Apple’s iPhone shipments bounced back from supply chain disruptions in the holiday period, though revenue still declined year-on-year for the second quarter in a row due to what it described as a “tougher” economic environment and currency headwinds.
Finance chief Luca Maestri said Apple had seen “significant acceleration in iPhone revenue from December to March”. Sales of the device, which accounted for 54 per cent of total revenue, rose 2 per cent in the quarter to $51.3bn, ahead of estimates at $48.9bn.
The uptick in sales came as a relief to investors questioning what demand would look like following an outbreak of Covid-19 at the Foxconn factory known as “iPhone City” that had derailed production in November.
Chief executive Tim Cook said Apple had made it through “this parade of horribles . . . between the pandemic and the chip shortages and macroeconomic factors”. He added: “The supply chain has been incredibly resilient and we feel good about what we are and what our plans are.”
Overall, total revenues fell 2.5 per cent year-on-year to $94.8bn in the three months to the end of March, driven by sharp declines in sales of Mac computers and iPads, while net profits were down 3.4 per cent to $24.2bn. Analysts had predicted $93bn in revenue and $22.6bn in net profits, according to Refinitiv.
Maestri blamed “significant headwinds in foreign exchange”, saying they accounted for a 5.4 percentage point hit to revenue. In constant currency, he said, revenues would have grown 3 per cent.
On a regional basis, Asia, excluding China and Japan, were a bright spot, as revenues there jumped by 15.3 per cent to $8.1bn. Cook said the group saw record revenues in Mexico, Indonesia, Turkey and the Philippines.
Apple has also made a big push into India, where it recently opened its first two stores and Cook met with the country’s prime minister. Commenting on the trip, Cook said: “There are a lot of people coming into the middle class, and I really feel that India is at a tipping point.”
However, sales last quarter fell about 3 per cent in China and 8 per cent in the US. Maestri told investors that overall revenue growth for the current quarter would be “similar to the March quarter”. implying sales will slightly shrink again compared with a year earlier.
Apple has increasingly focused on its services division as a driver of revenue growth. It now has 975mn paying global subscribers for an array of digital offerings including music, movies and iCloud storage, almost double the figure from three years ago. That was an increase of 150mn in the past 12 months, according to Maestri, who has called this Apple’s “economic engine” for the long-term.
Revenue in the division, which also includes App Store payments and licensing fees, rose 5.5 per cent to $20.1bn, in line with forecasts but slower than the 17 per gain recorded a year ago. The division accounted for 22 per cent of Apple’s revenues. It had margins of 71 per cent, versus 36.7 per cent for hardware.
Beyond the iPhone, sales of other Apple devices were softer than a year ago. Mac sales fell 31 per cent, worse than the 25 per cent decline that analysts had expected amid broader weakness in the PC market. iPad sales were also down 13 per cent, as expected, while the wearables division, which includes AirPods and the Apple Watch, were 1 per cent lower.
Dipanjan Chatterjee, analyst at Forrester, said these declines were “a harbinger of the uphill climb most consumer brands will face in the months ahead as consumers grow increasingly skittish about overextending themselves”.
“The pandemic spending euphoria is over,” he added.
Cook was asked about Apple’s efforts in artificial intelligence, a growth area where some observers have worried it is falling behind the more public efforts of Microsoft and Alphabet.
He said AI was “huge” for Apple’s future and that the company was making “enormous progress integrating AI and machine learning throughout our ecosystem”.
“I do think it’s very important to be deliberate and thoughtful in how you approach these things. And there’s a number of issues that need to be sorted, as is being talked about in a number of different places,” Cook said.
Apple announced its board had authorised the spending of $90bn on share buybacks in the coming 12 months, as expected. Apple has repurchased nearly $600bn in shares over the past decade, according to S&P Global Market Intelligence.
The company’s shares, already up about a third this year, rose 2.4 per cent in after-hours trading.