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Consumer electronics giant Apple report June quarter earnings Tuesday. Last quarter Apple reported i Mac and Services all-time record results, and Apple set new MarQ records for iPhone and Wearables sales. The iPhone 12 was Apple's first 5G phone.

IPhone 8

Apple (NASDAQ: $AAPL) Report Earnings After Close Tuesday

 $1.30 Beat $1.01 EPS Forecast AND $81.41 Beat $73.30 Billion forecast in revenue 

Q3 2021 earnings release: 4:30 p.m.; conference call: 5 p.m.

Earnings

Using Refinitiv estimates:

  • EPS: $1.30 vs. $1.01 estimated
  • Revenue: $81.41 billion vs. $73.30 billion estimated, up 36% year-over-year
  • iPhone revenue: $39.57 billion vs. $34.01 billion estimated, up 49.78% year-over-year
  • Services revenue: $17.48 billion vs. $16.33 billion estimated, up 33% year-over-year
  • Other Products revenue: $8.76 billion vs. $7.80 billion estimated, up 40% year-over-year
  • Mac revenue:$8.24 billion vs. $8.07 billion estimated, up 16% year-over-year
  • iPad revenue: $7.37 billion vs. $7.15 billion estimated, up 12% year-over-year
  • Gross margin: 43.3% vs. 41.9% estimated

 

Market Reaction to 143.70▼ 3.07 (2.09%) After Hours

Highlights

  • Greater China region, which includes Taiwan and Hong Kong in addition to the mainland reported $14.76 billion in sales in the region, up 58% from the same quarter last year, although it was an easy comparison given that China was in stages of lockdown during the quarter.
  • Americas sales were up nearly 33% year-over-year to $39.57 billion.

Apple's quarter ending in June is typically one of its slowest of the year, but the company has benefitted from work-at-home and remote schooling trends that have boosted sales of its premium computers.

AAPL Earnings Q3 2021

Cook mentioned that the success was not just because of people upgrading their old iPhones, but also Android customers buying their first iPhone

. "We saw a very strong double digit increases in both upgraders and switchers during the quarter," Cook said.

Supply shortages linked to the global chip shortage affected its Mac and iPad sales.

"The shortage primarily affected Mac and iPad," Apple CEO Tim Cook told CNBC's Josh Lipton. "We had predicted the shortages to total $3 to $4 billion. But we were actually able to mitigate some of that, and we came in at the lower than the low end part of that range."

Apple warned that silicon supply constraints could affect its September quarter iPhone and iPad sales, although the chips that are in short supply are the "legacy nodes" of older kinds of chips, instead of the processors that power Apple devices. Cook also said on a call with analysts that the company believes that freight costs are high.

Services Boom

Apple's services business also shook off investor fears that its rate of growth could slow as more people go back to work and spend less on online services and apps. Services was up 33% year-over-year, an acceleration from last quarter's 26.7% growth rate.

Maestri said that Apple expected the company's services growth rate to decrease in the September quarter. While Apple's services business includes many products and Apple does not break down how it's composed, Cook told CNBC that the company set records in music, video, cloud services, advertising and payments.

"It's clear that our long running investment in our services strategy is succeeding," Cook told CNBC.

  • Apple now has 700 million paid subscribers, up 150 million year-over-year, Cook said.
  • Apple's subscriber figure includes customers subscribed to an app through Apple's App Store billing.

Cook also said that Apple pushed back its return to its campus headquarters from September to at least October because of the Covid-19 situation

 "I've been really pleased with what we've been able to accomplish in this fully remote mode," Cook said.

Dividends and Buybacks

Apple declared a dividend of $0.22 per share of stock. In a statement, Apple said that it spent $29 billion on shareholder return during the quarter. Apple CFO Luca Maestri told CNBC that the company has bought back almost $450 billion in stock in recent years.

Outlook

Apple CFO Luca Maestri said Apple expects double-digit, year-over-year growth in the current quarter. Maestri said that Apple expected less than 36% growth in the September quarter because of foreign exchange rates, less growth in its services business and supply constraints for iPhones and iPads. Apple CEO Tim Cook said in a call with analysts that Apple is seeing supply constraints related to "silicon" (a common term for computer chips) that would affect the company's iPhone and iPad sales in the September quarter.

