The tech industry’s been struggling to catch up to a serious chip shortage.
Sarah Tew/CNET
For years, Apple’s seemed to defy the law of large numbers. Its iPhones, already found in over a billion pockets, surged again following the company’s launch of the iPhone 12, which featured a new boxy design and 5G wireless speeds. Still, with a market value topping $2.45 trillion, the question Apple constantly faces is whether it can keep going higher.
On Tuesday, we got an answer. During the three months of its fiscal third quarter, the company said it tallied nearly $39.6 billion in iPhone sales during the three months ended June 26, up 50% from the same time a year ago. Typically, Apple’s struggled to grow iPhone sales during the summer months before its annual fall iPhone reveal as people hold off to see the next iteration.
All told, Apple said it notched a profit of $21.7 billion, nearly double from the same last year. That translates to $1.30 per share in earnings, off $81.4 billion in overall revenue, which itself was up 36% from last year. That was also well above what analysts had been expecting the company to report, which on average was $1 per share in earnings and nearly $73 billion in revenue, according to surveys published by Yahoo Finance.
“This quarter, our teams built on a period of unmatched innovation by sharing powerful new products with our users, at a time when using technology to connect people everywhere has never been more important,” said Tim Cook, Apple’s CEO, in a statement.
Apple’s results mark the latest example of how technology companies have thrived during the coronavirus pandemic. The iPhone 12 family quickly became a hit among fans, who snatched so many of them up that the company reported the highest sales and profit in its history during last year’s holiday shopping season. People have also turned to Mac computers and iPad tablets to help with learning and working from home, a trend driving unusually high demand across the tech industry. At Apple, that translated to the highest Mac sales ever during the winter months.
In regular trading, Apple’s stock closed down more than 1%, to $146.77 a share, amid a broader market selloff over concerns that rising COVID-19 cases, driven almost entirely by unvaccinated people in the US, could affect the economy. Despite the uncertainty, Apple’s shares have risen more than 13% so far this year. They continued to fall 0.4%, to $146.24, in after-hours trading.
Other parts of Apple’s business are running smoothly as well. The tech giant tallied $7.4 billion in iPad sales, nearly 12% from the same time a year prior. The Mac, meanwhile, notched $8.23 billion in sales, up 16% from last year. Wearables, home and accessories, meanwhile, jumped 36% to nearly $8.8 billion. The company’s profitable services business also rose, nearly 33% to $17.5 billion in revenue.
Here’s everything we learned from Apple’s conference call with analysts following its earnings release.
Early innings of 5G
2:47 p.m. PTThat law of large numbers thing I mentioned earlier? Yeah, Cook says maybe forget it.
Despite the iPhone’s success, he believes “we’re in the very early innings of 5G.” He noted that most places around the world don’t have it broadly available, despite being “nine months or so into” the iPhone 12’s launch.
“We feel really great about the momentum, but at the same time we recognize that the 5G penetration is quite low around the world,” he added. “We’re at the front end of this.”
It’s not just Apple fans
2:39 p.m. PTA popular trope about Apple is that its fans are rabid and willing to spend endlessly on the company. To counteract that perception, Apple’s highlighted how many new people are coming to its products. Worldwide, for example, the company said that even though the Apple Watch was first released six years ago, 75% of the people who bought one in the three months ended in June were new to buying one.
Apple didn’t offer similar data about its phones, but Cook said it was strong. “We had strong double-digit growth for switchers, and for upgraders, and in fact it was our largest upgrade quarter for Q3 ever,” he said.
Chip shortage isn’t so bad anymore? Or it’s worse?
2:31 p.m. PTApple warned in the past that Mac and iPad supply were dictated by how many chips the company could get hold of, setting up the possibility sales could underwhelm in the future. Instead, Apple CFO Luca Maestri said the company’s been able to set records despite those troubles. “It is remarkable that the last four quarters for Mac have been its best four quarters ever,” he said. “This exceptional level of sales success has been driven by the very enthusiastic customer response to our new Macs powered by the M1 chip, which we most recently brought to our newly redesigned iMac.”
Despite “significant” supply constraints during the quarter, he added, “we also started shipping our new iPad Pro powered by the M1 chip and customer response has been outstanding.”
He said supply constraints will be “higher” during the September quarter.
Apple CEO Cook said he’s “paying more for freight than we’d like to pay” but component costs continue, as an aggregate, to decline.
“In terms of supply constraints and how long they will last,” he said. “I don’t want to predict that today. We’re going to take it sort of one quarter at a time and, as you would guess, we’ll do everything we can to mitigate whatever set of circumstances we’re dealt.”
COVID-19 isn’t just going away
2:11 p.m. PT
Apple’s CEO kicked off the company’s conference call talking about how much people have turned to his company’s products. But he also noted that despite a positive spring and summer, things may be getting tougher again.
“As the last 18 months had demonstrated many times before, progress made is not progress guaranteed. And uneven recovery to the pandemic and the delta variant surging in many countries around the world have shown us once again that the road to recovery will be a winding one,” he said. “As we look forward to more in-person interactions in the future, we’re doubling down on innovation and doing all we can to help chart a course to a healthier and more equitable world.”
While Apple’s business appears to be humming, the rest of the world is decidedly less steady. The US Centers for Disease Control and Prevention earlier Tuesday recommended that vaccinated Americans wear masks indoors again where transmission is “substantial or high,” for fear the coronavirus could spread even further among children who can’t yet receive a vaccine and the people who’ve opted against receiving one so far.
Even Apple has already told employees it’s delaying return-to-office plans until October at the earliest, mirroring moves from 2020 when companies began shifting schedules in response to worsening conditions.
Analysts and industry watchers will be watching for any signs from Apple about the future.
