Jiří Filip Apple posted the strongest profit and revenue growth in recent history in 2021, thanks in large part to a rapid increase in product sales. However, the company's overall growth is slowing, so Apple is currently focusing on building its position in services. The latest announcement of the company's economic results, which took place on Thursday 28 April in the night hours of our time, was watched with great anticipation.
The company has officially announced its financial results for the second fiscal quarter of 2022, which includes the first calendar quarter of 2022 - the months of January, February and March. For the quarter, Apple reported revenue of $97,3 billion, up 9% year-over-year, and a profit of $25 billion - earnings per share (the company's net income divided by the number of shares) of $1,52.
Details of Apple's Q1 2022 financial results
After an incredibly strong and record-breaking holiday quarter (last quarter of 2021), analysts once again had high expectations. Apple was expected to post total revenue of $95,51 billion, up from $89,58 billion in the same quarter last year, and earnings per share of $1,53.
Analysts also forecast growth in sales of iPhones, Macs, wearables and services, while revenue from iPad sales expected a slight decline. All these assumptions turned out to be correct in the end. Apple itself again declined to outline any of its own plans for the quarter. The management of the Cupertino company again only mentioned concerns about the disruption of supply chains. The ongoing challenges caused by the covid-19 pandemic continue to affect Apple's sales and its ability to forecast future numbers.
However, we currently have real numbers available for the first three months of this year. At the same time, Apple does not report unit sales of any of its products, but instead, it publishes a breakdown of sales by product or service category. Here is the breakdown of sales for Q1 2022:
- iPhone: $50,57 billion (5,5% YoY growth)
- Mac: $10,43 billion (up 14,3% year-over-year)
- iPad: $7,65 billion (down 2,2% year-over-year)
- Wearables: $8,82 billion (up 12,2% year-over-year)
- Services: $19,82 billion (up 17,2% year-on-year)
What did the company's top management say about the financial results? Here is a statement from Apple CEO Tim Cook:
“This quarter's record results are a testament to Apple's relentless focus on innovation and our ability to create the best products and services in the world. We are delighted with the strong customer response to our new products, as well as the progress we are making towards becoming carbon neutral by 2030. As always, we are determined to be a force for good in the world – both in what we create and in what we leave behind.” said Tim Cook, CEO of Apple in a press release for investors.
And CFO Luca Maestri added:
“We are very pleased with our record business results for this quarter, where we achieved record service revenue. If we compare only the first quarter of the year, we also achieved record sales for iPhones, Macs and wearable devices. Continued strong customer demand for our products has helped us reach our highest ever installed active device count.”
Apple stock reaction
In light of the company's better-than-expected financial results have increased Apple shares up more than 2% to $167 a share. The company's shares ended trading on Wednesday at a price of $156,57, however rose 4,52% in pre-earnings trading on Thursday.
Investors must have been pleased by the company's significant growth in services, which is currently a key indicator of success for Apple. The iPhone maker has long been known for its hardware products, such as smartphones and computers, however, in order to support future growth, it is now focusing strongly on the services it offers to its customers. At the same time, this turnaround occurred in 2015, when the growth of iPhone sales began to slow down.
Apple's ecosystem of services continues to grow and currently includes the company's digital content stores and streaming services such as various platforms – App Store, Apple Music, Apple Arcade, Apple News+, Apple TV+ and Apple Fitness+. However, Apple also generates revenue from AppleCare, advertising services, cloud services and other services, including Apple Card and Apple Pay.
Profit margins from selling services are significantly higher than Apple's profits from selling hardware. This means that every dollar of service sales adds significantly more to the company's profits compared to hardware sales. App Store margins are estimated at 78%. At the same time, it is estimated that the margin from the search advertising business is even higher than that of the App Store. However, service revenue still makes up a significantly smaller portion of the company's total revenue than hardware sales.
Apple shares have significantly outperformed the broader stock market over the past year, which has been true since early July 2021. The gap then began to widen, particularly in mid-November 2021. Apple stock has returned a total of 12% over the past 22,6 months, well above yield of the S&P 500 index in the amount of 1,81%.
