Apple posts $6.9 billion profit in Q3 as iPad sales shrink to 14.6 million

Apple today published its financial results for its third fiscal quarter of 2013, reporting a $6.9 billion profit on $35.3 billion in revenue. That’s roughly level in revenue terms with last year’s $35 billion revenue, but profit was down a massive 21.6 percent from the same period’s $8.8 billion. Both figures were also down from last quarter’s $9.5 billion on $43.6 billion. At the end of last quarter, the company forecast revenue in the range of $33.5 billion - $35.5 billion, and Thomson Reuters’ analyst consensus was around $35 billion for Q3, so the results don’t come as a massive shock.

Unfortunately, in recent quarters Wall Street seems to only judge Apple on innovation and growth, both of which become difficult to maintain over time. There really isn’t much innovation left in smartphones as we know them today, which means Apple’s previously insane growth in this market will eventually slow down and become low and stable. Such devices might be reimagined in the near future, something like Tony Stark’s phone in Iron Man 3, but that isn’t happening right now. 

iPhone sales continued to grow in Q3, from 26 million last year to 31.2 million. iPad sales were down slightly year-over-year, from 17 million last year to 14.6 million. The drop in iPad sales is to be expected: last year the company had just released the third-generation iPad.

It’s expected because the smartphone market is maturing and the iPhone is an extremely mature product. The iPad is heading in this direction as well, although the tablet market is still dominated by Apple today and is where the smartphone market was 2-3 years ago. Eventually competitors will catch up, enter the market and take away market share, probably with less expensive alternatives, but also with directly competing quality products. In the case of smartphones, the iPhone’s real challengers have been, in my opinion, Samsung’s Galaxy SIII and Note II (to a much lesser extent given its size) in the past and now the S4. The HTC One has been critically acclaimed, but its sales have not nearly matched Samsung’s. The fact that Apple can still sell over 30 million iPhones in one quarter is astonishing, even if it is a combination of three phones (the iPhone 4, 4S and 5). I do think though that the majority of those 30+ million devices are in fact iPhone 5s. Right now, although the Nexus 7 is a really good device and will likely be updated tomorrow, it hasn’t had the sales to match the iPad. Eventually though, someone will produce a tablet that will.

The criticism of the term 'Can't innovate anymore, my ass' may be somewhat justified for the iPhone in the face of Android’s break-neck pace of improvement and overall polish, but to doom Apple now is illogical and idiotic. Just because a small portion (geeks) of the masses today are becoming ever more impatient with consumer technology companies, it doesn’t mean Apple is destined for a steep decline. Yes, Samsung now does have very strong mind-share in the smartphone market, but it’s not necessarily at Apple’s expense. They’ll be fine for the coming few years, unless they actually do something extremely stupid and not something that people think is extremely stupid.