Apple Q2 2021 Earnings Report Recap

AAPL delivers strong beats on earnings, overall revenue, and services revenue

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Apple Earnings Results
Metric Beat/Miss/Match Reported Value Analysts' Prediction
EPS Beat $1.40 $0.99
Revenue Beat $89.6B $77.4B
Services Revenue Beat $16.9B $15.7B

Source: Predictions based on analysts' consensus from Visible Alpha

Key Takeaways

  • Apple delivered strong beats on earnings, total revenues, and services revenues in Q2 FY 2021, the quarter ending in March.
  • Apple's quarterly revenue for Q2 2021 hit an all-time record.
  • Services revenue was the highest of any quarter in Apple's history.
  • Apple's services business enjoys a gross profit margin almost double that of its products business.
  • Apple announced $90 billion in share buybacks and raised its dividend by 7%.

Apple (AAPL) Financial Results: Analysis

Apple Inc. (AAPL) reported Q2 FY 2021 earnings that beat consensus estimates handily. Note that Apple has a fiscal year that ends in September, thus the quarter that just ended in March was Q2 2021, not Q1, as it'd be if Apple followed calendar quarters. Earnings per share (EPS) were $1.40, beating the consensus estimate of $0.99 by 41.4%. Revenues were $89.6 billion, better than the estimate of $77.4 billion by 15.8%. This was record revenue for the fiscal quarter ending in March, and was up by 53.6% from the same period a year ago.

Apple's Key Metric: Services Revenue

Services revenue of $16.9 billion beat the estimate of $15.7 billion by 7.6%. This figure represented a new record for the company in any quarter, and was 26.6% higher than the same period one year ago.

Service revenue is so important for Apple for two reasons. First is that services revenue is predictable and steady, whereas product revenue is subject to the highly seasonal trends of the retail industry. Secondly, Apple's services segment has a much higher gross profit margin than its product sales. In the quarter it just reported, the margin for Apple's services segment was 70.1%, and the gross margin for its products segment was 36.1%, so every dollar of additional services revenue increases profits much more than a dollar of products revenue.

Big Buybacks

Apple authorized $90 billion of share repurchases, up from the $75 billion it spent in 2019 and $50 billion in 2020. Apple also announced a 7% increase in its dividend, to $0.22 per share.

Apple's Guidance and Stock Performance

Apple did not offer guidance in its brief earnings press release. Over the past year, Apple's shares have provided a total return of 91.8%, above the S&P 500's total return of 46.1%.

Apple (AAPL) Earnings Call Recap

This was the second consecutive quarter in which Apple posted double-digit year-over-year growth rates in all its product categories. CFO Luca Maestri indicated that he expects double-digit revenue growth in Q3 FY 2021, but warned that Apple is constrained by worldwide semiconductor shortages.

CEO Tim Cook said that Apple is seeing a surge of first-time buyers of Macs. Sales of Macs were up by 70% year-over-year, and sales of iPads surged by 79%. Meanwhile, paid subscriptions for all Apple's services stand at 660 million, up by 40 million from Q1 FY 2021.

Next Earnings Report

Apple's next earnings report is estimated to be released on August 3, 2021.

Article Sources
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