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

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.


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.


The World

The Budget Disaster that Sabotaged the WHO’s Response to Ebola

Are the Attacks in Canada a Sign of ISIS on the Rise in the West?

PowerPoint Is the Worst, and Now It’s the Latest Way to Hack Into Your Computer

Is It Offensive When Kids Use Bad Words for Good Causes?

Fascinating Maps Based on Reddit, Craigslist, and OkCupid Data


The Real Secret of Serial

What reporter Sarah Koenig actually believes.


The Actual World

“Mount Thoreau” and the naming of things in the wilderness.

In Praise of 13th Grade: Why a Fifth Year of High School Is a Great Idea

Can Democratic Sen. Mary Landrieu Pull Off One More Louisiana Miracle?

  News & Politics
Oct. 23 2014 3:55 PM Panda Sluggers Democrats are in trouble. Time to bash China.
Business Insider
Oct. 23 2014 2:36 PM Take a Rare Peek Inside the Massive Data Centers That Power Google
Atlas Obscura
Oct. 23 2014 1:34 PM Leave Me Be Beneath a Tree: Trunyan Cemetery in Bali
  Double X
The XX Factor
Oct. 23 2014 11:33 AM Watch Little Princesses Curse for the Feminist Cause
  Slate Plus
Oct. 23 2014 11:28 AM Slate’s Working Podcast: Episode 2 Transcript Read what David Plotz asked Dr. Meri Kolbrener about her workday.
Brow Beat
Oct. 23 2014 4:03 PM You’re Doing It Wrong: Puttanesca Sauce
Oct. 23 2014 11:45 AM The United States of Reddit  How social media is redrawing our borders. 
  Health & Science
Bad Astronomy
Oct. 23 2014 7:30 AM Our Solar System and Galaxy … Seen by an Astronaut
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.