Compared with a year ago, Apple is clearly facing a more severe operating environment. In the case of repeated epidemics in China, Apple's supply chain crisis has never been resolved. Cook also pointed out in last quarter's earnings meeting that the negative impact of supply chain restrictions will continue until the second fiscal quarter of this year, and the situation is not optimistic.
At the same time, multiple factors such as the continuation of the Russian-Ukrainian conflict and the continuous decline in US economic data have caused a general decline in the performance of US technology giants in the first quarter, investors have accelerated the selling of risk assets, and technology stocks that have unlimited scenery have underperformed the market. In this case, investors have placed their hopes on Apple's financial report, hoping that Apple can hand over a satisfactory answer sheet to the market and restore market confidence.
So does Apple stand the test? Last night, Apple released the company's fiscal second quarter of fiscal 2022 earnings. Apple's total net revenue for the fiscal second quarter was $97.278 billion, up 9 percent from $89.584 billion in the same period last year, and net profit was $25.010 billion, up 6 percent from $23.630 billion in the year-ago quarter, the report showed. Apple's Greater China revenue for the fiscal second quarter was $18.343 billion, up 3 percent from $17.728 billion in the year-ago quarter.
Judging from the book figures, Apple's financial report data for the second fiscal quarter is still a hot fire. In addition to the iPad series, which is out of stock due to "very serious supply chain restrictions", Apple's entire range of hardware products has basically ushered in growth. In addition to record high iPhone revenue, service revenue growth is even higher, helping Apple continue to maintain a strong revenue trend in a turbulent macro environment.
Still a great hardware business
When it comes to Apple, you can't get around the iPhone. Although the proportion of revenue has declined in recent years, the iPhone is still Apple's most important business.
According to Morgan Stanley analyst Katy Huberty, iPhone shipments in the second quarter will grow 10% year-over-year, driven by strong demand for the iPhone 13 series. Affected by this, despite the weak performance of the iPhone SE series, iPhone revenue still increased from $47.88 billion in the same period last year to $50.57 billion in the second quarter of fiscal 2022, an increase of 5.5% year-on-year, accounting for 51.97% of the total revenue in the quarter.
According to foreign media 9to5mac, after Apple released the second fiscal quarter of fiscal 2022, Apple CEO Tim Cook accepted an interview with CNBC. Cook said in an interview that the iPhone business has had significant success in "attracting users to change machines" during the quarter, with double-digit growth in the number of users switching from Android to iPhone. If Android manufacturers continue to sink, this number is expected to grow further.
Looking at other businesses, as Apple's longest-running hardware business, the Mac business's revenue in the past few years is actually not very optimistic. However, after Apple launched the M1 chip, the Mac business continued to pick up, with revenue up 14% year-on-year to $10.435 billion in the quarter. The M1 chip has successfully won market recognition, and it is expected that Apple will hit the iron while it is hot and launch a new Macbook product equipped with an iterative M2 chip this year.
Unlike the stable performance of the Mac business and the strong performance of the iPhone business, the iPad business became the only business that saw sales decline in the quarter. Although Apple released the iPad Air 5 at the spring new product launch in March this year, the sales of this product are not as good as expected, and a month and a half after the release, the sales of the Jingdong Mall are only more than 10,000 units. The unbalanced product configuration makes the machine's popularity even less than that of the iPad Pro 2018 model.
In addition to the problems with the iPad Air 5 itself, supply chain restrictions and intensified competition in the external market are also the reasons why the iPad business has not performed as expected. In the past six months, major domestic manufacturers have launched a lot of cost-effective products, such as Huawei MatePad 11, Xiaomi Tablet 5 Pro, OPPO Pad, Honor V7 Pro, vivo Pad and other products, the price of these products is generally around 2500 yuan, all have good quality speakers + high brush screen configuration, and the software ecology is much better than before, obviously will have a lot of impact on iPad sales.
Service is the backbone of Apple's future
When it comes to Apple, many people's first impression is its various types of powerful hardware, including iPhones, iPads and Macs, but in fact, Apple's service business has become an important part of its revenue.
According to Apple's earnings report, Apple's services revenue in the second fiscal quarter was $19.821 billion, a year-on-year growth rate of 17%, much higher than all businesses except the iPhone. In addition, the growth rate of revenue in this business unit is also very rapid, since Apple's financial report has statistics, in addition to 2021 due to the iPhone 13 series of hot sales to drive product revenue growth rate exceeds service revenue, Apple's service business revenue growth rate is basically above the product business every quarter.
The strong development momentum of Apple's service business has made many Internet giants have to look sideways.
In fact, since iPhone sales slowed in 2015, Apple has shifted its focus to the services business. Today, the services business has become Apple's second most important product group, and its growth prospects are more exciting than many hardware such as the iPhone, and in the strategy of the entire Apple Group, it can also be seen that Apple is shifting its focus to software services.
In recent years, Apple has successively announced a number of subscription services, including Apple One, Apple Fitness+ and Apple Self-service repair, and continues to enrich the content of apple games (Apple Arcade), Apple TV+, Apple News +and other existing subscription services.
Thanks to the rich content of the service, the growth of device sales and the increase in user engagement, yesterday evening, Apple's CFO revealed in an analyst conference call that the number of users of Apple services increased by 165 million in the quarter, an increase of 25% over last year. Considering that Apple, which relies on hardware sales, has a huge user base around the world, it can be predicted that Apple's paid services will still have a large space for explosion in the future.
Because of this, according to foreign media reports, Apple is planning to launch a subscription model involving iPhones and other Apple hardware products. As long as users pay a fixed fee every month, they can use the latest Apple hardware such as iPhone and iPad, and enjoy Apple One's paid services at the same time, including more iCloud disk space.
Why does a company like Apple, which can't sell its products, develop a hardware subscription service? In fact, Apple's product sales are facing an increasingly difficult bottleneck to find growth points. Especially in the case of the old market gradually becoming saturated and the new market becoming more and more difficult to open, how to promote the replacement cycle of iPhone users to replace new products has naturally become a major problem.
In this context, the launch of hardware subscription services could be a strategic shift for the international giant. Apple's internal employees said that the emergence of this subscription service can make the entry threshold for users lower, allow more Android users to join the ranks of replacement, and at the same time bind users through subscription services, changing the current situation that only die-hard Apple fans will replace new iPhones every year.
For a company mainly engaged in hardware business, the launch of this subscription service is undoubtedly a huge change, and it is a key node in the transformation of a hardware company into a service enterprise. At a time when the industry is collectively caught in the mobile phone hardware product update without great innovation, can this first-use-pay-after-pay, continuously upgraded subscription plan improve Apple's long-standing weak cycle, and can it strengthen the user stickiness of Apple's services? The answer is worth looking forward to.