Apple Inc. (AAPL) Changed Everything

Over the past seven months, Apple Inc. (NASDAQ:AAPL) has been engulfed in an endless spiral of negativity. Whereas once the Mac maker could do no wrong, overwhelming investor fear about deceleration and market saturation got the best of Apple, quickly turning it into a shunned stock.

With fiscal second quarter earnings and the long-awaited cash announcement, Apple Inc. (NASDAQ:AAPL) just changed everything.

Back to basics
Revenue totaled $43.6 billion, topping both consensus estimates as well as the high end of Apple’s own guidance of $43 billion. Net income was $9.5 billion, or $10.09 per share. The company sold an impressive 37.4 million iPhones and 19.5 million iPads during the quarter. All of the above were better than muted expectations. Operating cash flow was $12.5 billion, and Apple finished the quarter with $145 billion in cash.

Sources: SEC filings and conference calls. Calendar quarters shown.

Gross margin came in at the low end of guidance at 37.5%. That level of profitability is down significantly from the all-time high of 47.4% seen a year ago, but quite frankly a 47.4% gross margin is a freak of consumer electronics nature. That’s about the toughest comparison Apple Inc. (NASDAQ:AAPL)’s ever had.

Back to Mac outperformance
Mac units came in at just under 4 million, which was a modest 2% decline from a year ago. That’s actually strong relative to the 14% decline that the broader PC market saw during the quarter. This relative strength was driven by strong desktop sales as Apple overcame iMac constraints, which was partially offset by declining laptop sales.

After last quarter’s Mac weakness broke Apple Inc. (NASDAQ:AAPL)’s streak of outperforming the PC market, this quarter resumed that trend.

Nearly three years later, the iPhone 4 is still hot
Average selling prices for both the iPhone and iPad declined. iPhone ASP was negatively affected by product mix, as demand for the iPhone 4 is proving to be remarkably resilient.

Sources: SEC filings and conference calls. Calendar quarters shown.

iPad ASP was always destined to fall with the introduction of the iPad Mini.

Apple abroad
As a testament to Apple Inc. (NASDAQ:AAPL)’s international expansion, it just set a new record with how much of its revenue comes from abroad. International revenue accounted for two-thirds of all revenue during the quarter. The “Greater China” segment continues to march into new territory, with a record $8.8 billion in revenue including retail operations.

Sources: SEC filings and conference calls. Calendar quarters shown.

CEO Tim Cook predicted that Greater China would soon eclipse the U.S. as Apple Inc. (NASDAQ:AAPL)’s largest market, and that’s looking ever likelier; Greater China sales are quickly closing the gap with domestic revenue.

Sources: SEC filings and conference calls. Calendar quarters shown.

The Middle Kingdom is well on its way to becoming Apple’s biggest market.