Apple Revenue Up, Profits Basically Flat Because Competition Works

A blog about business and economics.
Jan. 23 2013 5:17 PM

Apple Revenue Up, Profits Basically Flat Because Competition Works

159911425
An employee of Japanese toy maker Tomy displays a new virtual dancing robot 'Dancing Face-stand for iPhone', which is used to dock iPhones on its face and react to the music stored in the iPhone at a press preview in Tokyo on January 23, 2013.

Photo by YOSHIKAZU TSUNO/AFP/Getty Images

Apple's latest quarterly earnings report is out today and there's nothing in here that's going to reverse the company's recent slide in the stock market. Growth has unmistakeably slowed. But as a consumer, what's most interesting here is why it slowed—not that Apple isn't selling things, but rather because its profit margin is slowing.

Last year's Q1 saw revenue of $46.3 billion and profit of $13.1 billion. This year revenue was up to $54.5 billion and the growth is even more impressive when you consider that this year's quarter had 13 weeks while last year's has 14. But this year's profit number is basically flat at $13.1 billion. Because of the change in number of weeks, that still constitutes growth, but it's clearly a much smaller figure.

Advertisement

And that's the kind of corporate stumble I like to see. Apple's amazing run has been built on products that people like to buy. But AAPL's amazing run has been built on a combination of popular products and insane profit margins. Today's announced gross margin of 38.6 percent is still amazingly high, but it's way lower than the 44.7 percent of a year ago. Rising sales on lower margins is the fruit of competition—in particular, the rise of cheap tablets that induced Apple to start making the lower-margin iPad Mini—and it spells increased consumer surplus and happy times for everyone.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Politics

Meet the New Bosses

How the Republicans would run the Senate.

The U.S. Is So, So Far Behind Europe on Clean Energy

The Government Is Giving Millions of Dollars in Electric-Car Subsidies to the Wrong Drivers

The Best Thing About the People’s Climate March in NYC

Friends Was the Last Purely Pleasurable Sitcom

The Eye

This Whimsical Driverless Car Imagines Transportation in 2059

Medical Examiner

Did America Get Fat by Drinking Diet Soda?  

A high-profile study points the finger at artificial sweeteners.

A Woman Who Escaped the Extreme Babymaking Christian Fundamentalism of Quiverfull

John Oliver Debunks the Miss America Pageant’s Claim That It Gives Out $45 Million in Scholarships

Trending News Channel
Sept. 20 2014 11:13 AM Watch Flashes of Lightning Created in a Lab  
  News & Politics
Over There
Sept. 22 2014 1:29 PM “That’s Called Jim Crow” Philip Gourevitch on America’s hypocritical interventions in Africa.
  Business
Moneybox
Sept. 22 2014 1:37 PM Subprime Loans Are Back! And believe it or not, that’s a good thing.
  Life
Outward
Sept. 22 2014 2:55 PM Nuptial Expert Sarkozy Worries About Gay Marriage and the Family
  Double X
The XX Factor
Sept. 22 2014 12:29 PM Escaping the Extreme Christian Fundamentalism of "Quiverfull"
  Slate Plus
Slate Plus
Sept. 22 2014 1:52 PM Tell Us What You Think About Slate Plus Help us improve our new membership program.
  Arts
Television
Sept. 22 2014 2:12 PM Crusader, Sans Cape The superhero trappings of Gotham are just a clever disguise.
  Technology
Future Tense
Sept. 22 2014 12:14 PM Family Court Rules That You Can Serve Someone With Legal Papers Over Facebook
  Health & Science
Science
Sept. 22 2014 12:15 PM The Changing Face of Climate Change Will the leaders of the People’s Climate March now lead the movement?
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.