Record revenues of $90bn amid Covid buying surge
Apple executives announced record revenues on Wednesday, with earnings far surpassing analysts’ expectations. Revenue was up 54% year-over-year to nearly $90bn. Sales in China doubled. Mac sales were a third higher than predicted and iPhone sales came in around $48bn – roughly $6.5bn higher than initial estimates.
“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,” said Tim Cook, Apple’s CEO, in a statement.
The company continued to see soaring profits through the last quarter, and built on its successes in the last two quarters to make $23.6bn in profits.
Apple also announced a $90bn share buyback and assuaged investors’ anxieties over how it would handle a severe semiconductor shortage that has hampered other companies and the automobile industry.
“There wasn’t a material issue with our results due to supply,” Cook told Reuters.
Apple was one of several companies that thrived during the Covid-19 pandemic, as consumers bought more products and spent more time online through long lockdowns and social distancing requirements. A bump in sales was also fueled by demand for Apple products, including laptops, desktops, and iPads, which grew as people transitioned to remote working and schooling.
After more than a month of delays, Apple unveiled its iPhone 12 line last fall, which outperformed its predecessors and analyst expectations. With the 5G-equipped devices, the new iPhone helped Apple finish 2020 with its most profitable quarter ever, drove a 21% increase in revenue in the first quarter of 2021 and carried those successes into Q2.
This week Apple also announced it was ramping up US investments, with more than $430bn in direct spending on American suppliers and data centers, and Apple TV+ productions, with 20,000 new jobs added over the next five years.
“At this moment of recovery and rebuilding, Apple is doubling down on our commitment to US innovation and manufacturing with a generational investment reaching communities across all 50 states,” said Cook in a statement.
Though the outlook certainly seems sunny, some analysts have doubts over whether the demand can be sustained as economies begin to transition out of the Covid crisis.
“Current high levels of both iPad and Mac demand are unlikely to be sustainable as the world re-opens, so another beat driven more by these areas may not be enough to drive the shares further,” Goldman Sachs’ Rod Hall wrote in a research note ahead of the call.
Cook argued, however, that demand felt strong. “Where this pandemic will end, it seems like many companies will be operating in a hybrid kind of mode,” Cook said.
Apple is also facing increased scrutiny from US lawmakers – along with other big tech companies like Google and Facebook – over possible antitrust violations.
In a Senate antitrust hearing last week, smaller tech companies criticized the company, saying it acts as a gatekeeper and uses its giant platform to squash competition. The day before the hearing, Apple introduced its new AirTags, which enabled users to track items with their iPhone’s “Find My” software, a device some believe was copied from a similar Samsung product.
Senator Amy Klobuchar, the Democratic chair of the antitrust subcommittee, censured the companies for using their dominance in the market to “exclude or suppress apps that compete with their own products” and “charge excessive fees that affect competition”.
Along with these issues, Apple will continue having to navigate uncertainties around a microchip shortage that’s expected to last into next year.
Computer chips, which are essential to Apple’s product-lines, have been in short supply since last summer after chip factories shut down early in the midst of the pandemic.
The backlog was complicated by bumps in demand, former president Trump’s trade war, and the shift to 5G. Joe Biden’s $2tn infrastructure plan includes roughly $50bn to invest in domestic production of the chips, but it can take years to get the complex factories up and running.
Apple has seemed to not have been greatly affected by the crunch, but the shortage has produced production delays and pushed prices higher, which could stifle growth in demand for Apple’s products in the future.
“There is no sign of supply catching up, or demand decreasing, while prices are rising across the chain,” Neil Campling, a media and tech analyst at Mirabaud, told the Guardian in March.
“This will cross over to people in the street. Expect cars to cost more, phones to cost more. This year’s iPhone is not going to be cheaper than last year.”
Cook acknowledged that there had been challenges to meet the demand but expressed only optimism about the future.
“It is worth remembering just how we felt at this time last year when everything we knew had to change,” Cook said during the call, listing examples of the difficult shifts people across the world made in their daily lives to limit the spread of Covid.
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