Apple had a huge quarter, but revenue growth is slowing
It made more money off its Services segment than ever before.
All eyes are on Apple today, after a tumultuous series of earnings reports dropped this week. Google parent company Alphabet missed revenue expectations, while Meta (formerly Facebook) recorded a higher profit than expected this quarter. Apple just released its results and the company has performed respectably in its second quarter of the fiscal year 2022. This was its best March quarter yet, with revenues of $97.3 billion — a 9 percent jump from the same period last year. On today's earnings call, CEO Tim Cook said the results were "better than we anticipated." That said, it's still a drop from its results last quarter, where it broke all-time records with revenues of $123.9 billion.
Apple also hit a new all-time high on its revenue from Services, which includes things like subscriptions to TV+, Music and Fitness+. With its strong showing on the awards circuit recently, it's hardly a surprise that TV+ is drawing in subscribers. Apple doesn't break down how much it makes specifically from each individual service, so it's hard to say just how much impact shows like Coda or Ted Lasso have had. Notably, Coda's winning of Best Picture at the Academy Awards makes Apple TV the first streaming service to win in that category.
The rest of the company's products continued to do well too, with revenues from Mac, iPhone and "Wearables, Home and Accessories" all having increased year over year. On the call, Cook highlighted the new Mac Studio and Studio Display that were launched in March, as well as the iPhone SE and the M1-powered iPad Air. CFO Luca Maestri also said on the earnings call that the last seven quarters have been "the best seven quarters ever for Mac." Interestingly, the one segment that faltered was iPad, raking in about $7.6 billion compared to around $7.8 billion the same time last year. That type of up-and-down performance is pretty typical for iPads, though.
The wearables category was the most eye-catching, with Apple making $19.8 billion this quarter from sales of things like AirPods and watches, compared to $16.9 billion this time last year. That's more than it made from Macs, which came in at $10.4 billion this quarter (up from $9.1 billion last year). Maestri said on the call that "our wearables business has doubled in three years and is nearly the size of a Fortune 100 business." If you're keeping track, that means the Services category made Apple almost twice as much money as Macs, which is the next closest category (aside from iPhones, which came in at about $50.5 billion).
Maestri attributed some of the Services earnings to a few things. The company's "install base has continued to grow, reaching an all-time high across each geographic segment," he said. Paid subscriptions also increased, with more than 825 million paying subscribers across the services on Apple now. Of that number, 165 million signed up in the last 12 months, Maestri added later in the call.
Global supply constraints were a big point of focus on the question-and-answer portion of the call, and when asked about the long lead time on Mac products, Cook cited COVID-related disruptions in China and the ongoing silicon shortage as contributing to the issue. "We're not really forecasting when we can be out of the silicon shortage," he said, adding "I think the COVID piece of it — I hope it is a transitory kind of issue and so I would hope that it would get better over time."