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Apple Reports $3.25 Billion Profit for Q3 2010

And now for something a little different. Rather than merely repeat Apple’s financial results for the quarter, we’re going interactive and providing some of the data in the form of quiz questions.

Quarterly Finances — Today’s first quiz question is: Apple reported its financial results from the third fiscal quarter of 2010, marking:

  1. Record revenue for the quarter
  2. Record revenue for any quarter in the company’s history
  3. “…a phenomenal quarter that exceeded our expectations all around, including the most successful product launch in Apple’s history with iPhone 4,” according to Apple CEO Steve Jobs
  4. All of the above

Apple recorded revenue of $15.7 billion, which fueled a net quarterly profit of $3.25 billion, or $3.51 per diluted share. That compares to $9.73 billion revenue and profit of $1.83 billion in the year-ago quarter. Last quarter (Q2 2010), Apple posted revenue of $13.5 billion and a $3.07 billion profit.

Numbers Behind the Dollars — These results can primarily be attributed to:

  1. Increased Mac sales: 3.47 million, a 33 percent increase over the previous year’s quarter
  2. Increased iPhone sales: 8.4 million, an increase of 61 percent (with only two days of iPhone 4 sales) accounting for $5.33 billion in revenue
  3. Strong iPad sales: 3.27 million, contributing $2.17 billion in revenue
  4. Who are we kidding? Of course it’s… All of the above.

The exception to all of this growth is the iPod category, which includes the iOS-based iPod touch as well as the Classic iPod, iPod nano, and iPod shuffle. Apple sold fewer iPods in this quarter than a year ago (9.4 million compared to 10.2 million, an 8 percent decline). Since iPod touch sales are up 48 percent from the year-ago quarter, the implication is that non-iOS iPod sales have fallen off dramatically, which isn’t really much of a surprise.

Interestingly, the average selling price for the iPad was $640, implying that most people aren’t buying the low end $499 model.

Product Breakdown — Answer this question in your head before you read the choices: Which product line generates the largest percentage of Apple’s revenues?

  1. Mac (28 percent)
  2. iPhone (34 percent)
  3. iPad (14 percent)
  4. iPod (10 percent)

So while it’s clear that Apple still relies heavily on Mac sales for revenue (thanks in part to record Mac sales in the education sector), the iOS devices combine for more than half of the company’s revenue. During this quarter, iOS device sales broke the 100 million mark.

Other contributions to Apple’s bottom line come from the iTunes Store, which generated over $1 billion, a 25 percent year-over-year increase.

Apple Retail Stores — Choose which of the following facts about the Apple retail stores does not belong:

  1. The retail stores generated $2.58 billion in revenue, averaging $9 million for each of the 287 stores open at the end of the quarter.
  2. Apple sold 677,000 Macs through the retail stores during the quarter.
  3. Roughly half of the customers buying a Mac from an Apple retail store are purchasing a Mac for the first time.
  4. The previous statistic has remained consistent for as long as Apple has been running the Apple stores.
  5. Apple just broke ground on the first Lunar Apple Store location.

(You can tell we want this quiz to be really easy, can’t you?)

Money in the Bank — Apple now has $45.8 billion in cash reserves, up from $41.7 billion last quarter, no doubt thanks to a comparatively small $1.9 billion in operating expenses for this quarter. The company expects to use that war chest for (choose one of the following):

  1. Preserving capital, as usual.
  2. Buying Dell, liquidating the company and giving the proceeds to shareholders.
  3. Following the suggestions made by TidBITS in “What Apple Could Do with $40 Billion” (1 April 2010).
  4. Turning it all into coinage, and creating a Scrooge McDuck money pit for Steve Jobs to frolic in.


Looking Ahead — Identify which of the following statements were provided as guidance for the next fiscal quarter (which ends 30 September 2010):

  1. Apple expects revenue to be about $18 billion, and diluted earnings per share of about $3.44.
  2. Apple will defer approximately $175 million to the December quarter, which is the estimated cost of providing free cases to customers who purchased the iPhone 4. Apple says it will recognize the cost based on when the cases are delivered to customers (which should be in 3 to 5 weeks; presumably it’s a matter of complicated accounting. (See “Apple Responds to iPhone 4 Antenna Issue,” 16 July 2010, for more information.)
  3. Apple will be launching the iPad in 9 additional countries.
  4. “Those whiny analysts will never be happy no matter how much money we make.”

We’ll have to wait until October to learn how well these results match up with reality, but in the meantime it’s safe to say that Apple continues to fare well. As Jason Snell said in Macworld’s Live Update: Apple Q3 Earnings Call (from which we pulled many of the figures for this article), “I think it’s safe to say that Apple is a titan of industry now,” and no longer the “beleaguered” Apple of old.

Thanks for taking the quiz! Add up all of your correct answers, multiple by 42, divide by 11, and no matter what the score, consider yourself a Mac pundit!

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