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Apple rakes in record earnings, thanks to China

Apple has posted the largest profit ever earned in history by a single company: $18 billion
$18 Billion: Apple posts historic profits 03:48

Apple's (AAPL) growth in China is propelling the technology company to record financial results.

The company on Tuesday reported quarterly revenue of $74.6 billion, an all-time high and far surpassing the $67.7 billion average estimate from analysts. Net profits of $18 billion also set a record, with earnings per share of $3.06 blowing away analyst estimates of $2.60.

"Our revenue grew 30 percent over last year to $74.6 billion, and the execution by our teams to achieve these results was simply phenomenal," said CEO Tim Cook in a statement.

Spearheading the unprecedented results were Apple's efforts in China. It led in smartphone unit sales in there for the first time last quarter, according to research firm Canalys. Given these products' relative expense in an often price-conscious market, the results could do nothing but guarantee a big boost to Apple's revenue.

It also suggests that Apple will continue to enjoy greater strength and growth because it has learned to tap into such an enormous pool of consumers.

The following graph prepared by CBS MoneyWatch shows how large a jump in unit sales (in millions) iPhones took.


Similarly, iPhones powered the enormous jump in revenue (in billions).


Apple has clearly figured out the China market. Not only did it experience its largest jump in iPhone unit sales, but gross margins were 39.9 percent, up from 37.9 percent the previous year. The iPhone's average sales price last quarter was $687.25, versus $637.25 the previous year.

Ironically, the breakthrough performance provides Apple with its own challenge. Wall Street expects continued growth. Much of the jump was due to finally engaging with China. However, it's unclear whether Apple could repeat this breakout.

Furthermore, the iPad continues to decline, with unit sales down nearly 18 percent compared to the previous year. That raises the question of whether the problem is competition or that after the initial promise, consumers have become less enchanted. That puts even more pressure on the continued success of the iPhone and for the upcoming Apple Watch to be yet another smash hit.

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