Apple’s 5 Most Profitable Business Regions (AAPL)

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Apple, Inc. (NASDAQ: AAPL) designs, manufactures and markets mobile communication 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 of Apple’s segments produced higher sales and operating income in 2018. The company manages its business by geographic area. Below, we’ll take a look at its five reportable segments, with each contributing different rates of profitability.

Key Takeaways

  • Apple is a global tech 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 revenues, followed increasingly by China. Japan and Europe have trended downward for Apple sales.

The Americas Region Is the Largest Contributor

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

The unit was the highest generator of sales, which were $93.9 billion in 2018. This produced one of the lowest operating margins among the segments at 33.2%. In 2018, the Americas had an operating profit of $26.2 billion, contributing 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 increasingly important. In 2018, the business had an operating profit of $23 billion, which was 27.4% of the company’s total operating profit. Its 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 sharply 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 2017’s total operating profit. The margin was 34.7%.

Europe Decreasing in Importance

Although the European segment’s sales and operating profit are growing, they are not increasing at the same rate as those of Greater China. 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.

Europe’s 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. This represented 23.2% of Apple’s total profits. The segment’s margin was 32.6%.

Japan Trails 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 2018’s 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, which was 11.1% of that year’s total. The region’s margin was 45.1%.

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, producing an operating profit of $5.5 billion. The geographical area was responsible for 6.6% of Apple’s 2018 operating profit. Its margin was 36.6%.

In the year-earlier 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, though it does disclose sales in this manner. During the fourth quarter of 2018, global iPhone sales hit 64.5 million units, earning Apple 15.8% market share during the period. That was down from 73.2 million unit sales and 17.9% market share during the fourth quarter of 2017.

Analysts’ 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 being pegged 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 are composed of sales of the Apple TV and Apple Watch, as well as iPod and Apple-branded accessories.

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