 

Earnings Preview

Apple report third-quarter 2021 earnings on Thursday with projected EPS of $1.01 and Projected revenue of $73.3 billion. The Q2 (Mar) earnings reported a huge $0.42 EPS beat, well ahead of the $0.27 beat reported last quarter with revenue jumping 53.6% yr/yr to a new MarQ record high of $89.58 bln, well above the $76.84 bln consensus.

  • The Street expecting Q3 iPhones revenue to be $33.5 bln vs. $26.4 bln last year,
  • iPad revenue of $6.4 bln vs. $6.6 bln last year,
  • wearables and home products revenue of $7.8 bln vs. $6.5 bln last year,
  • Macs of $7.7 bln vs. $7.1 bln last year,
  • services revenue of $16.7 bln vs. $13.2 bln last year.
  • The Street is expecting Q3 gross margins of 42.0% versus 38.0% last year.

Cowen expects "AAPL to report Jun '21 quarter (F3Q21) in line with consensus driven by steady 5G iPhone and strong Mac & iPad demand that was tempered by product availability due to the ongoing chip supply tightness. Similar to prior quarters and in lieu of formal guidance, they expect management to provide a broad range and qualitative color for the Sep Q. With the launch of the upcoming new iPhone expected in September, they expect the 5G upgrade cycle will continue to drive healthy Y/Y growth into CY22 while Mac & iPad supply is likely to continue to fall short of market demand. Sentiment wise, they believe investors are increasingly weighing FY22's EPS growth potential given tough comps for the hardware businesses."

The report will include a big launch of the new models that will support 5G and upgrades. Apple increasingly sticky service revenue streams are expeced to gain more prominence.

iPad and Mac

iPad and Mac sales have been fueled by the pandemic. Over the past year, tens of millions of iPads and Macs have been sold to help students learn and employees work remotely. Mac sales were a bit light in DecQ, likely on some pull-forward sales in SepQ due to back-to-school and remote learning.  Last quarter Apple reported i Mac and Services all-time record results. One valid concern is whether we'll see any turbulence in Mac and iPad sales in the next few quarters as we lap the start of the pandemic.

"According to the sources, Apple is planning to use the A15 chip inside the new iPad mini, just like the new iPhones expected to be released later this year. The A15 chip will use the same 5-nanometer fabrication process as the A14, and our sources indicate Apple is also working on a more powerful A15X variant that could be used in other iPads down the line." - 9to5Mac

iPhones

Apple set new MarQ records for iPhone and Wearables sales. The iPhone 12 launched in DecQ, but there was a spillover effect into MarQ. The model was Apple's first 5G phone, has been very popular with both upgraders and new customers.

"The OLED LTPO displays expected to be included in the high-end iPhone 13 models would also enable the inclusion of a 120Hz refresh rate. Apple has been long-rumored to bring its 120Hz ProMotion technology to its ‌iPhone‌, and despite widespread rumors of it happening on the ‌iPhone 12‌, Apple now seems set-in-stone to include it for the high-end models of the iPhone 13." - MacRumurs

AAPL saw double-digit growth in several product categories,

  • iPhone sales jumped 66% yr/yr to $47.9 bln vs. $41.0 bln estimates;
  • Mac sales jumped 70% yr/yr to $9.1 bln vs $6.6 bln ests;
  • iPad sales increased 79% yr/yr to $7.8 bln vs $5.7 bln ests;
  • Wearables sales rose 25% yr/yr to $7.8 bln vs $7.6 bln ests;
  • Services revenue rose 27% yr/yr to $16.9 bln vs $15.7 bln ests.

Guidance

One area of disappointment may be Apple's decision to continue not providing guidance. On the conference call, Apple guided to strong double-digit revenue growth, but the outlook was not very specific.

 

Market Reaction > Apple. Nasdaq: AAPL

Market Reaction to Q2 133.48 ▼ 0.10 (0.075%) Close · April 29, 2001

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