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Apple is expected to post stellar second-quarter results with revenue of $ 76.6 billion that will become the standard narrative about the company.
In recent years, Apple’s consensus is that the iPhone maker is pushing hard on services and software because hardware sales are already saturated. For example, customers typically hold a new iPhone for four years, compared to three years back in 2018, forcing Apple to find new sources of growth.
The 2020 results proved it: March quarter results saw iPhone sales drop nearly 7%, while iPad and Mac sales were stagnant. Stronger-than-expected growth of 17% in services (the unit comprising the App Store, warranties and licensing agreements) was a highlight and generated a surge in profits.
When Apple reports its March 2021 results on Wednesday, revenue from services is expected to grow more than 17% to $ 15.7 billion, but better news is expected for the company in the rest of the world. your business.
In a notable change, sales of iPhones, iPads, Macs, and laptops, including Apple Watch and AirPods, are expected to perform so well that services would be the slowest-growing category in all of its divisions.
“Apple is firing every cylinder,” said Morgan Stanley analyst Katy Huberty.
Total revenue is expected to rise nearly a third to $ 76.6 billion, with a high net profit of 47% to $ 16.6 billion, according to analyst estimates compiled by Visible Alpha.
The results are flattering by a comparison with a year ago, as Chinese factories were closed by the coronavirus at the end of the quarter and Apple made the decision to close its retail stores around the world. Still, Apple has never reported a quarter other than Christmas with more than $ 65 billion in revenue, let alone $ 76.6 billion.
The iPhone is wide is expected to have a prominent quarter, with analysts projecting growth of 42% to $ 41.2 billion, 54% of its top line. The rapid growth is due in part to some Christmas and New Year quarter sales being pushed to 2021 after Apple’s first formation of 5G-enabled devices was delayed by supply chain restrictions.
A strong rebound in the Chinese market it’s likely to play a big role, as Huberty expects record 11.1 million iPhones to be shipped, nearly double what it was a year ago. Globally, the number of iPhones shipped is expected to increase by 27% to 52 million, according to Visible Alpha.
The next fastest-growing category is expected to be the iPad, with analysts projecting 27% growth to $ 5.6 billion. Similarly, Mac sales are expected to increase 22% to $ 6.5 billion.
Both categories are in high demand in the education sector as students around the world have been marking Zoom classes. Goldman Sachs analysts, who have a rating of “selling” to Apple, expect new demand in the June quarter thanks to the announcement of the iPad Pro, available in mid-May, but warn of a possible reversal.
“The current high levels of demand for iPad and Mac are likely to be sustainable as the world reopens,” they told customers in a note. “Therefore, another pace driven more by these areas may not be enough to drive action.”
Huberty, of Morgan Stanley, has much more confidence and said Apple has a “significant opportunity” to grow the Mac from 7% of the global PC market to 15%, more in line with the market share of the iPhone, for 2025.
Portable products are expected to grow 21% to $ 7.6 billion. This pace is even more impressive considering that the category grew 54% a year ago.
Neil Cybart, an analyst at Above Avalon, notes that Apple Watch alone is expected to sell about 40 million units this year, about “twice the unit sales of the entire Swiss watch industry.”
If these projections occur roughly, services will be the only category to grow by less than 20% last quarter, a startling feat for the $ 2.3 million company.
That’s not to rule out services: Apple’s category is second in revenue, and with more than 1 billion people using an iPhone, the set of software products is likely to be catchy and consistent in the coming years, as well. that hardware sales fluctuate.
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