Tech

Apple’s 5 Most Profitable Business Regions (AAPL)

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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.

All segments of Apple delivered higher sales and higher revenues in 2018. The company manages its activities by geographical area. Below, we’ll look at the five reportable segments, each contributing varying degrees of profitability.

Key learning points

  • Apple is a global technology company with a strong brand and innovative products.
  • While Apple does not report individual performance of its product lines, it does segment regional business units.
  • The Americas lead Apple’s sales, increasingly followed by China. Japan and Europe show a downward trend for Apple’s sales.

The Americas region is the largest contributor

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

The unit was the largest revenue generator, reaching $93.9 billion in 2018. This yielded one of the lowest operating margins at the segments at 33.2%. In 2018, America had an operating profit of $26.2 billion, contributing 42% to Apple’s overall profit. Margin was lower, at 32.7%, based on revenue 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 company had an operating profit of $23 billion, which was 27.4% of the company’s total operating profit. With an operating margin of 39.2%, it is one of the highest among Apple’s segments. To be net sales were $58.8 billion, the second largest total.

Results improved strongly in 2017, with revenue and operating profit increasing by 84.3 and 108.4% respectively. In the same period a year ago, the Greater China segment had revenue of $31.9 billion and operating profit of $11 billion. This was 17.7% of the total operating profit for 2017. The margin was 34.7%.

Europe is becoming more and more important

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

Sales in Europe were $50.3 billion. The company 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. This represented 23.2% of Apple’s total profit. The segment margin was 32.6%.

Japan is lagging behind

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

Rest of Asia-Pacific

This business includes Australia and other Asian countries that are 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 was responsible for 6.6% of Apple’s 2018 operating profit. The margin was 36.6%.

In a year earlier, operating profit was $3.7 billion, or 5.9% of Apple’s total. In 2017, the margin was much lower at 32.7% on revenue of $11.2 billion.

Other factors

Apple does not divide its profits by individual business unit or product line, although it discloses the sale this way. During the fourth quarter of 2018, global iPhone sales reached 64.5 million units, giving Apple a 15.8% market share over that period. That was less than the 73.2 million units sold and 17.9% market share in the fourth quarter of 2017.

Analyst consensus estimates say revenue of $61.48 billion, up 16.9% year over year and near the top end of Apple’s forecast; earnings per share are set at $2.78, up 34.3% from last year’s quarter.

In the year-ago quarter (Q4 2017), Apple earned $52.58 billion in revenue. In 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. Other products include sales of the Apple TV and Apple Watch, as well as iPod and Apple accessories.

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