Apple revenue pops 11% to $123.9 billion, Cook says supply chain improving
Apple beat analyst estimates for sales in every product category except iPads and overall revenue was up 11% annually.
Here is how Apple did in the quarter ending Dec. 25 versus Refinitiv consensus estimates:
EPS: $2.10 vs. $1.89 estimated, up 25% year-over-year
Revenue: $123.9 billion vs. $118.66 billion estimated, up 11% year-over-year
iPhone revenue: $71.63 billion vs. $68.34 billion estimated, up 9% year-over-year
Services revenue: $19.52 billion vs. $18.61 billion estimated, up 24% year-over-year
Other Products revenue: $14.70 billion vs. $14.59 billion estimated, up 13% year-over-year
Mac revenue: $10.85 billion vs. $9.52 billion estimated, up 25% year-over-year
iPad revenue: $7.25 billion vs. $8.18 billion estimated, down 14% year-over-year
Gross margin: 43.8% vs. 41.7% estimated
Apple again did not provide official guidance about expectations for the current quarter. Apple hasn’t provided guidance since the start of the Covid-19 pandemic, citing uncertainty.
Apple CEO Tim Cook did provide a forward-looking data point in an interview with CNBC’s Julia Boorstin.
“What we expect for the March quarter is solid year-over-year revenue growth,” Cook said. “And we expect supply constraints in the March quarter to be less than they were in the December quarter.”
It was another strong showing for Apple in its most important quarter of the year which includes holiday sales. Every one of Apple’s product lines grew year-over-year from last year, except for iPad sales, despite management warnings from October that supply issues could hurt the company’s sales.
Cook said that the company’s supply issues were improving. He said that in terms of supply challenges, the December quarter was worse than Apple’s September quarter, but that he is projecting the March quarter to improve.
“Our biggest issue is chip supply, it’s chip supply on legacy nodes,” Cook said. “And we’re doing okay on the leading edge stuff.”
Leading edge chips are the powerful processors at the heart of a phone, while “legacy node” chips are the other, less sophisticated parts that run functions like driving displays or managing power.
Apple released new iPhone models in September, and this quarter was the first full quarter of iPhone 13 sales, giving investors a preview of how competitive the devices are in the market. Sales were up 9% annually to $71.63 billion, although they are growing slower than Apple’s overall business.
Cook said that Apple was proud of the 9% increase in iPhone sales. “That’s despite having supply constraints during the quarter,” Cook said.
Services, which include iCloud, Apple Music, search licensing and App Store fees, continued growing strongly, rising 25% annually to $19.52 billion. Services is Apple’s most profitable business unit and its rise contributed to Apple’s higher-than-expected gross margin.
Apple’s other products category, which includes Apple Watch and AirPods, was up 13% year-over-year. This quarter included sales from Apple’s latest Series 7 watch, which has a larger screen, and new AirPods.
Macs had the strongest growth of any of Apple’s hardware lines, growing 25% over last year to $10.85 billion. In October, Apple launched new MacBook Pro models starting at $1,999 that were well-received and featured a new Apple chip instead of an Intel chip.
iPads were the most notable disappointment. Sales shrunk from last year, and missed analyst estimates, but it was likely because Apple could not make enough iPads and prioritized other devices. Cook attributed the iPad results to “significant” supply constraints.
Cook also told CNBC that Apple was seeing inflationary pressure.
“I think everybody’s seeing inflationary pressure,” Cook said. “There’s no two ways about that.”