Apple puts worries to rest

Apple's latest earnings report bucked the trend in personal computers and quelled investor concerns about China growth.

Revenue for 2015 rose 28% to $234 billion.

“To put that into some context, our growth in one year was greater than the full year revenue of almost 90% of the companies in the Fortune 500,” said CEO Tim Cook. Well, there you have it.

The company’s dominance in not only mobile, but also content and services, defies normal stock valuation.

Over the last year, the company has sold more than 231 million iPhones, setting new unit records. In the latest quarter, iPhone sales rose 22% to 48 million, beating expectations. Cook noted the highest rate of switches from Android to iPhone.

And the company isn’t sacrificing gross margin, which came in at 39.9%, up versus expectations with a solid outlook for next quarter as well. iPhone average selling price was $670, a $67 increase, and costs were lower.

Concerns about China have been front and center heading into the current quarter. But in emerging markets, about one-third of company sales, the tech giant generated over $79 billion in revenue and grew about 65%.

In the latest quarter, revenue in greater China—where the company just opened its 25th store—nearly doubled, up 99%, year-over-year. iPhone sales were up 120% in Mainland China.

“Frankly, if I were to shut off my Web and shut off the TV and just look how many customers are coming in our stores regardless to whether they're buying, how many people are coming online, and in addition looking at our sales trend, I wouldn't know if there was any economic issue at all in China,” said Cook.

 

Worried about the death of the PC?

In the last year, the company sold 21 million Macs, which continues “to defy the negative trend and the global personal computer market, which IDC estimates contracted by 11%.” The 5.7 million Macs sold last quarter marked an all-time quarterly record and solid 3% year-over-year growth.

Behind in enterprise?

Cook highlighted that the enterprise market accounted for $25 billion in annual Apple revenue in the last year, now over 10% of sales and up 40% over the prior year.

Crowded payment space?

Apple Pay is seeing double digit growth in transaction month after month, aided by merchant rewards programs and now a new partnership with American Express.

The Other Products segment—which includes Apple Watch, Apple TV, Beats products and others—saw revenue growth of 61%. While the annual revenue number of $3 billion is still a small percentage of overall revenue, improvement does reveal some strength for newer products.

New products have been largely written off by investors which leaves room for upside. And while the iPad remains a weak spot, this has largely been factored into investor expectations.

How did they do it?

According to Cook, “these results were made possible by Apple’s commitment to innovation and creating the best products on earth.”

Momentum should continue into the holiday quarter, with a strong revenue outlook of $75.5 to $77.7 billion for the first fiscal quarter. As Pacific Crest noted in its upgrade this morning, that suggests iPhone units of 75 million or more. Importantly, long-term, financing programs promoting yearly replacements should aid the pace of upgrades and support unit growth, especially with minimal competition on the high-end.

As William Blair said in their note out this morning, Samsung is “increasingly looking like another Nokia in the making.”

Ultimately, the company executed, outlook is healthy, and long-term picture remains healthy and strong.