Apple on Wednesday reported holiday quarter sales and profits that beat Wall Street expectations, as new 5G iPhone modelss helped push handset revenue to a new record and sparked a 57 percent rise in China sales.
During the financial results call, Apple CEO Tim Cook said on opportunity for market share expansion, “This is particularly the case in some of the emerging markets where we’re proud of how we’ve done… If you take India for example, we doubled our business last quarter compared to a year ago quarter but our absolute level of business there is still quite low relative to the size of the opportunity.”
“There are several markets I alluded to before, India is one of those, where our share is quite low, it did improve from the year ago quarter, our business roughly doubled over that period of time, so we feel very good about the trajectory.” Commenting on Apple’s active efforts to grow market share in India, Cook said, “We are doing a number of things in the area, we put the online store there for example, and last quarter was the full first quarter of the online store and that has gotten a great reaction to it and has helped us achieve the results that we got to last quarter. We are also going in there with retail stores in the future and so we look to that to be another great initiative, and we continue to develop the channel as well.”
Apple shipped its iPhone 12 lineup several weeks later than usual, but an expanded number of models and new look tapped pent up demand for upgrades, especially in China. The company also posted strong sales of its Mac laptops and iPad units in the quarter, driven by consumers working, learning and playing from home during the pandemic.
Apple’s revenue for the quarter ended December 26 rose 21 percent to $111.44 billion (roughly Rs.8,14,700 crores). Earnings per share rose to $1.68 (roughly Rs. 120) from $1.25 (roughly Rs. 90), beating Wall Street targets, according to IBES data from Refinitiv. Sales of iPhone models were $65.60 billion (roughly Rs. 4,79,650 crores) and beat a record set three years ago.
Chief Financial Officer Luca Maestri told investors that revenue growth was likely to accelerate on a year-over-year basis in the current fiscal second quarter and that gross margins were likely to be similar to the fiscal first quarter’s rate of 39.7 percent. He also said the company’s services segment revenue faced a tough comparison to the year before, when the pandemic lifted sales, and that year-over-year growth in the company’s wearables segment would slow.
Shares of Apple were down 2.6 percent at $138.33 (roughly Rs. 10,100) in after-hours trade following the report but have risen nearly 12 percent since January 15. Apple shares rose 85 percent over the previous year, versus 46 percent for the Nasdaq 100, of which it is a component.
“Their challenge is keeping up the success to justify the now-premium valuation,” Trip Miller, managing partner at Apple investor Gullane Capital Partners.
Apple, the biggest US listed public company by market capitalisation with a value of $2.4 trillion (roughly Rs. 1,75,50,600 crores), has thrived through a pandemic that forced it to shutter many of its stores but prompted many consumers to buy or upgrade devices.
Apple Chief Executive Officer Tim Cook told Reuters in an interview that the company now has an active installed base of 1.65 billion devices, compared with 1.5 billion devices a year ago. Cook also said Apple now has an installed base of more than 1 billion iPhone devices, an increase over the 900 million the company most recently disclosed in 2019.
China proved a strong market for iPhone, with overall sales there rising 57 percent to $21.31 billion (roughly Rs. 1,55,830 crores).
“We had two of the top three selling smartphones in urban China,” Cook told Reuters in an interview, adding that “upgraders in particular set an all-time record in China.”
Mac sales hit expectations at $8.68 billion (roughly Rs. 63,470 crores). Sales of iPad units, services, and wearable topped Wall Street targets. iPad revenue was $8.44 billion (roughly Rs. 61,720 crores) and the services business, which includes its new Apple One bundle of television, music, and cloud storage services, had $15.76 billion (roughly Rs. 1,15,250 crores) in revenue.
Cook told Reuters that sales of Mac models, iPad units, and the iPhone 12 Pro models all ran into “supply constraints.” He said that “semiconductors are very tight” but that other areas of the supply chain contributed to the constraints as well.
Apple has 620 million paying subscribers on its platform, ahead of its goal to have 600 million subscribers by the end of 2020, Cook said.
The services segment also includes sales from Apple’s App Store, whose billing practices have become a flashpoint of conflict with Fortnite creator Epic Games and whose privacy rules have ticked off a public spat with Facebook.
Apple’s wearables and accessories segment, which includes the Apple Watch and AirPods product lines, hit $12.97 billion (roughly Rs. 94,850 crores) in revenue. Apple in December released the AirPods Max, a $550 (roughly Rs. 40,200) set of over-ear wireless headphones, with shipment dates stretching months into the future within hours of the product’s launch. Cook said short supplies of the AirPods Max could continue into the company’s current fiscal second quarter.