Company / Analytics

Analytics, 29 January 2021

Apple reports the largest all-time revenue in Q1

iPhone marker Apple delivered its largest quarter by revenue, for the first time crossing the symbolic $100 billion mark in a single quarter in a period which saw sales rise by 21% while earnings per share rose 35% year over year. The $111.4 billion revenue was powered by sales of iPhone 12.

This is the first quarterly report Apple issued following the launch of its iPhone 12 mini, the iPhone 12, the iPhone 12 Pro, and the iPhone 12 Pro Max. The boost in revenue came from sales of the iPhone 12 which was released in October, a month later than Apple usually debuts its new phones, after pandemic-related delays.

What do the numbers say?

Though Apple is among companies that have benefitted from the pandemic as its products allowed people to work from home or kept them entertained during lockdowns, Apple CEO Tim Cook said the results could have been even better if not for the Covid-19 pandemic and lockdowns that forced Apple to temporarily shutter some Apple stores around the world.

Cook said that Apple’s total install base for iPhones is over 1 billion, up from the previous data point of 900 million. The total active install base for all Apple products is 1.65 billion.

Apple’s other products category, which includes Apple Watch and headphones such as AirPods and Beats, was up 29% from last year to $12.97 billion, even as people are spending less time commuting and traveling. Apple released a high-end set of headphones, AirPods Pro Max, in December, with a steep $549 suggested price.

Apple’s Services business outperformed in the quarter, key metric analysts and investors watch to ensure the company’s growth continues outside of iPhone sales. The Services segment was up 24% year over year to $15.76 billion. That product category is a catch-all: It includes the money Apple makes from the App Store, subscriptions to digital content such as Apple Music or Apple TV+, licensing fees paid by Google to be the iPhone’s default search engine, and AppleCare warranties.

The Mac business segment pulled in $8.68 billion in the quarter following the debut of Apple’s new MacBook Air powered by its custom M1 processor. Apple’s processors received positive reviews that said they were superior in terms of power and battery life to the old models. Rumors abound of Apple releasing additional M1-powered Macs in the near future, which could further bolster the division’s sales moving forward.

What does the future look like for Apple?

Apple did not provide official guidance for the upcoming quarter. Apple has not offered investors any forecasts since the beginning of the pandemic. However, even in the lack of company guidance, the company still blew out the quarter. Apple users continue to upgrade their devices to newer models, even during pandemic-induced lockdowns. Investors believe the four iPhone 12 models released in October, the first to include 5G, could drive a “supercycle” of users clamoring to upgrade. Indeed, iPhone revenue was up 17% from the same period last year.

International markets appear to be the next growth frontiers for most US tech companies. For the quarter, international sales accounted for 64% of the company’s sales, up from 61% in the same quarter last year.

How new iPhone models fare in China, the company’s third-largest market is a constant topic of discussion among investors. Sales in what Apple calls greater China, which includes Taiwan and Hong Kong, were up nearly 57% to $21.3 billion.

Wednesday’s blowout earnings represent a recovery story for Apple. Two years ago, Apple warned that its projection for its holiday quarter sales was lower than the company expected, a rare warning that raised questions about whether Apple was losing its momentum. On Wednesday, Apple revealed that revenue is up over 32% since that report.

Apple declared a cash dividend of $0.205 per share and said that it had spent over $30 billion on total shareholder return, which includes share buybacks, during the quarter. Apple’s first fiscal quarter is typically its largest of the year and includes critical holiday sales during December.

On Tuesday, Apple announced that its senior vice president of hardware engineering, Dan Riccio, was transitioning to a different role at the company to take on a “new project.” The news comes amid rumors that Apple has an electric vehicle endeavor in the works. It’s also reportedly testing folding iPhone screens and an expensive virtual and augmented reality headset that is slated to be released in 2022.

How did the stock move?

Apple shares have gained following three of the past five earnings reports, and the shares were up 75% over the past year as the Dow which counts Apple as a component, has gained 7%. Apple stock dropped 2% in extended market trading after earnings release on Wednesday and slid roughly 1% on Thursday as investors digested the blowout earnings. The stock closed Thursday trading at $137.09.

Should you buy or sell Apple shares?

Market analysts largely applauded the quarter, taking it as a sign of more good news to come from Apple. The current consensus among 41 polled investment analysts is to buy stock in Apple Inc. The 38 analysts offering 12-month price forecasts for Apple Inc have a median target of 153.50, with a high estimate of 175.00 and a low estimate of 74.10. The median estimate represents a +12.00% increase from the last price of 137.05, according to CNN Business.

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