Apple posts record profit as China sales soar

Apple reported its highest-ever net profit in the fourth quarter as revenues surpassed forecasts to hit $111.4bn, driven by a 57 per cent rise in sales in greater China.

Net profits rose 29 per cent to $28.8bn, against forecasts they would increase 6.3 per cent, while earnings per share jumped 35 per cent to $1.68. Forecasters expected revenues of about $102bn.

“We couldn’t be happier with the December quarter and we couldn’t be more optimistic about the future,” Luca Maestri, Apple’s finance chief, told the Financial Times.

Sales in all five of the $2.4tn company’s product categories grew at double-digit percentages, led by a 41 per cent gain in iPad sales and a 30 per cent climb in its wearables unit, which includes AirPods and the Apple Watch.

The iPhone — sales of which grew 17 per cent compared to the same quarter a year ago to hit $65.6bn, reflecting 59 per cent of Apple’s revenues — was the group’s slowest growing category because of supply constraints and the delayed launch of its first 5G-enabled smartphones. Despite these pressures, “Apple shipped the highest number of smartphones ever by any vendor in the history of the smartphone”, according to Francisco Jeronimo at IDC.


Apple’s revenues in greater China for the quarter

Apple no longer discloses unit sales but Mr Jeronimo estimated the company shipped 90.1m iPhones, beating Samsung’s long-held record of 88.5m smartphones in the first quarter of 2014. He calculated the average selling price was $728, down from $869 the previous year.

“Apple is championing 5G sales and it will be the catalyst for 5G adoption in many countries across the world,” Mr Jeronimo said.

Apple shares fell more than 3 per cent in after-hours trading but analysts credited factors other than the company’s results. “It’s fair to say it’s a ‘sell on the news situation’,” said Scott Kessler, an analyst at Third Bridge, a research company. “There’s no question the results are strong all around, operationally and financially.”

One disappointment for investors was that Apple declined to offer any guidance for the March quarter, citing uncertainties around the pandemic.

“It becomes very easy for things to get really difficult, really quickly,” Mr Maestri said, adding that many Apple stores remain closed in the Americas and Europe.

Revenues in the services division increased 28 per cent, a record, after the company hit its previous goal of doubling revenues between 2016 and 2020 six months ahead of schedule.

The results underscore the success of Mac computers, AirPods earphones and Apple Watches, as well as the company’s efforts in marketing services such as Apple Music to 1bn iPhone users.

In greater China, which includes Hong Kong and Taiwan, revenues surged 57 per cent to $21.3bn, reflecting pent-up demand for 5G iPhones, Mr Maestri said.

Tim Cook, chief executive, added in an earnings call that China was more than just an iPhone story, however, as sales of iPads, Mac, wearables and accessories were all above average as the economy recovered from the pandemic.

China demonstrated that it “is sort of beyond Covid”, he said. “They were very much in the recovery stage. This quarter, there are different reports about some cases in some places, and lockdowns occurring, but we haven’t seen that in our businesses yet.”

All other geographic segments also set records, with revenues in the Americas up 12 per cent to $46.3bn, European sales rising 17 per cent to $27.3bn, Japan revenues up 33 per cent to $8.3bn and the rest of Asia up 11 per cent to $8.3bn.

Mr Cook suggested growth would continue at a high level as more countries adopted 5G mobile technology and non-Mac users switched to iPhones or bought Apple computers.

In November, Apple introduced two laptops and a desktop Mac Mini equipped with the company-designed M1-chip, which had the potential to lure more consumers. “The M1, I think, gives us a new growth trajectory that we haven’t had in the past,” he said.

Mr Cook added that the company still believed it would continue to report growth in wearables. “We’ve brought this thing from zero to a Fortune 120 company, which was no small feat, but I still think we’re in the early stages of those products,” he said.

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