As we reported this morning, Apple has just revealed its fiscal second quarter earnings – and, unsurprisingly, the figures are monstrous. Apple made a profit of $10.2 billion (£6.1 billion) on revenue of $45.6 billion (£27.2 billion) in Q2 fiscal 2014, up from $9.5 billion (£5.7 billion) and $43.6 billion (£26 billion) respectively for the same period last year.
The increase in revenue was mostly bolstered by a big jump in iPhone sales (from 37.4 million to 43.7 million). Apple also announced that it would be increasing its share buyback scheme to $130 billion (£77 billion) from $100 billion (£60 billion), putting to rest the finance community's belief that Tim Cook is actually a dragon called Smaug that sits atop a massive pile of gold.
It's not all good news, though. At long last, after one of the most meteoric rises in tech history, the iPad appears to be slowing down: Despite analysts predicting sales of 19.7 million units, Apple only shifted 16.35 million – a drop of more than 16 per cent from the 19.48 million that it sold in Q2 2013.
To put Apple's earnings into perspective, Samsung – a conglomerate with 430,000 employees and interests as diverse as ship building, refrigerators, computer chips, and smartphones – generally has a quarterly revenue of around $60 billion (£36 billion). Apple, with just 80,000 employees, averages around $50 billion (£30 billion) per quarter. Better yet, almost the entirety of that revenue (and thus its huge profit margins) comes from just a single product line: The iPhone. Apple does sell a few million Macs per quarter, and 10-20 million iPads, but the iPhone is by far and away the jewel in crown, accounting for around 60 per cent of the company's revenues.
It is fortunate, then, that the iPhone continues to grow. The iPad, however, isn't faring quite so well. Despite the introduction of the brand new iPad Air, and the launch of the much-requested iPad Mini with Retina display, iPad sales are down significantly. This is probably due to increasing competition from Amazon, Google, and Samsung, all of which are driving down the price that Apple can charge for its iPads (the entry-level iPad mini is now just £249). It's worth pointing out that sales of 16.35 million is still very, very strong; no other tablet comes close.
Today, it's the iPad that has stopped growing – and next quarter it could be the iPhone. If Apple doesn't release a new, market-defining product before that happens, the company's market capitalisation is only going to go in one direction.
Most bets are on Apple's next product being an iTV or iWatch – but in both cases, I think it will be much harder for Apple to position itself as the de facto leader of either market segment. Without the mindshare that comes from being the authority on smart TVs or wearables, I just don't see Apple having another runaway hit on the same scale as the iPad or iPhone.