Apple iPhone shipments rebounded from supply chain disruptions over the holiday season, although revenue still fell year-over-year for the second consecutive quarter due to what he described as a “more challenging” economic environment and currency headwinds.
Chief Financial Officer Luca Maestri said Apple saw “significant acceleration in iPhone revenue from December through March.” Sales of the device, which accounted for 54% of total revenue, rose 2% in the quarter to $51.3 billion, ahead of estimates of $48.9 billion.
The surge in sales provided relief to investors who wondered what demand would look like following an outbreak of Covid-19 at the Foxconn factory known as “iPhone City” that derailed production in November.
CEO Tim Cook said Apple got through “this parade of awful things. . . between the pandemic and chip shortages and macroeconomic factors”. He added: “The supply chain has been incredibly resilient and we are happy with who we are and our plans.”
Overall, total revenue fell 2.5% year-on-year to $94.8 billion in the three months to the end of March, due to the sharp decline in sales of Mac computers and iPad, while net profits fell 3.4% to $24.2 billion. Analysts had predicted $93 billion in revenue and $22.6 billion in net profit, according to Refinitiv.
Maestri blamed “significant currency headwinds,” saying they accounted for a 5.4 percentage point decline in revenue. In constant currency, he said, revenue would have increased by 3%.
On a regional basis, Asia, excluding China and Japan, was a bright spot, with revenue there jumping 15.3% to $8.1 billion. Cook said the group had recorded record revenues in Mexico, Indonesia, Turkey and the Philippines.
Apple has also taken a big step in 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 moving into the middle class, and I really feel that India is at a tipping point.”
However, last quarter sales fell about 3% in China and 8% in the United States. Maestri told investors that overall revenue growth for the current quarter would be “similar to the March quarter.” which implies that sales will decrease slightly compared to the previous year.
Apple has increasingly focused on its services division as the engine of revenue growth. It now has 975 million paying subscribers worldwide for a range of digital offerings including music, movies and iCloud storage, nearly double the figure from three years ago. This represents an increase of 150 million over the past 12 months, according to Maestri, who called this Apple a “long-term economic engine”.
The division’s revenue, which also includes App Store payments and licensing fees, rose 5.5% to $20.1 billion, in line with forecasts but slower than the 17% recorded it a year ago. The division accounted for 22% of Apple’s revenue. It had margins of 71%, compared to 36.7% for hardware.
Beyond the iPhone, sales of other Apple devices were weaker than a year ago. Mac sales fell 31%, worse than the 25% decline analysts expected amid broader PC market weakness. iPad sales were also down 13%, as expected, while the wearables division, which includes AirPods and Apple Watch, fell 1%.
Dipanjan Chatterjee, an analyst at Forrester, said the declines were “a harbinger of the ramp-up most consumer brands will face in the coming months as consumers grow increasingly nervous about the idea of surpassing oneself.
“The pandemic spending euphoria is over,” he added.
Cook was asked about Apple’s efforts in artificial intelligence, a growth area where some observers fear it is falling behind more public efforts by Microsoft and Alphabet.
He said AI was “huge” for Apple’s future and the company was making “tremendous strides in embedding AI and machine learning across our entire ecosystem.”
“I think it’s very important to be deliberate and thoughtful in how you approach these things. And there are a number of issues that need to be sorted out, as they’re being talked about in a number of different places,” Cook said.
Apple announced that its board has authorized the spending of $90 billion in stock buybacks over the next 12 months, as planned. Apple has repurchased nearly $600 billion in stock over the past decade, according to S&P Global Market Intelligence.
Shares of the company, already up about a third this year, rose 2.4% in after-hours trading.