iPhone really smells good!
Last night, Apple announced the latest installment of its earnings report. Apple’s net revenue for the second quarter of fiscal year 2021 (January to March 2021) was $89.58 billion, up 54% from $58.313 billion in the same period last year; net profit was $23.63 billion, up 110% from $11.249 billion in the same period last year. Chinese fruit fans spent money at a particularly alarming rate, with Apple’s China revenue of $17.73 billion in the quarter, up 87 percent year-over-year and well above the overall growth rate.
Apple’s CFO said Apple achieved two consecutive quarters of double-digit year-over-year percentage gains in revenue across all product categories, two consecutive quarters of record revenue in every geographic market, and a continued significant rebound in Greater China sales since late last year. Total revenue for the quarter was at an all-time high for the same period, with record service and Mac computer revenue and a new all-time high in active device installations.
Apple’s bright results
Greater China revenue up more than 87 percent year-over-year
Apple’s fiscal second quarter earnings per share were $1.40, compared to market expectations of $0.99. Revenue grew 54 percent year-over-year to $89.58 billion, compared to market expectations of $77.103 billion, and net income was $23.63 billion, compared to market expectations of $16.589 billion, according to the results.
Apple achieved double-digit revenue growth in every product category. Revenue from its most important product line, the iPhone, grew 65.5% year-over-year, while Mac and iPad sales did even better, up 70.1% and nearly 79%, respectively.
In terms of product composition, the iPhone contributed 53.5% of revenue ($47.938 billion), compared to 49.66% a year ago; correspondingly, Apple’s hardware revenue rose to 81.1% from 77.1% a year ago, while Apple’s services business, on which it has high hopes for transformation, dropped to 19.9% from 22.9%. Of course, this is not due to Apple’s poor service revenue performance, but rather to the fact that the hardware business grew at a much faster rate than the service revenue.
Specifically, it appears that Apple’s fiscal second quarter.
iPhone revenue of $47.94 billion, up 65.5% year-over-year, compared to analysts’ expectations of $41.43 billion.
iPad revenue of $7.80 billion, up 78.9 percent year-over-year, compared to analysts’ expectations of $5.58 billion.
Mac revenue of $9.10 billion, up 70.1 percent year-over-year, compared to analyst estimates of $6.86 billion.
Services revenue of $16.90 billion, up 26.7 percent year-over-year, compared to analyst estimates of $5.65 billion.
Other products revenue of $7.84 billion, up 24 percent year-over-year, compared to analyst estimates of $7.79 billion.
Gross margin of 42.5 percent, compared with analysts’ expectations of 39.8 percent.
Apple said revenue in Greater China grew more than 87 percent year-over-year to $17.73 billion in the fiscal second quarter.
Revenue in the U.S. rose nearly 35 percent year-over-year in the fiscal second quarter, surpassing the previous quarter’s nearly 12 percent increase; revenue in Europe rose nearly 56 percent year-over-year; revenue in Japan rose nearly 49 percent year-over-year, after having increased 33 percent in the previous quarter; and revenue in the Asia-Pacific market outside of China and Japan rose more than 94 percent year-over-year, nearly doubling.
Apple said it will raise its dividend by 7 percent to $0.22 per share and authorize $90 billion in share repurchases, significantly higher than the $50 billion last year and the $75 billion in 2019.
Apple did not release earnings guidance about the next quarter. The company has not provided earnings guidance since the start of the outbreak, citing uncertainty.
Image source: Photo by Zhang Jian, a reporter for each of the reporters (Source)
EU may launch first antitrust prosecution against Apple
Fines could reach 10% of global revenue
Apple’s future performance is not without risk, however, and demand for iPads and Macs could fall back after the outbreak. Goldman Sachs analyst Rod Hall said the current high demand for iPads and Macs is unlikely to continue as the world reopens, so a surge in revenue in these areas may not be enough to further drive the stock up.
Another factor that could have a knock-on effect on Apple’s performance is antitrust charges in various countries.
According to reports, the European Union is expected to formally file antitrust charges against Apple as early as this week, which mainly involve Apple using its platform position to limit the market position of its competitors. The charges could lead to fines of up to 10 percent of Apple’s global revenue and could challenge its business model of relying on platform sharing.
If the EU formally prosecutes Apple, it would also be the first antitrust action launched against Apple in the EU. The EU antitrust authorities have previously launched four antitrust investigations against Apple, including Spotify’s complaint against Apple.
In March, Spotify, a music streaming service provider, filed a complaint against Apple, claiming that Apple’s own music playback service application, Apple Music, restricted competitors’ access to subscribers and violated the principle of fair market competition.
Spotify also complained that Apple’s 30% fee charged to app developers through its in-app purchase system (IAP) was unreasonable and a sign of abuse of market dominance.
In the U.S., antitrust agencies are also investigating whether Apple is using its dominant market position to restrict competitors and charge excessive commissions. At a hearing held last week by the U.S. Senate Antitrust Task Force, Spotify and dating service giant Match questioned the monopoly status of Apple and Google’s platforms.
“We’re all terrified of Apple and Google.” Match Chief Legal Officer Jared Sine said. He argued that Google and Apple take 30 percent of the platform’s digital transaction revenue in commissions, which raises the price paid by consumers. He also revealed that Match pays nearly $500 million a year to app stores, making it the largest single expense for the company’s operations.
On May 3, game engine company Epic Games’ antitrust lawsuit against Apple is set to go to trial. The two companies confirmed that Epic Games founder CEO Tim Sweeney and Apple executive Phil Schiller will attend the first court hearing.
Epic Games circumvented Apple’s rules last year by launching its own in-app payment system on the iPhone platform, thereby avoiding paying commissions to Apple, a practice that led to the removal of its popular game “Fortnite” from the Apple Store. Epic has since sued Apple for abuse of its dominant market position, which constitutes a monopoly.
After being sued by Epic Games and other developers for antitrust, Apple cut its commission rate for small app developers with less than $1 million in revenue to 15 percent, down from 30 percent in the past.
Notably, on April 27 the Federal Investigation Service (FAS), a Russian antitrust organization, announced a penalty against Apple. The announcement stated that Apple will be fined over 900 million rubles (over $12 million) for violating antitrust laws by abusing its dominant position in the iOS application market and restricting competitors from developing parental control features.
Apple concept stocks underperformed yesterday
Back to the A-share market, due to Apple’s strong influence, Apple’s every move affects related concept stocks, and the new quarterly earnings report announced by Apple will also have an impact on related stocks. However, Apple concept stocks have fallen more than they rose this year, with the Flush Apple Concept Index falling 7.59%.
And on the 28th it was reported that Apple plans to cut AirPods production this year, from the previously expected 110 million down to 75-85 million, a 25%-30% cut in production capacity.
From the viewpoint of the market, Apple AirPods to provide chip packaging services for the ring Xu Electronics fell on the 28th. The “fruit chain” leading Lixun Precision and Goer shares fell 3.12% and 1.77%, respectively.
In 2020, Lixun Precision achieved a net profit of 7.225 billion, up 53.28% year-on-year. Goer achieved a net profit of 2.848 billion, up 122.41% year-on-year. However, both companies’ share prices have recently pulled back, with Lixun Precision’s latest price retreating more than 40% from its yearly high, and Goer’s retreat reaching 17%.
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