Apple Sets More Records

Does anyone dare bet against Apple anymore? After a record-setting quarter in Q1 2015, led primarily by the release of the iPhone 6 and iPhone 6 Plus, Apple was back at it on Monday, setting second quarter records as well. Here are the stats you need to know:

• Apple raked in $58 billion in revenue, a 27% increase from this time last year, beating the consensus estimate handily by $1.95 billion.
• Net income came in at $13.6 billion, or $2.33 per share, beating analyst estimates by $0.17. That’s a nearly 33% jump year-over-year.
• Apple sold 61.2 million iPhones, a 40% increase from Q2 2014. “We’re seeing a higher rate of people switching to iPhone than we’ve experienced in previous cycles,” CEO Tim Cook said in a statement.
• The App Store had its best quarter in history, which helped drive the results—this is likely due to the influx of users switching to the iPhone 6.
• Apple expanded its capital return program to $200 billion, including an 11% increase on its dividend (now at a 1.57% yield) and a buyback authorization increase by $50 billion to $140 billion.
• The tech giant expects Q3 2015 revenues to be $46 billion to $48 billion, a marked decrease due to likely fewer iPhone sales.

Companies as big as Apple aren’t supposed to see the same type of growth numbers Apple has been seeing over the past two quarters. It’s been absolutely mind-boggling to see this company grow. It’s a sign that Apple has found ways to improve its competitive position in the industry and remain at the forefront of innovation despite its size.

Key future indicators

One of the biggest developments to watch for in the near future is Apple’s burgeoning market in China. Apple has 21 stores in China as of Monday’s press conference, and plans to have 40 up and running by the mid-2016. Mainland China revenue was up 71% year-over-year. The iOS App store had over 100% growth in China from this time last year. Even the Mac is doing its part in China, with 31% growth.

Something else that didn’t necessarily make the headlines, yet is still essential to the forward-looking investor is Apple’s increase in R&D spending. In Q2 2015, it grew 34.9% to $1.92 billion. The company admitted it is investing in “foundational technologies” to broaden its product portfolio. What that means in plain English is that Apple is cooking up something new—maybe something we didn’t know we needed.

Apple Watch chilled

It’s not surprising that CEO Tim Cook didn’t give any preliminary revenue data for the Apple Watch, considering it was released only three days prior to the press conference. However, market research firm Slice Intelligence found that only 22% of US buyers have received their pre-order of the smartwatch and another 38% do not yet have a shipping estimate. Apple Watch buyers received notifications that their order could ship as late as June 11.

Cook did mention that it’s difficult to gauge demand when supply is so short of demand, so it’s likely that management is more than a little perturbed at the current supply chain situation.

Of course, the lack of information and the supply chain issues aren’t stopping people from already calling the Apple Watch a flop. "I look at consensus as being around about 50 million (sales) and the way things are going, I would be looking more like things coming in about 20 million for the first 12 months, best case," Richard Windsor, independent analyst, said in a TV interview with CNBC.

"Frankly, I actually think that will be negative for the share price…People are expecting it to have a reasonable impact on the operating line and the cash flow, so I would expect an earnings miss if my 20 million figure turns out to be right."

Without any hard data, though, it’s too early to tell whether Windsor is correct in his assumptions. Even if the Apple Watch turns out to be a dud, it won’t be of Amazon Fire Phone proportions. Thus, it’s likely that it won’t be cast off entirely, giving Apple an opportunity to improve on the second model.

Conclusion

Apple has made some serious strides, even in the last few years since Steve Jobs’ death. Even with the Samsung Galaxy 6 now on the market. Though it could be considered a better phone, it’s unlikely to convert many iPhone users. Its operating system and styling are too different than the iPhone and the improvement isn’t enough to justify switching entirely. Moving forward, the Apple Watch will be at the forefront of investors’ minds for the next few months. But even if the Apple Watch disappoints, don’t be alarmed. Apple has too much else going for it that there’s really no reason to bet against it.