Apple: Revenue Growth Vs. Growth in Operating Expenses
I'm taking time mid-week as I prepare revisions to my December quarter estimates and resulting updates to my AAPL price targets and forecasts for a comparison of Apple's revenue growth vs. growth in the company's operating expenses.
Outside of the cost of sales (the costs of products sold), operating expenses represent Apple's largest cost segment. Comprised of R&D expenses and selling, general and administrative expenses, in fiscal year 2010 operating expenses consumed about 11.2% of Apple's reported revenue. From a high of 12.2% of revenue in the second fiscal quarter to a low of 10.2% of revenue in the fourth fiscal quarter, operating expenses have an direct and material impact on Apple's earnings and pace of earnings growth.
FY2010 Revenue Growth v. Operating Expense Growth
In fiscal year 2010 Apple grew revenue 52% and earnings per share by an impressive 67%. Contributing to a pace of eps growth greater than the pace of growth in revenue was Apple's ability to keep the pace of growth in operating expenses well below the pace of growth in revenue.