Apple Q3 earnings are out! It is worth applauding that Apple reported a historically strong third quarter on Tuesday, including $81.4 billion in revenue growth, up 36 percent year over year, soaring past analysts’ estimates of an optimistic figure of $73.8 billion. The Cupertino company showed growth over 12% on an annual basis across all product categories – including the iPhone. Overall, Apple sales were up 36% from the third quarter last year. iPhone sales increased nearly 50% on an annual basis.
Apple stock was down over 2% in extended trading on Tuesday. It dropped after the tech giant warned on its earnings call growth in the fourth quarter due to the global chip shortages.
(2021) Apple Q3 Earnings: Analysis
As we mentioned earlier, Apple Q3 earnings crushed analysts’ expectations. Here is a breakdown of what Wall Street (based on Refinitive estimated), was expecting from Apple’s third-quarter earnings versus how the company did for the quarter:
Apple Q3 revenue: $81.4 billion vs. $73.8 billion estimated, up 36% year-over-year.
Apple Q3 EPS: $1.30 vs. $1.01 estimated.
iPhone revenue: $39.57 billion vs. $34.4 billion estimated, up 49.85% year-over-year.
Apple services revenue: $17.48 billion vs. $16.3 billion estimated, up 33% year-over-year.
Other products revenue: $8.76 billion vs. $7.80 billion estimated, up 40% year-over-year.
Mac revenue: $8.24 billion vs. $8.07 billion estimated, up 16% year-over-year.
iPad revenue: $7.37 billion vs. $7.15 billion estimated, up 12% year-over-year.
Gross margin: 43.3% vs. 41.9% estimated.
(Note: The Cupertino company’s 2020 fiscal year ended in September 26, 2020. Apple’s latest earnings report is for its fiscal third quarter, which coincides with the second quarter of the calendar year.)
Apple shares were up in after-hours trading. Over the past year, Apple shares have provided a total return of 55.9%, above the S&P 500’s total return of 35.9%.
It should be worth noting that Apple’s business is highly season, meaning every year it sees a historic rise in sales during the holiday season. Despite post-pandemic blues, Apple revenue was the highest the company has ever reported in its third quarter. It comes as a huge surprise to Apple analysts who’ve labeled it as the slowest quarter of the year. Apple revenue was up 36% year over year, and every product line saw 12% increase year-over-year growth. Apple services revenue was up 33% year over year.
In the company’s own words, services revenue reached “new all-time high.” Apple services revenue rose 33% year over year, making it the strongest third quarter growth since Q3 2019. The company’s services include its digital content stores and streaming services, such as its App Store platforms, Apple Arcade, Apple Music, Apple TV+, and Apple News+. The Cupertino giant also generates a great deal of revenue from AppleCare, cloud services, advertising services, and other services, including Apple Pay and Apple Card.
Profit margins on Apple’s services sales are larger than hardware profits. This means that each dollar of services sales dramatically boosts Apple’s fiscal Q3 2021 earnings compared to hardware sales.
Apple iPhone sales alone rose 49.8% year over year, and account for 48.6% of total revenue. Hardware sales made up a majority of Apple’s third quarter revenue.
The company did not issue official guidance for the sixth quarter in a row and hasn’t since the beginning of Covid-19 pandemic. Apple Q4 2021 earnings report is estimated to be released on October 27, 2021.
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