Apple’s (AAPL) 5 Most Profitable Business Regions

Apple’s (AAPL) 5 Most Profitable Business Regions

Apple, Inc. (NASDAQ: AAPL) designs, manufactures, and markets mobile communications and media devices, personal computers (PCs), and portable digital music players. The company’s products and services include the iPhone, iPad, iPod, and Apple Watch.

Sales and operating income were higher in all of Apple’s segments in 2018. The company manages its business by geographic area. Below, we’ll look at the five reportable segments, each of which offers different rates of profitability.

Key Street Shops

  • Apple is a global technology company with a strong brand and innovative products.
  • Although Apple does not report the individual performance of its product lines, it does break down regional business units.
  • Americans lead Apple’s revenue, with China becoming more so. Japan and Europe are trending downwards for Apple sales.

The Americas Region is the Largest Contributor

Apple’s Americas region consists of North and South America. In fiscal 2018, which ended September 26, 2018, the segment produced an operating profit of $31.2 billion. That represented 37.2% of the company’s total operating profit, which excludes corporate-level expenses such as research and development (R&D) and share-based compensation.

The unit was the highest sales generator, accounting for $93.9 billion in 2018. This produced one of the lowest operating margins among the segments at 33.2%. In 2018, Americans had an operating profit of $26.2 billion, which contributed 42% to Apple’s total profit. The margin was lower, at 32.7%, based on sales of $80.1 billion.

Greater China is Growing

The Greater China segment includes China, Hong Kong, and Taiwan. It is the second largest contributor to Apple’s profits, but it is growing rapidly and becoming more important. In 2018, the business had an operating profit of $23 billion, which is 27.4% of the company’s total operating profit. The 39.2% operating margin makes it one of the highest among Apple’s segments. Its net sales were $58.8 billion, the second largest total.

Results improved significantly over 2017, with sales and operating profit growing 84.3 and 108.4%, respectively. In the year-ago period, the Greater China segment had sales of $31.9 billion and operating profits of $11 billion. This was 17.7% of total operating profit for 2017. The margin was 34.7%.

Europe declining in importance

Although the European segment’s sales and operating profit are growing, they are not increasing at the same rate as Greater China. In 2018, the unit had $16.5 billion in profits, including European countries and India, the Middle East, and Africa, which accounted for 19.7% of Apple’s total operating profit.

European sales were $50.3 billion. The business generated a margin of 32.8%, making it Apple’s lowest. Europe had an operating profit of $14.4 billion on sales of $44.3 billion in 2017. That was 23.2% of Apple’s total profits. The segment margin was 32.6%.

Paths of Japan behind

The Japanese segment is the fourth largest generator of Apple’s profits. The business produced an operating profit of $7.6 billion, or 9.1% of the 2018 total. It is the highest margin business, which was 48.5%. In 2017, Japan’s sales were $15.3 billion and its operating profit was $6.9 billion, 11.1% of that year’s total. The region’s margin was 45.1%.

The rest of Asia-Pacific

This business includes Australia and other Asian countries not included in the company’s other operating segments. The unit’s sales were $15.1 billion, generating an operating profit of $5.5 billion. The geographic area accounted for 6.6% of Apple’s 2018 operating profit. The margin was 36.6%.

In the year-ago period, operating profit was $3.7 billion, or 5.9% of Apple’s total. In 2017, its margin was much lower, at 32.7%, on sales of $11.2 billion.

Other Factors

Apple does not break down its profits by individual business unit or product line, although it discloses sales this way. During the fourth quarter of 2018, global iPhone sales hit 64.5 million units, earning Apple a 15.8% market share during the period. That was down from 73.2 million unit sales and a 17.9% market share during the fourth quarter of 2017.

Analyst consensus estimates are calling for revenue of $61.48 billion, up 16.9% year over year and near the high end of Apple’s forecast; earnings per share are picking up at $2.78, rising 34.3% compared to the prior-year quarter.

In the year-ago quarter (Q4 2017), Apple earned $52.58 billion in revenue. During that quarter Apple sold 46.7 million iPhones, 10.3 million iPads, and 5.4 million Macs. Services include revenue from the iTunes Store, the App Store, and Apple Pay, among others. Other products comprise sales of the Apple TV and Apple Watch, as well as iPod and Apple-branded accessories.

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