Apple reported financial results for Q3 2014 with year-over-year revenue growth of 6% to $38 billion. iPhone sales increased 13% to 35.3 million units while iPad sales declined 9% to 13.8 million units. Net income grew 12% to $7.7 billion. The company provided guidance for Q4 2014 with expected revenue of $40.4 billion, representing continued growth.

1. Aquilla
Apple Results Q3 2014
Summary and Commentary
!
!
Note: Apple Q3 = Calendar Q2

2. Aquilla
Key Data Points
Wall Street Reported YoY
Revenue $ 38 B $ 37.43 B + 6%
Net Income $ 7.5 B $ 7.7 B + 12%
EPS (Diluted) (vs Adjusted) $1.23 $1.28 + 20%
iPhone Units 35.3 M 35.2 M + 13%
iPhone ASP $561 -3%
iPad Units 13.8 M 13.3 M - 9%
iPad ASP $444 2%
Mac Units 3.9 M 4.4 M + 18%
iPod Units 2.3 M 2.9 M - 36%
Gross Margin 39.4% + 2.5 points
Cash & Long Term Securities 164 B 9% *
Q4 Revenue Guidance $ 40.4 B $ 37 - 40 B FY13: $37.5 B
Q4 Gross Margin Guidance 37.5% 37-38% FY13: 37.0%
* QoQ

3. Aquilla
Source: Apple Results
Annual Revenue
Apple Still Growing
•Revenues topped $140B
after 3 quarters, and are
heading for $180B in FY14
•This is over 4x growth in 5
years
•Grew 6% YoY, pretty much
in line with Wall Street
expectations consensus
•6% growth is still
impressive for a company
of Apple’s size (This is
$10B annualised)
•Growth was largely from
iPhone in $ terms, but
Mac and iTunes were also
strong
•Anticipation of new
products on top of this
brings confidence to the
analyst community
•Meanwhile the stock is
becoming recognised as
an income hold.
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FY '07 FY '08 FY '09 FY '10 FY '11 FY '12 FY '13 FY '14 3Q
($B)
Apple Revenue

4. Aquilla
Quarterly Revenue
Source: Apple Results
Apple Still Leads
•Apple still leads the
market in scale, and
despite this size, has
returned to growth
•Comparisons with
leading competitors
are revealing, in
particular with
Samsung, whose
revenues fell by 6%,
and Microsoft, whose
business is
undergoing a
complete
restructuring.
Comparative
Revenues
CQ2 2014
SamsungMobile
Microsoft
Google
0%
15%
30%
45%
60%
75%
90%
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30.0
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($B)
Apple Revenue
Revenue B$ Revenue YoY Growth

5. Aquilla
Net Income
Comparative
Net Income
CQ1 2014
Net Income Grows 12%
•Net Income came in at
$7.7B, or 22% of
revenues, reflecting the
still strong iPhone mix,
this being the highest
margin product line for
Apple
•With the iPhone 6
expected this quarter, a
boost to both sales and
margins is anticipated
Source: Apple Results
Google
SamsungMobile
Microsoft
0%
5%
10%
15%
20%
25%
30%
35%
0.0
2.0
4.0
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$M
Apple Net Income
Net Income B$ Net Income %

6. Aquilla
Source: Apple Results
Diluted EPS
EPS Up YoY
•EPS Adjusted reflects the
7:1 stock split
•EPS was well ahead of
Wall Street expectations,
and was up 20% YoY
•Q3 being Apple’s slowest
quarter, this was a good
result for the company
$ 0.00
$ 0.50
$ 1.00
$ 1.50
$ 2.00
$ 2.50
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Apple Diluted EPS $ (Adjusted)

7. Aquilla
Source: Apple Results
Gross and Net Margins
Margins Strong
•Gross Margins held up
close to the 40% mark
which many felt was
unsustainable
•GM of 39.4% was
influenced by the strong
iPhone and Mac quarters,
as well as weaker iPad,
which is the lowest margin
product family
•Upcoming quarter
forecasts a slight decline
QoQ, though gain YoY
•A longer term gross margin
trend rate of between 35
and 40% still seems likely
•Wall Street was impressed
by the GM number, and
the consensus was that
Apple may yet be able to
avoid the deeply damaging
price wars facing Android
vendors
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
Q1
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Margins
Gross Margin % Net Income %

