Apple Benefits from a Surge in Earnings

The iPhone maker seems to be pulling off a rare feat in almost any industry, much less the competitive and cutthroat world of consumer electronics; commanding high prices and yet still expanding its market share. Last fall, Apple Inc. introduced larger-display iPhones, which enabled the company to sell about 61.2 million phones in the three months that ended on March 28th. As compared to a year before, this is a 40% increase. Majority of these sales occurred in emerging markets, which also included a 72% increase in the number of devices sold in China. During the most recent quarter, the average selling price of an iPhone was about $659, which, in contrast with a year before, is higher by $60.

According to the American smartphone giant, its latest devices have proven quite effective in luring customers away from competitors. Tim Cook, the Chief Executive Officer of the firm, said that as opposed to previous iPhone cycles, there has been an increase in the number of switchers this time around. In the six months since the new devices were introduced by the company, it has seen an increase in revenue by about $29 billion as compared to a year earlier. This is equal to the revenue made by Nike Inc. in 2014.

The company further said that its gross margin, which is closely watched as it is a measure of profitability that reflects the percentage of revenue remaining after deduction of manufacturing costs, was about 40.8%. This meant that it was higher than even the firm’s own estimates, which had been about 38.5% to 39.5%. The smartphone maker also gave its dividends an 11% boost and its share-repurchase program also saw an increase by $50 billion, making it about $140 billion. All in all, the company said that about $200 billion would be returned to shareholders by March 2017 through dividends and share buybacks.

Previously, the company had made a promise of returning $130 billion by March 2015, a vow it was able to keep. The cash pile of the device maker continues to grow, thanks to the strong earnings, even though it is still aggressively paying dividends and repurchasing shares. At the end of March, Apple’s cash pile was about $193.5 billion whereas it had been about $178 billion at the end of December. Since it initiated the capital-return program back in 2012, the company said that about $112 billion had been returned to shareholders. During this time, there had been a $76 billion increase in its cash hoard.

Most of the revenue growth of the company is occurring in China. The greater China market, including Taiwan and Hong Kong, passed Europe to become the second-largest region of the company. During the quarter, there was a 71% increase in revenue. The increase in revenue is occurring despite the fact that the dollar is getting stronger, which reduced revenue by 6%. However, a worrying point for the company is the slump in the sales of the iPad in the face of larger-screen smartphones.