases that contain meaning. Lucky is my interpretation of perception.

      • Professional analysts avoid the use of phrases that contain meaning. Lucky is my interpretation of perception.

      • Professional analysts avoid the use of phrases that contain meaning. Lucky is my interpretation of perception.

      • Professional analysts avoid the use of phrases that contain meaning. Lucky is my interpretation of perception.

      • Professional analysts avoid the use of phrases that contain meaning. Lucky is my interpretation of perception.

      • Professional analysts avoid the use of phrases that contain meaning. Lucky is my interpretation of perception.

      • Professional analysts avoid the use of phrases that contain meaning. Lucky is my interpretation of perception.

      • Professional analysts avoid the use of phrases that contain meaning. Lucky is my interpretation of perception.

      • Professional analysts avoid the use of phrases that contain meaning. Lucky is my interpretation of perception.

      • Professional analysts avoid the use of phrases that contain meaning. Lucky is my interpretation of perception.

      • Professional analysts avoid the use of phrases that contain meaning. Lucky is my interpretation of perception.

      • Professional analysts avoid the use of phrases that contain meaning. Lucky is my interpretation of perception.

      • Sacto_Joe

        Perception is a strange critter. If what you are saying is true, then the perception is at odds with reality. That implies that it’s also amenable to change. In fact, I believe that the process of change may be already underway. I thoroughly didn’t expect to see AAPL hit a P/E of 18.3 just before their Q1 earnings, and yet it happened. One way to look at that is as an expression of a change in perception.

  • Noam B.

    When is the next earnings date? is it already scheduled or is it still unknown?

    • Jeff G

      I think I saw July 17

      • Noam B.

        Someplaces show July 17, others list July 15. I don’t know how reliable these dates are. I couldn’t find a date on apple investors relations site.
        The July calls are set to expire on the 20th, knowing if the earnings call is before or after that is critical for deciding my position.
        Could anyone help with a definite answer? Thanks in advance.

  • Prazan

    If Apple produces new iPads at a daily run rate similar to that of the iPad 2 in FQ1 2012 (Christmas quarter, so no sure thing), and iPad 2 equals 1/3 of sales, then it’s easy to see how Apple gets to 23-24 million units. I’m not sure of the accuracy of the data set, but Computer Intelligence Research Partners reports 59% of iPads are new iPads, and 41% iPad 2s.

  • Regarding the stock price – Apple will eventually convince the market that it can pay a sustainable dividend. I believe the long-term sustainable earnings per share will be at least $50. At some point the market will believe this too.
    Eventually the cash pile will reach a level which will force the Apple board to pay out virtually all the profit in dividends. I think investors will be happy with a 4% dividend. That would put the share price at $1250.
    Most investors would even be happy with 3% since Apple’s cash would make a reduction in dividends very unlikely in the future.
    Smart investors will want to anticipate this situation and the result will be to pump the price up, producing momentum and consequently a bubble in the price. That’s my take anyway.

  • Jony

    What does Apple have its guidance as?

    • Apple’s guidance for the third quarter of fiscal 2012: revenue of $34 billion and earnings per diluted share of $8.68

  • A 24 million iPad quarter would be insane. I believe 15.43 million is their record right now (1st fiscal quarter, 2012)

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  • artlaz

    Anyone basing this year’s Q3 over Q2 iPhone sales on last years is overlooking a clear fact – last year iPhone 4 was supply constrained into July, so they sold all the iPhones they could make in Q3 last year, this year that is not the case. I think 28.5 million iPhone units this Q3 is probably a good number. I’m blown away by the 24 million iPad units projection – but hope it is correct.

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  • John

    The new iPad will not make it to China before next week and hasn’t been available in this past quarter. Are you still forecasting 24 million iPads for the third quarter, Horace?

    If Apple can pull that off, even without Mainland China availability, it sure is crazy.

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  • Chris


    Have your thoughts changed at all regarding the quarter given the recent reports of Chinese and US carriers. It seems generally that the analyst community has been revising estimates downward, particularly on the iPhone.

    • I would be inclined to increase my iPhone estimate. I’m won’t change it, but I’m inclined to go to 50% growth.

      • Jony

        AT&T just announced they activarted 3.7 miillion iphones, with 22 percent new to AT&T. Verizon said 2.7 million. So we have a total of 6.4 million. Can they make up for the other 21.6 million elsewhere?

      • actualbanker

        Wow. I can’t wait for tonight. Can we get an extended Critical Path this week?

      • Jony

        Damn Horace, Katy Huberty was the closest analyst…can you imagine that lol….hot damn shes never right.

      • actualbanker

        We look forward to the analysis of a miss, as much as we would a beat. Can’t wait for your post-mortem.
        And I’m curious how next quarter will pan out since the 6th iPhone might not come till October…

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