8. Aquilla
Source: Apple Results
Cash and Investments
Cash Pile Grows Again
•Apple generated $10.3B of
cash-flow from operations
in the Quarter
•Total Cash grew $13B to
$164B
•Stock buybacks and
dividends returned $8B to
shareholders
•Much of the cash remains
outside the US, held there
for tax reasons
•Apple is now increasingly
positioned as an income
stock, satisfying some on
Wall Street who wanted
access to this bonanza
•Apple also completed the
7:1 stock split, and recent
gains have made this a
highly successful action 0
20
40
60
80
100
120
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160
180
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($B)
Cash
Short Term Cash B$ Long Term Cash B$

9. Aquilla
Source: Apple Results
Inventory
Stock Stable
•Apple’s miracle stock
management continues,
ending the quarter with
3.9 days of stock
•This is still nearly 100
annual stock turns!
•And this despite having
428 retail stores with stock
on the shelves
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Days
Days of Stock

10. Aquilla
Source: Apple Results
Revenue by Product Line
Apple as Phone Company
•iPhone continues to
dominate Apple’s mix,
and while growth
slowed a little (to be
expected at this stage of
the cycle, it was still up
13% YoY
•Mac also had 18% YoY
growth, a good 20%
ahead of the PC market,
and a great result for
Apple
•iPad disappointed again,
declining 9%
•iTunes/SW/Services
continued their
inevitable growth, 12%
this quarter, with the
App Store the main
driver, meaning that
iTunes overall grew 25%
0
5,000
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15,000
20,000
25,000
30,000
35,000
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Product Line Revenue Streams
iPhone M$ iPad M$ Mac M$ iPod M$ iTunes/SW/Svcs M$ Accessories M$

11. Aquilla
Revenue Mix by Product Line
Source: Apple Results
Most recent
$ Share YoY
4% 12%
12% 12%
1% -36%
15% 18%
16% -9%
53% 13%
iPhone dominates
•iPhone still dominates
with 53% of Apple’s
revenues
•A strong quarter for Mac
moved it to 15% of the
mix
•iPad declined again by
9%, but the IBM
partnership opens
potentially massive
opportunities in
enterprise
•iTunes/SW/Services
continues to grow, and
now represents 12% in
share
iPhone M$
iPad M$
Mac M$
iPod M$
iTunes/SW/Svcs M$
Accessories M$
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Product Line Revenue Mix

12. Aquilla
iPhone Trailing 12 months - Soaring
Tracking the trailing 12 months (current and 3
previous Quarters) eliminates seasonality, and
gives a better indication of the longer term trends
Source: Apple Results
0
30,000
60,000
90,000
120,000
150,000
180,000
0
10,000
20,000
30,000
40,000
50,000
60,000
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Trailing 12m
Units (000s)
Q Units
(000s)
iPhone Units
iPhone Units kU iPhone Units Trailing 12m kU

13. Aquilla
iPad Trailing 12 months - Peaked?
Tracking the trailing 12 months (current and 3
previous Quarters) eliminates seasonality, and
gives a better indication of the longer term trends
Source: Apple Results
0
15,000
30,000
45,000
60,000
75,000
90,000
0
5,000
10,000
15,000
20,000
25,000
30,000
Q1
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Trailing 12m
Units (000s)
Q Units
(000s)
iPad Units
iPad Units kU iPad Units Trailing 12m kU

14. Aquilla
Mac Trailing 12 months - Ticking Up
Tracking the trailing 12 months (current and 3
previous Quarters) eliminates seasonality, and
gives a better indication of the longer term trends
Source: Apple Results
0
4,000
8,000
12,000
16,000
20,000
24,000
0
1,000
2,000
3,000
4,000
5,000
6,000
Q1
'07
Q2
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Q3
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'14
Trailing 12m
Units (000s)
Units
(000s)
Mac Units
Mac Units kU Mac Units Trailing 12m kU

15. Aquilla
iPod Trailing 12 months - Decline
Tracking the trailing 12 months (current and 3
previous Quarters) eliminates seasonality, and
gives a better indication of the longer term trends
Source: Apple Results
0
15,000
30,000
45,000
60,000
75,000
0
5,000
10,000
15,000
20,000
25,000
Q1
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Trailing 12m
Units (000s)
Units
(000s)
iPod Units
iPod Units kU iPod Units Trailing 12m kU

16. Aquilla
iTunes/SW/Svcs Trailing 12 months - Soaring
Tracking the trailing 12 months (current and 3
previous Quarters) eliminates seasonality, and
gives a better indication of the longer term trends
Source: Apple Results
0
4,000
8,000
12,000
16,000
20,000
0
1,000
2,000
3,000
4,000
5,000
Q1
'07
Q2
'07
Q3
'07
Q4
'07
Q1
'08
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Trailing 12m
Revenue
($M)
Revenue
($M)
iTunes, Software, Services Revenue
iTunes/SW/Svcs M$ iTunes/SW/Svcs Trailing 12m M$

