All the most important facts from Apple’s record quarter

Apple set yet another Q4 September record with revenue reaching $83.4 billion, up 29%. The company press release stressed its work to become carbon neutral by 2030 but warned of continued uncertainty. Here’s what we also learned during its analyst call.

The executive summary

“This year we launched our most powerful products ever, from M1-powered Macs to an iPhone 13 lineup that is setting a new standard for performance and empowering our customers to create and connect in new ways,” said Tim Cook, Apple’s CEO. “We are infusing our values into everything we make — moving closer to our 2030 goal of being carbon neutral up and down our supply chain and across the lifecycle of our products, and ever advancing our mission to build a more equitable future.”

Some of the essential data

• Revenue: Up 33%
• This year, Apple reported $366 billion in revenue, which represents 33% annual growth.
• Operating income: Up 64%
• EPS: Up 71%.
• iPhone up 47% setting new records
• Mac up 2%: Last five quarters for Mac have been the best five quarters ever for the category
• iPad up 21%
• Wearables/Home/Accessories up 12%
• Services up 26%
• Research and development hit $21.9B, up from $18.7B.

Revenue increased in every geographic territory and across every product line.

Not bad during a pandemic reflecting how Apple’s products helped support remote working when we needed it. This will be why half of iPad and Mac purchasers were new to the product.

The supply chain crisis

Supply chain crisis. Apple’s component pre-purchases, product backlog, and an earlier close to F1Q (Dec 25th) should protect its upcoming quarter. While next year may be difficult, Apple’s core silicon (A-, M- chips) remain secure – it’s the ‘legacy nodes’ that are constrained. The company said it’s mainly legacy modes and covid related disruption that is generating problems and also admitted freight costs have increased considerably.

All the same, Apple stressed that demand for its products remains strong as it heads into the holiday quarter and hinted that demand for some products (specifically iPads) may see growth in the quarter. Does this hint at that elusive third Apple event? Finally, it admitted supply constraints trimmed $6B off its record-breaking results.

I’ll be writing on this in more detail here.

Customer loyalty

The latest survey of U.S. consumers from 451 Research indicates:

• iPhone customer satisfaction of 98%
• iPad customer satisfaction of 97%
• Mac customer satisfaction of 97%

The ever-growing Services business

Revenue climbed again to just over $18 billion from $14.5b in the year ago quarter. Year on year, services raised $68.4b in FY21 up from $53.7b in FY20. This is almost 40% higher than the $50 billion per year services income Apple CEO Tim Cook was aiming for by 2021. Services growth exceeds 26% Year on year and Apple doesn’t anticipate any material impact from App Store changes. It’s also interesting that Apple invested an additional $1.5B in services in the quarter – that’s a lot of TV+ content.

Apple’s annual services income 2016-2021

• 2016: $24.3B
• 2017: $29.97B
• 2018: $37.1B
• 2019: $46.3B
• 2020: $53.7B
• 2021: $68.4B

Apple’s Q4 revenue 2010-2021

$AAPL Q4 revenue

2010: $20.3 billion
2011: $28.3 billion
2012: $36.0 billion
2013: $37.5 billion
2014: $42.1 billion
2015: $51.5 billion
2016: $46.9 billion
2017: $52.6 billion
2018: $62.9 billion
2019: $64.0 billion
2020: $64.7 billion
2021: $83.4 billion

— Emil Protalinski (@EPro) October 28, 2021

A note about subscribers

What’s also interesting here is that Apple referred to its subscriber base for the twentieth time during the call. “The number of subscriptions that we have on the platform, we mentioned during the call, 745 million paid subs right now. It’s an increase of 160 million versus just 12 months ago,” the company said. This includes all the company’s services, including iCloud, ads and the App Store. Horace Dediu notes that on this growth trajectory:

Apple is 5-6 quarters away from 1 billion paid subs. Could happen even sooner.

— Horace Dediu (@asymco) October 28, 2021

Big in China

Demand in China is outpacing other markets, reflecting the relative strength of that economy as it emerges from Covid and embraces the need for a green new deal. Apple also mentioned continued growth in Vietnam.

The 5G opportunity

On 5G, Tim Cook notes this upgrade is a once in a decade scenario for iPhone, but that the transition will happen over several years.

Enterprise purchasing

• SAP is one of this quarter’s big Apple deployment story. The company has now deployed tens of thousands of Macs across its employees. Martin must be busy.
• France’s national railway company, SNCF, equips all train drivers with iPads to manage their entire daily workflow and train operations. Drivers like these so much that 90% purchase them for personal use at the end of the corporate device refresh cycle.

Saving the planet

Apple has more than doubled the number of its suppliers who have committed to becoming carbon neutral by 2030.

“We’ve never viewed our environmental work as a side project. Teams across Apple are pushing this work forward in the same spirit of innovation we bring to our products and services. We are determined to be a ripple in the pond that drives a far greater change. From the pandemic to climate change, to inequity and injustice, global challenges won’t abide solitary solutions. And we feel a deep sense of responsibility to help,” said Cook.

Apple as a service

One more thing: While the company isn’t quite there yet, Tim Cook did state that outright purchase was still the most used way to buy products other than the iPhone, “but we are seeing more and more demand for monthly payments.”

He added: “And so we want to get the customer what they want. And so you will see us do more and more things like that that will meet the customer and provide the price that they want in a way that they want to pay for it.”

(In recent months we’ve heard some speculation Apple may enter the purchase now pay later market. Might it offer product subscriptions, also?).

• Apple’s press release here.
• A good transcript here.

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