App sale

Apple posts record quarterly sales in a sign it’s gotten the supply slump under control

Apple Inc. posted record quarterly sales that beat Wall Street estimates, a sign it was able to ride out a supply chain crisis fueled by the pandemic and chip shortages.

Sales soared 11% to $123.9 billion in the fiscal first quarter, which ended Dec. 25, the company said Thursday. Analysts had predicted $119.1 billion on average. Earnings also beat projections.

The surprisingly strong results suggest fears of a supply disruption were overblown. Apple CEO Tim Cook warned late last year that shortages could cost the company more than $6 billion in sales during the all-important holiday season. But the tech giant weathered the crisis and benefited from a flood of new products, including the iPhone 13, Apple Watch Series 7 and updated Macs.

The shares gained 3.5% late in the session. Prior to the report, they had fallen 10% this year, hit by a broader slowdown in tech stocks. The stock has gained 34% in 2021.

Earnings rose to $2.10 a share from $1.90 estimated by analysts. The Cupertino, Calif.-based company did not provide guidance for the current period, its fiscal second quarter, an approach it has used during the unpredictable era of Covid-19.

Investors are looking to Apple for reassurance after a recent rout in tech stocks. Concerns about slowing sales and looming interest rate hikes have made the sector less attractive over the past month, with Apple itself suffering from the pullback. After surpassing a market value of $3 trillion in early January, Apple is now worth $2.6 trillion.

The company generated $71.6 billion in revenue from its flagship iPhone, beating Wall Street estimates of $67.7 billion. This is an increase of 9.2% compared to the quarter of the previous year. The sales period represented the first full quarter of iPhone 13 revenue.

The phone went on sale in September, several weeks earlier than the iPhone 12 in 2020. Although the iPhone 13 was seen as a modest update, users looking to upgrade to 5G service were still clamoring for the device.

“Supply and demand were broadly balanced at the end of the quarter and shipments to China were strong,” Bernstein analyst Toni Sacconaghi said in a note ahead of the earnings release.

Supply constraints hitting the iPhone 13 lineup and other new products, including the latest Macs and Apple Watch, have caused shipping delays of weeks. In Apple’s previous earnings report, the company said the problems cost it $6 billion in sales – and warned the holiday quarter would be even worse.

In this context, the results have relieved investors. But all was not rosy: sales of the iPad were lower than expected. The company said after its previous quarter that supply issues particularly hit this product. Japan was also a weak point in the last quarter.

The iPad brought in $7.25 billion in the first quarter, against an estimate of $8.1 billion. The company rolled out the biggest iPad mini update in product history and a minor refresh to its lowest-priced tablet during the quarter, but struggled to secure enough supply in the market.

Apple generated $19.5 billion in services revenue in the first quarter, beating Wall Street expectations of $18.6 billion. The category grew 24% year-over-year on strong sales of App Store, Apple Music and iCloud subscriptions. Apple said earlier this month that developers generated about $60 billion from the App Store in 2021, but did not share specific App Store revenue for the company.

The apparel, home and accessories division – a unit that includes the Apple Watch, Apple TV, AirPods, Beats headphones, HomePod and other items – produced $14.7 billion in course of the quarter. That was up 13% from a year earlier and above the average estimate of $14.2 billion. The category was boosted by the launch of new AirPods headphones towards the end of 2021 after not getting a similar upgrade in 2020. The Apple Watch Series 7, however, faced a release delay and significant shortages.

The company also reported about $10.9 billion in Mac sales, beating the estimate of $9.5 billion. This is up 25% from the period a year ago. Apple launched a new MacBook Pro during the quarter that was well received by consumers and reviewers.

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