Apple profits more than double on pandemic-fueled iPhone sales
Apple's profits more than doubled between January and March as strong consumer spending drove sales of its gadgets and services. Despite that growth, the company predicts the second half of the year will be marred by shortages of semiconductor chips used for its Macs and iPads.
Profits for the quarter surged to $23.6 billion, more than double the year-ago period, the company said Wednesday. Revenue climbed 54% to $89.6 billion.
The iPhone, Apple's crown jewel, has sold less briskly in recent years as people held on to their existing models. But the release of four iPhone 12 models last fall has boosted demand, and iPhone sales in Apple's latest quarter rose 66% to $47.9 billion, building on a robust holiday-season for the company.
Some analysts think the popularity of the iPhone 12 could lead to the device's biggest sales year since 2014, when the iPhone 6 — with an enlarged screen — came out.
"[W]e are seeing order activity continue to track significantly ahead of expectations signaling a green light into FY21. We believe this quarter ultimately will be the first step in driving this stock to a $3 trillion market cap over the next year," analysts at Wedbush Securities wrote in a note.
Apple's stock market value is around $2.2 trillion, already making it the most valuable U.S. company.
The iPhone 12 is the first model to connect to 5G wireless networks, which promise higher speeds but are still being built out. Apple is trying to goose sales even further during the current quarter with a new purple iPhone 12.
Apple's other products and services are also growing. It has music and TV streaming services, just announced a new key- and backpack-tracking device called AirTags, and a watch, as well as computers and iPads. Meanwhile, the company's steadily expanding services division, which includes streaming services and the 15% to 30% commissions Apple collects from most paid transactions completed with iPhone apps, generated revenue of $16.9 billion during the quarter.
The coming crunch
The second half of the year could be rocky, Apple executives warned. The company predicts that a semiconductor shortage now affecting industries from tech to cars would reduce revenue by $3 billion to $4 billion.
The shortages would mostly affect iPad and Mac sales, leading to "challenges meeting the demand that we've got," CEO Tim Cook said on an earnings call Wednesday.
He also noted that, even with COVID-19 restrictions easing, many workers would continue to work at home at least part-time, keeping demand for the company's devices high.
"When this pandemic will end, it seems many companies will be operating on a hybrid model. It seems that the productivity of work from home remains critical," Cook said.
Other clouds are looming on the horizon. Regulators in different countries are now scrutinizing the cut that Apple takes through the its App store. That issue will be the focal point of a federal court trial scheduled to start May 3. Epic Games, the maker of the popular video game Fortnite, contends that Apple exploits the popularity of its App store to extract high fees from smaller companies.
Apple says its fees are reasonable in light of its massive investment in the iPhone and that its "walled garden" approach helps protect the security of its customers and their devices.
Apple is also feuding with Facebook over a recent software update limiting developers' ability to automatically track users. Facebook and other advertisers contend that the change will harm small businesses by reducing their power to wield targeted ads.
Cook doubled down on the company's privacy commitments on Wednesday, telling investors that the company received "tremendous" user feedback on the update.
"We're really standing up for the consumer here," he said.
He did not share figures on how popular the do-not-track option has been since the software was released on Tuesday, but said that "even if it's very low, it's worth doing. It's up to people to decide if they want to be tracked or not."
Apple's stock rose 3% in after-hours trading Wednesday.
The Associated Press contributed reporting.
