Apple Inc. (NASDAQ:AAPL) reported earnings which impressed investors earlier this afternoon. Comments from the conference call, including those by CEO, Tim Cook, helped shares of the tech giant soar over 8% in after hours trading. Below are some comments which Tim Cook made on the Apple Inc. (NASDAQ:AAPL) conference call.
Tim Cook – Apple Inc. (AAPL) – Chief Executive Officer
We generated $45.6 billion in revenue, which was ahead of our expectations and represents a new March quarter record and is our strongest non-holiday quarter ever. Our underlying business performance was even stronger than our reported results imply, when you take into account changes in channel inventory this year versus last year and foreign exchange headwinds that we faced in several of our international markets. Setting foreign exchange and inventory changes aside, our underlying growth rate would have been close to double digits.
These strong revenue results combined with our best gross margin percentage since September of 2012 resulted in earnings per share growth of 15%, which is our highest earnings growth rate in the last six quarters. iPhone was key in driving our stronger-than-expected results. We sold almost 44 million Apple Inc. (NASDAQ:AAPL) iPhones, setting a new March quarter record.
These strong results were broad-based, both from a product point of view, with demand for each of our three iPhones stronger than its predecessor, and from a geographic standpoint. We gained smartphone share in many developed and emerging markets including the US, the UK, Japan, Canada, Germany, France, Vietnam, and greater China, just to mention a few. In fact, we established a new all-time record for total iPhone sales in the BRIC countries.
iTunes software and services revenue continued to grow at a double-digit rate, thanks to an incredible ecosystem and our very large, loyal, and engaged customer base. With its strong momentum and growing profitability, iTunes is a very important driver of our business, not only here in the United States, but around the world.
We now have an almost 800 million iTunes accounts, most of these with credit cards. This is a staggering number.
We continued to gain share in the personal computer market as well. We defied industry trends again by growing while the market contracted. Our bold decision to make OS X free has resulted in the largest-ever percentage of the Mac install base running on the latest version of the operating system, just months after its release.
iPad sales came in at the high end of our expectations, but we realized they were below analyst estimates and I would like to proactively address why we think there was a difference. We believe almost all of the difference can be explained by two factors.
First, in the March quarter last year we significantly increased iPad channel inventory, while this year we significantly reduced it. Luca will go into more detail about this later.
Second, we ended the December quarter last year with a substantial backlog of iPad mini that was subsequently shipped in the March quarter, whereas we ended the December quarter this year near supply/demand balance. We continue to believe that the tablet market will surpass the PC market in size within the next few years and we believe that Apple Inc. (NASDAQ:AAPL) will be a major beneficiary of this trend. When we look at our Company performance on a geographic basis, we’re especially proud of our very strong results in greater China, where we established an all-time quarterly revenue record of almost $10 billion, including the results from our retail stores, and in Japan, where revenue was up 26% in spite of the foreign exchange headwinds and where our smartphone market share reached an incredible 55%.
We are continuing to invest in our retail stores, and since our last call, we’ve opened our first stores in Brazil and Turkey, and we now have retail stores in 15 countries around the world. I’m looking forward to welcoming our new retail and online leader, Angela Ahrendts, who will be joining Apple’s executive team next week.
Stepping back, we’re now just past the halfway mark for FY14. Our strong March quarter results brings us to total revenues of over $103 billion for the first six months of the year, and earnings per share growth close to double-digits. We estimate that over the last six months, we’ve added over 60 million new registered users of our four product categories.
Additionally, over two-thirds of people registering an iPad in the last six months were new to iPad, while over half of the people registering iPhones were new to iPhone. It’s wonderful to add tens of millions of first-time Apple product users, especially considering the strong halo effect we’ve seen over and over again in our history. Customers who have a great experience with their first Apple product often become loyal and happy owners of multiple Apple Inc. (NASDAQ:AAPL) products over time.
As always, I’d like to thank our talented employees who make these results possible through the creativity and passion they bring to their work every day. And I’d like to thank our hundreds of millions of customers for their loyalty and enthusiasm and for continually inspiring us to surprise and delight them.
In addition to our quarterly results, we’re also announcing an update to our capital return program today and I’d like to share a few thoughts about our guiding principles for capital allocation and our conclusion on the changes we are making for this year. Apple has created tremendous value for shareholders by developing great products that enrich people’s lives, and that will always be our top priority and driving force. We’ll continue to innovate by investing in research and development and capitalizing on our strengths and hardware, software and services.
Apple Inc. (AAPL) capital allocation
We’ll keep investing in our supply chain to promote scale and efficiencies, expanding our global presence by building retail stores, investing in marketing and distribution, and extending our reach into new markets. We’re expanding Apple Inc. (NASDAQ:AAPL)’s products and services into new categories and we are not going to underinvest in this business. We’re also investing through acquisitions, and we’ve acquired 24 companies in the past 18 months.
To invest organically and to make acquisitions strategically, we need to maintain financial flexibility. With this framework in mind, Apple’s Board and management team review capital allocation regularly and we solicit input on our program from a broad base of shareholders. We very much appreciate all of the input that so many of our shareholders have provided us on how best to deploy our cash.
We’ll continue to seek investor input going forward, and will update you on our conclusions around this time each year. This regular process allows us to continually evaluate return of capital in light of the most current information available and it enables us to be thoughtful about the size, mix, and pace of the program.
We continue to be in the fortunate position of being able to return significant capital to shareholders. We started doing so two years ago when we announced our first program of $45 billion, and we more than