Original article:
https://www.cnbc.com/2021/04/28/apple-aapl-earnings-q2-2021.html
TECH
Apple reports another blowout quarter with sales up 54%, authorizes $90 billion in share buybacks
Kif Leswing @KIFLESWING
PUBLISHED WED, APR 28 2021 3:33 PM EDT UPDATED WED, APR 28 2021 6:05 PM EDT
KEY POINTS
- Apple reported a blowout quarter on Wednesday, announcing companywide sales up 54% higher than last year, and significantly stronger profits than Wall Street expected.
- Apple did not issue official guidance for what it expects in the quarter ending in June.
- Apple authorized $90 billion in share buybacks.
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Apple reported a blowout quarter on Wednesday, announcing companywide sales up 54% higher than last year, and significantly stronger profits than Wall Street expected.
Apple stock rose over 4% at one point in extended trading.
Apple reported double-digit growth in every single one of its product categories, and its most important product line, the iPhone, was up 65.5% from last year. Its Mac and iPad sales did better, with its computers up 70.1% and iPad sales growing nearly 79% on an annual basis.
Apple said it would increase its dividend by 7% to $0.22 per share and authorized $90 billion in share buybacks, which is significantly higher than last year’s $50 billion outlay and 2019′s $75 billion.
Here’s how Apple did versus Refinitiv estimates:
EPS: $1.40 vs. $0.99 estimated
Revenue: $89.58 billion vs. $77.36 billion estimated, up 53.7% year-over-year
iPhone revenue: $47.94 billion vs. $41.43 billion estimated, up 65.5% year-over-year
Services revenue: $16.90 billion vs. $15.57 billion estimated, up 26.7% year over year
Other Products revenue: $7.83 billion vs. $7.79 billion estimated, up 24% year-over-year
Mac revenue: $9.10 billion vs. $6.86 billion estimated, up 70.1% year-over-year
iPad revenue: $7.80 billion vs. $5.58 billion estimated, up 78.9% year-over-year
Gross margin: 42.5% vs. 39.8% estimated
Apple did not issue official guidance for what it expects in the quarter ending in June. It hasn’t provided revenue guidance since the start of the pandemic, citing uncertainty. This is Apple’s second quarter in a row with double-digit growth in all product categories. Apple CFO Luca Maestri told analysts that the company expects June quarter revenue to rise by double digits year-over-year, although it faces some supply shortages due to the worldwide chip shortage.
Apple has said in the past months that its business has been boosted by the pandemic as consumers and businesses bought computers to work and entertain themselves while at home. But Apple’s strong results in the quarter suggest that the trend may persist as more economies open up.
Or, as Apple CEO Tim Cook said in a statement: “This quarter reflects both the enduring ways our products have helped our users meet this moment in their own lives, as well as the optimism consumers seem to feel about better days ahead for all of us.”
Mac sales were up 70%, and Cook said that the result was “fueled by” the company’s introduction of its Mac laptops that used its own M1 chips for longer battery life, instead of processors sold by Intel. iPad sales were up nearly 79% year-over-year.
Neither of those results include iPad Pro or iMac models the company announced in March, which are expected to drive additional demand.
“We’re seeing strong first-time buyers on the Mac … it continues to run just south of 50%,” Cook told CNBC’s Josh Lipton. “And, in China, it’s even higher than that … it’s more around two-thirds. And that speaks to people preferring to work on the Mac.”
Apple’s iPhone also reported strong results this quarter, quelling fears that the current annual cycle could slow down. Last year, Apple released iPhones with a new exterior design and 5G support, which many investors believed could prompt a major upgrade cycle, which this quarter’s results indicate.
In greater China, which includes the mainland, Hong Kong, and Taiwan, Apple’s revenue increased over 87% year-over-year to $17.73 billion, although the comparison is to a quarter last year in which China was largely shut down in the early days of the pandemic. Every other geographical category, including the Americas and Europe, were also up on an annual basis.
Apple’s high-margin services business, including iCloud, App Store, and subscriptions like Apple Music, also showed 26.7% growth.
