^{Source: Predictions based on analysts’ consensus from Visible Alpha}

Apple (AAPL) Financial Results: Analysis

Apple Inc. (AAPL) reported Q3 FY 2021 earnings that crushed analysts’ expectations. Earnings per share (EPS) came in well above expectations, doubling from the year-ago quarter. Revenue also exceeded analyst forecasts by a wide margin, rising 36.4% year over year (YOY) to a record high for the June quarter. Apple’s services revenue beat analysts’ estimates. The company’s shares were up slightly in after-hours trading. Over the past year, Apple’s shares have provided a total return of 55.9%, well above the S&P 500’s total return of 35.9%.

Note that Apple’s 2020 fiscal year ended in Sept. 26, 2020. Its current earnings report is thus for its fiscal third quarter, which coincides with the second quarter of the calendar year.

AAPL Services Revenue

Apple’s services revenue rose 32.9% YOY, marking the fastest pace of growth since Q3 FY 2018. The company’s services include the its digital content stores and streaming services, such as its various App Store platforms, Apple Music, Apple Arcade, Apple News+, and Apple TV+. Apple also generates services revenue from AppleCare, advertising services, cloud services, and other services, including Apple Card and Apple Pay.

Profit margins on services sales are dramatically larger than on Apple’s hardware profits. That means that each dollar of added service sales disproportionately boosts Apple’s profits compared to hardware sales.

Hardware sales still make up the majority of Apple’s revenue, however. Apple’s iPhone sales alone, which rose 49.8% YOY, accounted for 48.6% of total revenue.

Apple did not provide any specific future guidance in its earnings release. It has not provided any guidance since the beginning of the COVID-19 pandemic.

Apple Earnings Call Recap

In a conference call with analysts, Chief Executive Officer (CEO) Tim Cook said that Apple is being affected by supply constraints related to “silicon,” which is a common term for computer chips. Cook said these constraints would affect the company’s iPhone and iPad sales in the September quarter. The iPhone is the company’s biggest revenue generator. Cook also said that Apple believes that freight costs are high.

Apple’s next earnings report (for Q4 FY 2021) is estimated to be released on Oct. 27, 2021.