Predictions leading up to today’s earnings report from Apple were mixed, but the actual news turned out to be just what Wall Street wanted to hear. While iPhone sales are still down, the numbers weren’t bad enough to spook the market further. The worst seems to have passed, which is good. Almost everything else is up, with some areas really excelling in the March quarter.
Let’s lead off the good news with our namesake here- the iPad. While Apple stemmed the huge losses that their tablets faced two years ago, sales have been just been steady and revenue growth has been up and down. Until this quarter. iPad revenue shot up 22% from the December quarter, which is notable. This is the biggest revenue jump in six years, which shows that Apple’s tablets do still have legs.
Those legs aren’t limited to the US, either. iPad sales in China are up and this was the biggest March quarter ever for iPad in Japan. Other parts of the world also showed double-digit growth, so this quarter was a big win for the Apple tablets.
While the big increase in iPad revenue came as a pleasant surprise, continuing growth in both services and wearables was expected. That said, the numbers still impressed. Services were up 16%, continuing a solid run of expansion and growth. Also keep in mind that Apple will have several new services coming online between the Summer and the end of the year, so the good news should continue for this category.
Wearables growth was pretty ridiculous, as Apple posted a full 50% year-over-year increase. Considering that Apple already leads this category, that big of a number is very impressive. Both services and wearables also beat analyst estimates for the March quarter, which is part of the reason that Apple’s stock price shot upward again today. Another big reason is that Apple’s projections for next quarter are also ahead of what analysts expected before today. That optimism should insure that the stock price continues to rise through the current quarter.
There was other good news in this earnings report other than just sales. Here are a few of the highlights:
- Revenue and sales in China are recovering. This is particularly important for the iPhone.
- Three quarters of new Apple Watch owners had never worn a smartwatch before. That market standing should continue to fuel growth.
- Part of the reason that iPad revenue is up is that the current-gen iPad Pros are selling very well.
- iPad satisfaction ratings are also pretty hard to knock at 93% positive.
- 77% of consumers and 75% of businesses looking buy tablets plan to purchase an iPad. iPad owns this category now.
- The Mac, iPad and Apple Watch are all bringing in impressive numbers of new customers. This is especially interesting for the established iPad and very established Mac.
Add all of this together and you have a surprisingly solid quarter for Apple. Now, it wasn’t all positive news. Both overall sales were down 5% year-over-year and iPhone revenue was down a full 17%. Mac sales were also off, although Tim Cook and Luca Maestri blamed this on component shortages holding back sales.
So why is the market so upbeat about Apple today? Here’s the bottom line. The iPhone now only represents 53.5% share of Apple’s business, which is down significantly. Apple’s other businesses are catching up faster than most predicted, which should allow the company to continue to grow, at least in the short term.
Combine that with the fact that iPhone sales appear to have hit bottom and are bouncing back and you have a couple of good reasons for investor optimism. The positive outlook for next quarter certainly doesn’t hurt, either. Apple may never be able to duplicate the kind of growth that investors and analysts got spoiled with over the last decade, but they aren’t even close to being a company in trouble.