Monday, February 16, 2015

Apple’s Deferred Revenue Balances

Apple defers up to $25 in revenue per iOS device sold and $40 in revenue per Macintosh sold to future periods. The amounts deferred represent an estimate of the value of the free software upgrades Apple provides to device owners over the anticipated useful life of the product. This value is included in the purchase price of each device and recognized as revenue over subsequent periods following the period of original purchase.

In the December quarter (FQ1 2015) Apple added on a sequential basis $945 million to the company’s deferred revenue total. The year-over-year rise was $1.039 billion. At the end of the quarter Apple had $12.467 billion in current and non-current deferred revenue on the balance sheet. 

The graph below illustrates Apple’s deferred revenue balances on a quarterly basis and the year-over-year change in the deferred revenue total in each quarter.

While the pace of growth in the company’s deferred revenue total moderated as revenue growth moderated beginning in the latter half of FY2013 with very little movement in the total throughout FY2014, much faster rates of revenue growth this fiscal year and through at least the first half of FY2016 may deliver rising deferred revenue balances each quarter for the next several quarters. In other words, more revenue may be deferred in each quarter this fiscal year than is recognized from revenue deferred in prior periods. 

Robert Paul Leitao