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Apple Earnings Blowout In FYQ1 Rides Success Of Connected Economy

It was supposed to be a record-breaking fiscal year first quarter for Apple and the company did not disappoint. Riding the success of the global connected economy and a better than expected performance from the iPhone 12, the company logged its first $100 billion quarter, with the number reported during its earnings announcement on Wednesday (Jan. 27) coming in at $111.4 billion.

Apple saw double-digit growth in every product category for its fiscal 2021 first quarter ended Dec. 26, 2020, which drove revenue records in each geographic region and set an all-time high for its installed base of active devices. Though Apple’s newest iPhone 12 was only available for part of the quarter, Apple still saw $65.60 billion in sales for the category compared with $55.96 billion in 2019.

Sixty-four percent of the quarter’s sales came from markets outside of the U.S. Apple’s China revenue surged to $21.31 billion from $13.58 billion. Apple disclosed that it saw a record number of people upgrading their iPhones in China during the quarter. Apple also continued to benefit from the stay-at-home economy. For example, iPad revenue increased to $8.44 billion from $5.98 billion; Mac revenue increased to $8.68 billion from $7.16 billion.

But perhaps the most impressive part of Apple’s earnings came from the connected economy, which it accesses via services. The service category grew to $15.76 billion up from $12.72 billion. Sales from Apple’s wearables, home, and accessories category climbed to $12.97 billion from $10.01 billion.

“The key drivers for our services continue to move in the right direction,” Chief Financial Officer Luca Maestri told analysts on the company’s earnings call. “First, our installed base growth has accelerated and each major product category. Second, the number of both transacting and paid accounts on our digital content stores reached a new all-time high during the December quarter, with paid accounts increasing double digits in each of our geographic segments.”

Specifically, Apple now has 620 million paid subscribers across its platform, including Apple Music, TV and the newly launched fitness category. During the same quarter of 2019 it had only 140 million.
Among the services categories mentioned by Maestri: app store, cloud services, music, advertising, Apple care, and payments services, our new service offerings, Apple TV, plus Apple arcade, Apple news blast, Apple card, Apple fitness class and the Apple one entertainment bundle.

On the call, Apple CEO Tim Cook addressed the rollout of 5G, which has not yet been a factor in iPhone sales in the U.S. He took a typically global approach to the technology’s rollout.

“If you look at the 5G rollout in Europe, it’s true that Europe is not … close to where China is and … nowhere close to the U.S. either,” Cook said. “But there are other regions that 5G has very good coverage, like Korea … So I would describe the world right now as a patchwork quilt when it comes to 5G … I believe there’s lots of opportunity ahead there for us.”

While the quarterly numbers were beyond expectations, Maestri’s comments about 2021 hinted that Apple will not be able to keep pace.

“Assuming the COVID-related impacts to our business do not worsen from our current assumptions for the quarter. For total company revenue, we believe growth will accelerate on a year over year basis,” he said, “and in aggregate follow typical seasonality on a sequential basis at the product category level. But keep in mind two items: First during the March quarter, last year, we saw elevated activity in our digital services as lockdowns occurred around the world. So our services business faces a tougher year over year comparison. Second, we believe the year over year growth in Wearables, Home and Accessories category will decelerate compared to Q1.”

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