17. Aquilla
Source: Apple Results
Product Line Average Selling Prices
iPhone ASPs Slip A Little
•iPhone ASPs slipped to
$561, which is to be
expected at this stage in
the product cycle, but
are still healthy
•Other product lines also
ticked down slightly, but
not enough to indicate
any longer term trend
•Indications are that
Apple can continue to
operate its premium
approach to the market
0
200
400
600
800
1,000
1,200
1,400
1,600
Q1
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$
ASPs
iPhone ASP $ iPad ASP $ Mac ASP $ iPod ASP $

18. Aquilla
Geographical Split
Most recent
Share YoY
11% 1%
6% 6%
7% 1%
16% 28%
22% 6%
39% 1%
Source: Apple Results
US Diminished
•Minimal growth in
the Americas again,
but seasonality saw
share back up to
39% (excluding
Retail)
Retail Flat
•Angela Ahrendts
now on board (1st
May), but too early
for impact. Store
count grew by 5%
China soars
•28% growth was
ahead of Apple’s
expectations, and
shows there is a
market for premium
phones in China
Europe Gains
•Healthy growth, and
seasonality keeps
EMEIA ahead of
China (for now)
Americas
EMEIA
Greater China
Japan
APAC
Retail
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Geo Splits

19. Aquilla
Geographical Split with Estimated Retail Allocation
Most recent
Share YoY
6% 5%
7% 1%
16% 28%
24% 6%
46% 1%
Source: Apple Results, Q-end Apple Store counts, pro-rata revenue allocation
Estimations
•Estimations from
allocation of Retail
revenues by region
(pro-rata by Q-end
store counts)
US Flat
•US still shows only
1% growth. As
flagship stores are a
higher proportion
outside the US, pro-
rata allocation may
be generous to
Americas
Europe Strong
•With 101 Apple
Stores, EMEIA is
solid at 24% share
Americas
EMEIA
Greater China
Japan
APAC
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Geo Splits Inc Retail

20. Aquilla
Source: Apple Results
Geo Share with Retail - 12m Trailing
US/APAC Flat / Declining
•Trailing 12 months
shows clearly where
Apple’s growth is
coming from
•China is consistently
upwards (and has
massive upside)
•EMEIA is promising,
despite ongoing
problems in southern
Europe. India could
become a driver of
future growth
•Japan is an ongoing
success story
Tracking the trailing 12 months (current and 3
previous Quarters) eliminates seasonality, and
gives a better indication of the longer term trends
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
Q1
'07
Q2
'07
Q3
'07
Q4
'07
Q1
'08
Q2
'08
Q3
'08
Q4
'08
Q1
'09
Q2
'09
Q3
'09
Q4
'09
Q1
'10
Q2
'10
Q3
'10
Q4
'10
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
'12
Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
'13
Q4
'13
Q1
'14
Q2
'14
Revenue
$M
Geo Growth 12m Trailing Revenue Inc Retail
Americas EMEIA Greater China Japan APAC

21. Aquilla
Main Conclusions
•A relatively dull set of results, with a few hidden gems
•Highlights were iPhone, Mac and Gross Margins
•iPhone matched expectations, and despite heading towards the end of its cycle, still saw 13% growth
•Mac grew 18%, which is impressive, but even more so in light of the declines in the PC market (~ 2% down overall)
•Gross Margin jump of 2.5% YoY had Wall Street salivating that GMs of close to 40% may be defendable in the long term
•Another miss on iPad, down 9%, and below analyst expectations
•Cook indicated some channel inventory adjustments, but also a sluggish US market
•A broader view is that Phablets are eating into iPad in Asia, while developed countries see slower than anticipated upgrade cycles
•If iPhone 6 has the rumoured larger screen, Apple may see overall upside, but not for iPad (this is good - iPhone is higher margin)
•Cook again flagged iPad’s success in enterprise, alongside (or including) education, and put much emphasis on the IBM partnership
•Strong gains in China, with EMEIA and Japan also growing
• Every region saw growth, though Americas and APAC were minimal. Retail is also treading water
• Cook reported overall strong performance in the BRICs, and with two of these being in EMEIA, this could prove significant (unless
the Ukraine crisis derails Russia)
•Guidance for Q4 Revenues on the low side of expectations, but GM is in line
•Three big questions:
•Will the iPhone 6 open new opportunities in the Asia Phablet market? (assuming the rumoured bigger screen materialises)
•Can the App Store continue to support iTunes/Services growth while transitioning/developing subscription music services?
•Can Apple develop a mobile payments business, perhaps as its “Next big thing”

22. Aquilla
Data Summary

23. Aquilla
23