One metric that Apple uses to show the growth in services is the number of subscriptions it has, which not only include its own subscriptions like Apple One, but also subscriptions through its App Store.
“We now have over 660 million paid subscriptions across the services on the platform, and that’s up 40 million from the previous quarter, which is an acceleration from 35 million,” Cook told CNBC.
However, Apple’s App Store has been challenged by lawmakers and companies that say it costs too much and has too much power. A closely-watched trial with Fortnite maker Epic Games over App Store policies kicks off next week.
“The App Store has been an economic miracle. Last year, the estimates are that there was over a half a trillion dollars of economic activity because of the store. And, so, this has been just an economic gamechanger for not only the United States, but several countries around the world. And, we’re going to go in and tell our story. And we’ll see where it goes. But, we’re confident,” Cook told CNBC.
Apple’s gross margin was also unusually elevated for the company. Most quarters, it tends to be in the 38% to 39% range, but in the quarter ending in March, Apple reported 42.5% margins.
TECH
Apple just recorded a 42.5% gross margin for the quarter, the highest in nine years
Ari Levy @LEVYNEWS
PUBLISHED WED, APR 28 20216:08 PM EDT
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KEY POINTS
- Apple said the gross margin in its services business climbed to 70% in the quarter from 65% a year earlier.
- By building its suite of software products and charging more for iPhones, the company is squeezing more profits out of its customers.
- Apple recently announced a podcast subscription services that will compete with a new offering from Spotify.
In this article
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After Hours
Apple CEO Tim Cook delivers the keynote address during the 2020 Apple Worldwide Developers Conference at Steve Jobs Theater in Cupertino, California, June 22, 2020.
Apple CEO Tim Cook delivers the keynote address during the 2020 Apple Worldwide Developers Conference at Steve Jobs Theater in Cupertino, California, June 22, 2020.
Brooks Kraft | Apple Inc. via Reuters
Apple’s 38% gross margin was about as certain as death and taxes.
Until recently.
In its quarterly earnings report on Wednesday, Apple said that its gross margin — the percentage of revenue left after accounting for the cost of goods sold — jumped to 42.5%. In the prior period, the figure was 40%.
It’s the highest margin for Apple since 2012, when the company was less than half its current size. Between 2013 and 2020, the number hovered between 37% and 39%, more often than not sitting right at 38%, according to FactSet.
Apple, the most valuable company in the U.S., is squeezing more profit out of its business by getting buyers of its iPhones and iPads to spend more money on services like iTunes, Apple Music, Apple Pay and App Store purchases. In reporting better-than-expected sales and earnings figures for the quarter, Apple said the services business jumped 27% from a year earlier, while its services gross margin expanded to 70% from 65% last year at this time and 64% a year before that.
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Canaccord Genuity analysts said in a report last week that Apple should generate higher margins as users of its 1.65 billion active devices snap up add-on software products.
“This growing base should consume increasing Apple services, helping drive faster growth for this high-margin business than the overall hardware business,” wrote the analysts, who recommend buying the stock.
Apple, which maintains a notoriously strong grip over its supply chain, is also getting stronger profits from its hardware sales. Its product margin jumped to 36% in the period from 30% a year earlier.
At least some of that increase comes from price hikes. The iPhone 12, which was announced in October, costs $100 more than the prior year’s baseline model. Analysts at Wedbush said that average selling prices have also moved higher for the more expensive iPhone Pro and Pro Max versions.
While iPhone sales move through cycles, software and services are more reliable and have allowed Apple to find avenues for growth regardless whether people are upgrading their devices in any particular period. This month, the company announced a podcast subscription and said it’s redesigning its podcast app.
Spotify, Apple’s top rival in music and audio, followed this week by launching its own podcast subscription service. Spotify isn’t taking a subscription revenue cut for the next two years as it tries to lure content developers, and said creators will receive 100% of their sales, excluding payment transaction fees. Starting in 2023, the company will charge a 5% fee for the tool. Apple takes a 30% cut the first year and will then drop the fee to 15% in the second year.
Apple shares rose as much as 3.6% in extended trading to $138.41 after the earnings report. The stock is about flat this year as of the close.
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