Apple reported during its quarterly release and conference call a record-breaking $89.6 billion in revenue for its Q2 2021 once again beating Wall street expectations especially at a time where many markets around the world are still reeling from the deadly pandemic.
The total set a new March quarter record and represented a 54% year-over-year growth for the company. Net profit rose by an astonishing 110% growth to hit $23.6 billion. This was helped by a record increase in net profit margin at 42.5% from 38.4% a year ago. Apple was able to increase its margin due to cost savings, a strong mix of iPhone sales, and weakening dollar. Apple showed notable increases in all its product categories.
Apple’s CFO Luca Maestri says that the gross margin is the highest it has been in nine years and believes that June quarter will show similar results.
Diluted earnings-per-share (EPS) is at $1.40 up from the split adjust EPS of $0.64. Operating expense for the period was at $10.6 billion. Up from the $9.5 billion a year ago.
Greater China sales increased by 87.5% to $17.7 billion. APAC sales were up 94.2%. Europe up 55.8%. Japan up 48.7%. and Americas up 34.7%.
“This quarter for Apple wouldn’t have been possible without the tireless and innovative work of every Apple team member worldwide. We’re gratified by the enthusiastic customer response to the unmatched line of cutting-edge products that we delivered across a historic holiday season,” said Apple CEO Tim Cook. “We are also focused on how we can help the communities we’re a part of build back strongly and equitably, through efforts like our Racial Equity and Justice Initiative as well as our multi-year commitment to invest $350 billion throughout the United States.”
Apple’s Q2 results in the first full quarter of sales for the iPhone 12 range as there was a delay in product release due to the pandemic. It was dubbed a super-cycle release as the iPhone 12 is the first iPhone to include 5G support. iPhone sales were up 65.5% with revenue hitting $47.9 billion, up from $28.9 billion a year ago.
Cook noted that the iPhone 12 was the best selling iPhone in Apple’s lineup with the iPhone 12 Pro and iPhone 12 Pro Max in the second and third place. There was no mention of the iPhone 12 mini, which is rumored to have weak sales.
Apple’s iPad revenue hit $7.8 billion from $4.4 billion a year ago. That’s a 78.7% increase year-over-year. Customer service satisfaction of iPad reached 94% and more than 50% of all new purchases belongs to new users.
This quarter marks the first full period of the iPad Air 4 and 2020 version of the 10.2-inch iPad.
The “Spring Loaded” event brought new iPads and iMacs that will enter the market during the 3rd quarter which should further help drive sales of iPad and Mac.
The Mac marks the first full period since the release of the well received Apple Silicon M1 Mac. Along with the iPhone and iPad, the Mac continues to benefit from the new age of the work-from-home environment.
Mac revenue hit $9.1 billion from $5.4 billion a year ago marking a 70.1% increase year-over-year.
Cook noted that the last three quarters for Mac was the best quarters in has been. “The demand feels very strong right now, both on the Mac side, you have the combination of work from home and remote learning. And in iPad, you’ve got remote learning and work from home as well.”
Wearables, Home, and Accessories
The Wearables, Home, and Accessories unit saw high revenue gains for this quarter. The category grew by 24.7% to $7.8 billion, up from $6.3 billion from a year ago.
Cook said during the conference call that the Apple Watch is in its “early innings and a long way from being a mature market”.
This category includes the Apple Watch, HomePod and HomePod mini, Apple TV, and AirPods.
Services is a core revenue source with its Q2 sales at $16.9 billion marking a 26.6% increase from the $13.4 billion a year ago.
During the Q&A session, Apple was asked about a potential price increase for Apple TV+ and other services. Cook said that Apple is focused on giving customers great value and “we’ll see where we go from here.”
Services category has been on a steady upward trajectory and is already a size of a Fortune 500 company. Included in this category are what makes the ecosystem great and includes App Store, iCloud, Apple Music, Apple TV, and Apple Fitness Plus. It also includes AppleCare warranties and Apple Pay and Apple Card.
Apple also revealed that its services segment added 40 million additional paid subscriptions for a total of 660 million. That is up 28% from the same quarter last year.
Several Analysts have increased their price targets for Apple with JP Morgan and Cowen leading the pack following another blowout quarter from the company.
Apple did not provide a forecast for Q3 2021, as it did when the pandemic started citing continued uncertainty around the world in the near term. The company provided gross margin guidance of 41.5% to 42.5% and operating expenses guidance of $11.1 billion to $11.3 billion and tax rate expectations of 14.5%. Maestri though said that he expects Apple to have strong double-digit growth in the 3rd quarter. Maestri cites the later launch timing and strong demand for the iPhone 12 and iPhone 12 Pro lineups and that iPhone only achieved supply and demand balance in the March quarter which is later than usual.