In an environment of weak consumer demand and still shortage of chip supply, Apple lived up to the title of "the hope of the whole village" and handed over the second quarter financial report, which became one of the few growth stories in recent times.
In the quarter, Apple reported revenue of $97.3 billion, up 9% from $89.6 billion in the same period last year, and quarterly net profit of $25 billion, up 6% year-on-year from $23.6 billion in the same period last year.
In terms of products, in addition to the iPad, Apple's hardware and software products have ushered in the best quarterly performance.
iPhone: $50.57 billion (5.5% yoy)
Mac: $10.43 billion (up 14.3% yoy)
iPad: $7.65 billion (down 2.2% year-over-year)
Wearables: $8.82 billion (12.2% yoy)
Services: $19.82 billion (17.2% yoy)
01 Apple: iPhone 13 Customer Satisfaction 99%
The iPhone remains Apple's largest source of revenue, with revenue of $50.57 billion, or 52 percent of total revenue. After the release of the iPhone 13 series, demand remained strong in the second quarter, continuing to extend the mass production cycle of the 5G iPhone. Add to that $71.63 billion in the first quarter, and the iPhone 13 series has generated $120 billion in revenue for Apple.
It is worth noting that the iPhone 13 is also bringing a large number of new users to Apple, Apple CEO Cook said in an interview that a large number of Android users have turned to the iPhone, and this part of the user growth rate has reached double digits, helping the iPhone business to achieve success.
Apple CFO Luca Maestri further revealed that the top six mobile phones in the United States are iPhones, and the top four in Japan, the top five in Australia and five of the top six in China are all iPhones. "Strong sales coupled with unmatched customer loyalty," the number of active installs of the iPhone hit an all-time high in all regions. Luca stressed that "the iPhone 13 is truly a global success. ”
Obviously, the iPhone 13 series has a good reputation, and Luca cited the statistics of 451 Research Company to say that iPhone users' satisfaction with the iPhone 13 series has reached 99%.
02 Unlimited potential of the service business
Apple's services revenue remains the second largest source of revenue, accounting for 20 percent of total revenue of $19.82 billion, up 17.2 percent from last year.
Apple services include the App Store, Apple Music Music, iCloud, AppleCare+, and Apple TV+, advertising, and payments. In the quarter, Apple's service gross margin grew to 72.6 percent, well above the company's overall profit margin of 43.7 percent and hardware products at 36.4 percent.
The iPhone has brought new users to Apple, and these increments and existing users have been accelerated by Apple's services. In the second quarter, Apple's trading accounts, paid accounts and paid subscription accounts "reached record highs in every region." The number of paid subscribers was 825 million, up 25% from 660 million in the same period last year.
It is worth noting that after Netflix handed over a bad earnings report, the outside world expects the growth of Apple TV+ to be ready. According to a report by JustWatch, apple TV+ has a global market share of 5.6% as of February 2022, which is close to HBO Max. The science fiction series "Base", adapted from Asimov's series of novels of the same name, the science fiction series "Invasion", the second season of "Morning News", and the Oscar best picture "Hearing Girl" have effectively led to the growth of paying users.
In addition, with the launch of "Friday Baseball Night" signed by Apple with Major League Baseball and "Pachinko", which has a 100% Rotten Tomatoes rating, the potential of Apple's service is expected to be better.
03 The supply crisis spreads, and self-developed chips drive new users
Apple's continued investment in self-developed chips is increasingly reflected in the performance of Mac computers. While supply constraints remain, Apple's Macs generated $10.4 billion in revenue, up 15 percent year-over-year. Cook said that this is mainly due to strong demand for the M1 chip MacBook Pro.
The past seven quarters since the launch of the self-developed chip have been the seven best performing quarters for Mac computers. In the past three months, a record number of Mac users have upgraded to Apple Silicon chips, and nearly half of the users who buy Macs are new users.
However, even if the self-developed chip is installed on the iPad, the iPad still has not been able to escape the supply crisis such as chip shortage. The iPad became the only product to experience a revenue decline in the quarter, with iPad revenue at $7.6 billion, down 2 percent year-over-year. Cook said the iPad business still faced "very severe supply constraints" in the third quarter.
It is foreseeable that because the demand for iPad has not weakened, the iPad is likely to appear in a difficult situation in the short term for some time to come. Cook revealed: Users have a strong response to the iPad product line, especially the demand for iPad Air equipped with M1 chip is still very strong.
04 Hidden Crisis: What to Support 3 Trillion
It is worth noting that the impact of the latest round of the epidemic in late March was not reflected in this quarter's financial report. However, Cook stressed that the biggest crisis in the future will remain a global supply crisis, which is expected to cause losses of 4 billion to 8 billion in the next quarter.
In addition to the decrease in revenue, there may be a deeper crisis hidden under the supply shortage.
Under the record revenue of the iPhone, the decline in growth has become the biggest "wake-up call" of this financial report. In 2021, the iPhone's four quarters of average revenue growth rate of 45%, the maximum growth rate of 66%. In the first two quarters of 2022, the growth rate was only 9% and 5%.
The 5G replacement cycle has entered the end, and the weakening of user replacement demand has become an indisputable fact. The market generally believes that the next growth point to stimulate sales is Apple cars and AR headsets. However, under the influence of supply shortage, even if these products are released, they are likely to face a mass production crisis.
Judging from the news exposed in the industry, the iPhone 14 series closer to the user has limited appeal, and Apple hopes to shorten the replacement cycle and stimulate user growth through the "hardware subscription service", and then expand the user life cycle value through the service business.
Under the shroud of supply crisis, compared with the distant cars and AR headsets, this may be a more reliable story to support Apple's market value of 30,000 yuan.
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