AAPL 3Q12 Estimate

Revenue: $41.3 billion (AAPL guidance: $34.0 billion/Consensus: $37.4 billion) 

• I expect iPad and iPhone to represent approximately 75% of Apple’s quarterly revenue.  

GM: 45.5% (AAPL guidance: 41.5%/Consensus: 43.3%)

• Apple’s margin jumped to 47.4% last quarter, from 40.5% in 2011. Weaker iPhone sales should serve as a headwind for sequential quarterly GM expansion in 3Q12, although attractive component pricing will continue to provide support for yoy improvement (Apple reported 41.7% margin in 3Q11). 

EPS: $12.30 (AAPL guidance: $8.68/Consensus: $10.34) 

• I expect Apple to report 58% yoy EPS growth. 

Product Unit Sales and Commentary

Macs: 4.7 million (19% yoy growth)

• I expect Mac shipments to show continued strong yoy growth following updates to the laptop lineup at WWDC. Pent-up demand and early back-to-school purchases should help offset MacBook Pro with Retina display shortages.

iPad: 21.3 million (130% yoy growth)

• Apple will report record iPad sales for 3Q12. My iPad estimate assumes approximately 1.8 million iPads sold per week (including iPad 2 sales), which compares to the approximate 1.2 million weekly run rate during the last holiday quarter. Management commentary regarding continued iPad supply/demand imbalance bodes well for record iPad sales. Anecdotally, iPad 2 sales in education and business appear robust following the price cut, while lower component and manufacturing pricing should help to limit margin compression.

iPod: 6.6 million (13% yoy decline)

iPhone: 29.5 million (45% yoy growth)

• My estimate reflects an average 2.5 million weekly iPhone sales run rate. At the end of 2Q12, Apple reported 8.6 million iPhones in the channel inventory, a sequential increase of 2.6 million units. Backing out the inventory build, Apple reported an average 2.7 million weekly sales run rate last quarter. With supply/demand in balance and rumors of the new iPhone building, I expect the weekly sales run rate to decline into the fall.

When Apple releases earnings on July 24, iPad and iPhone sales, along with reported margin, will represent investor’s primary focal points. Apple’s prior commentary foreshadows a strong iPad quarter, surpassing the 15.3 million units sold in 1Q12. Any iPad sales number solidly above 17-19 million units will be looked at positively by the Street. With iPhone supply/demand having been in equilibrium for some time, Apple will not benefit from any significant inventory build this quarter, although carrier and country distribution expansion will result in solid yoy growth. Sell-side iPhone sales estimates have been set at somewhat realistic levels and one should not be surprised with sales between 25-30 million units, although iPhone sales estimates become somewhat irrelevant as we get closer to the new iPhone launch.