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Apple CFO: Expect record March-quarter revenue despite supply constraints

In spite of "very significant supply constraints," said CFO Luca Maestri, the company's installed base of iPads "reached a new all-time high."
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Written by Tiernan Ray, Contributing Writer on

Apple this afternoon reported fiscal Q1 revenue and profit that both topped Wall Street's expectations. 

The report follows a fiscal Q4 report in October when the company lost $6 billion worth of sales to supply chain disruption, and warned at the time that Q1 would be worse. 

The report sent Apple shares almost 3% in late trading. 

CEO Tim Cook remarked that the "quarter's record results were made possible by our most innovative lineup of products and services ever."

Added Cook, "We are gratified to see the response from customers around the world at a time when staying connected has never been more important. We are doing all we can to help build a better world — making progress toward our goal of becoming carbon neutral across our supply chain and products by 2030, and pushing forward with our work in education and racial equity and justice."

Revenue in the three months ended in December rose to $123.9 billion, yielding a net profit of $2.10 a share.

Analysts had been modeling $119 billion and $1.90 per share.

Also: Apple CEO Cook: chip shortage impact will be even worse this quarter

Apple's sales of iPhones rose 9%, year over year, to $71.63 billion.

The company's services business rose by 24% to $19.5 billion, it said. 

Apple's Mac sales rose by 25% to $10.85 billion.

iPad sales declined by 14% to $7.25 billion.

Apple's sales growth was greatest in the "Greater China" region, where sales rose by 21%, year over year, to $25.8 billion.

Gross profit margin in the quarter was 43.8% of sales.

Apple did not provide a forecast. 

Cook and team will host a conference call to discuss the results at 5 pm, Eastern time, and you can listen to the Webcast from the company's investor relations Web site.

Update: During the company's conference call, Cook remarked that the results had turned out "better than we expected at the beginning of the quarter."

"We experienced supply constraints that were higher than the September quarter," said Cook. 

Cook took a moment to note the continued toll that COVID-19 is taking around the world. "On behalf of all of us at Apple, I want to extend our deep gratitude to the scientists, doctors, nurses, and so many others on the front lines of combating COVID-19," said Cook. 

Apple now has more than 1.8 billion devices in its installed base.

The quarter's iPhone sales, $71.6 billion, was a new quarterly record for the product, noted Cook. So was the total of Mac sales, he said. 

The company's AppStore continues to be "an economic miracle" for developers, said Cook. The store set a new revenue record in the quarter, he said, and since its debuted has produced payments to developers of "more than $260 billion." Cook said 2021 saw a new record for developer payments.

CFO Luca Maestri repeated that the company had faced "significant supply constraints" in the quarter. Supply constraints for the iPad were "particularly pronounced."

iPad sales were down 14% "due to very significant supply constraints," said Maestri, "but customer demand was very strong across all models."

"Despite the supply shortages, our installed base of iPads reached a new all time high during the quarter," said Maestri.

Apple ended the qurater with $230 billion in cash and equivalents against debt of $123 billion, for $80 billion in net cash.

Maestri said the company would again face supply chain challenges in the March quarter but less so than the December quarter. 

"Despite significant supply constraints, which we estimate to be less than what we experienced during the December quarter, we expect to achieve solid year over year revenue growth, and set a March-quarter revenue record," said Maestri.

However, Maestri said the company's revenue growth rate would decelerate in March versus December's rate because of difficult comparisons and because of foreign currency effects.

The year-earlier quarter saw a 54% growth rate thanks to the December debut of the iPhone that year, versus September, setting up a more difficult comparison, he said.

"Due to the later launch a year ago, some of the associated channel inventory sale occurred during the March quarter last year," noted Maestri.

Maestri said foreign exchange will lead cause a "three-point headwind when compared to the December quarter growth rate," adding, "We currently expect FX to have a negative impact on growth of two points in the March quarter, while it represented a one point benefit" in the December quarter.

Maestri said gross profit margin would drop to a range of 42.5% and 43.5%. 

Asked during the Q&A about supply constraints, Cook said that the company had faced more than $6 billion of limitations on its shipments, and that it would be less than that this quarter. 

He said the pressure, as in the prior quarter, continues to be with older technology.

Said Cook, "the challenge is on legacy nodes, and these legacy nodes are by legacy supplier, and so it's by supplier more than anything else."

The iPad's "very significant constraint," he said, "was very much on these legacy nodes I have talked about.

"Overall, we're not guiding by constraint, but overall, we do see an improvement in the March quarter, in terms of the constraints going down versus what they were in the December quarter."

Asked specifically for the revenue impact in March, Cook declined to offer a dollar figure, merely reiterating that
"it's very difficult to estimate with great precision," adding March's impact will be "less than the December quarter."

"Yes, it is challenging," added Cook. "March is better than December, so there's some encouraging sign there."

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