Apple Fiscal Q1 Revenue Growth Strong in iPhone, Mac, Wearables

Defying supply chain shortages plaguing the tech industry, Apple posted its strongest December quarter on record, with revenue growth in all categories but iPad, said CEO Tim Cook on an earnings call for fiscal Q1 ended Dec. 25. Revenue in the quarter jumped 11% year on year to $123.9 billion.

IPhone revenue grew 9% year on year to a record of $71.6 billion, despite supply constraints. Apple had the four top-selling smartphones in urban China in the quarter, with revenue there up 21% year on year, said Cook. The company had a record number of upgraders and double-digit growth in iPhone switchers in China, he said.

Overall iPad revenue dropped, as expected, on “very significant supply constraints,” said Chief Financial Officer Luca Maestri. IPad revenue tumbled 14% year on year to $7.2 billion; half of purchases were made by customers new to the product, and the iPad installed base reached a new high during the quarter, he said. Though supply chain constraints persist, the company is seeing improvements this quarter, he said.

On whether Apple is revisiting its supply chain strategy due to industry-wide manufacturing and logistics disruptions, Cook acknowledged the chip shortages on legacy nodes but said Apple’s supply chain “actually does very good” because it’s “fast-moving” with very short cycle times. “There's very little distance between a chip being fabricated and packaged and a product going out of factory.”

Apple’s homegrown M1 chip drove record upgrade sales for the Mac in the quarter, said Maestri. The last six quarters have been the best ever for the Mac, he said, with revenue jumping 25% to $10.9 billion. Wearables, home and accessories sales increased 13% to $14.7 billion. Two-thirds of Apple Watch buyers were new to the product, he said.

The services business grew 24% to $19.5 billion on strength in Apple Music, Apple TV+, advertising and payments; the App Store had a record December quarter, Maestri said. Paid subscriptions totaled 785 million, with 165 million added in the past 12 months, he said. Maestri didn't break out subscriptions for Apple TV+. Services have pulled in $72 billion in the past 12 months, he said.

Apple launched a beta program, Apple Business Essentials, in November, offering 24/7 support and iCloud storage to help small businesses manage the end-to-end lifecycle of employees’ Apple devices. M1-powered Macs have shown strength in the enterprise market, Maestri said.

The CFO declined to give guidance​​​​​​​ for the March quarter due to market uncertainties. But in terms of “directional insights,” assuming COVID-19-related impacts don’t worsen, Apple expects “solid” year-on-year revenue growth and a record fiscal Q1, “despite significant supply constraints,” he said.

Maestri warned of a “challenging compare” with the iPhone in the March quarter. The iPhone 12 line launched later in the year in 2020, pushing out sales to the first three months of 2021. The iPhone 13, by comparison, launched during 2021 late in the September quarter in time for the holiday selling season. The stock closed 6.9% higher Friday at $170.33.