Shrinking gross margins projected to take big bite out of Apple’s income

Apple Quarterly Earnings

Apple (AAPL) is certainly a long way from being doomed but that doesn’t mean the company is still firing on all cylinders like it’s done for most of the last decade. Case in point: Fortune has surveyed several Apple analysts and all of them expect the company’s next quarterly earnings report to show a decline in income compared to the same quarter last year. Granted, Apple’s second-quarter earnings last year delivered a hard-to-match $12.30 earnings per share, but the projected decline to the $10 range would still mark the first time since 2003 that the company has posted a year-over-year decline in earnings.

Fortune says the reason for this earnings sag is the steady fall in Apple’s gross margins, which peaked at over 47% in Q2 2012 and have been shrinking ever since while dipping below 40% last quarter for the first time since 2011. This explains how Apple can report lower earnings year-over-year while still producing record revenues that are projected to exceed $41 billion in Q2 2013. Concerns over Apple’s ability to maintain high profitability are only likely to intensify as rumors swirl around about the company offering a cheaper version of its iPhone that will surely boost its market share but will also likely slash its gross margins even further.

Source:
Fortune
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