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Apple Earnings, Revenue Soar

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Apple Earnings, Revenue Soar

Apple Inc. AAPL -0.60% signaled that the historic rise in sales it has achieved during the pandemic is set to continue, addressing a key investor concern as the company reported record revenue in the first three months of the year.

New, more expensive models of the iPhone 12 have been a hit with customers, and revenue from Mac computers and iPads also rose during the quarter on strong demand from employees and students conducting their work at home.

Apple’s fiscal second-quarter results set new highs in what could very likely be a record-setting year for profit and revenue. Analysts predict full-year profit will exceed $70 billion, nearly a third more than last year.

Apple shares soared 4% in after-hours trading Wednesday in New York. The Cupertino, Calif. company reported its profit more than doubled to $23.6 billion in the latest quarter, off of $89.6 billion in revenue, far exceeding Wall Street expectations. The company also announced a 7% increase to its cash dividend to 22 cents a share and that the board had authorized an increase of $90 billion to an existing share-repurchase program.

“We feel very good, given the results we’ve had in the first half of our fiscal year,” Apple finance chief Luca Maestri said in an interview. “And clearly as economies start to reopen, particularly those economies where there are enough vaccines, obviously we think that should be a positive.”

While work-from-home trends helped Apple’s performance, Mr. Maestri said the company may see continued benefits from a hybrid work model. A return to more normal conditions could also boost other business lines, such as from an increase in the purchase of AppleCare and advertising, which were negatively affected by the Covid-19 pandemic.

“It was obviously more difficult for us to sell iPhones and watches—that typically require a lot of interactions of our customers, particularly in the retail stores and in the carrier stores,” he said. “So that may provide an offset.”

After a year of hype about the potential for the iPhone 12 and the rapid rise in the company’s shares, Apple is one of a number of companies that investors are closely watching for signs on whether the historic, pandemic-induced success can continue.

Investors like Dan Morgan were looking for signs that growth would continue, even as the tech sector struggles with a microchip shortage and other uncertainties tied to the coronavirus pandemic. “The market always looks six months ahead,” said Mr. Morgan, a senior portfolio manager who focuses on technology at Synovus Trust Co., which counts Apple among its largest holdings.

Mr. Maestri said the company didn’t face a microprocessor shortage during the March period.

Some shareholders have evidently been jittery. Apple shares were up 1.3% this year through Tuesday, compared with a roughly 12% gain for the S&P 500.

Apple and Its Rivals

Apple and other tech giants have benefited as students and workers stuck at home turned to their products in record numbers, pushing share prices to new heights. Apple’s stock almost doubled last year. Its current valuation, as a measure of its price-to-earnings ratio, is the highest since December 2007, according to FactSet.

Google-parent Alphabet Inc. beat sales records in the latest quarter thanks to an increase in digital-ad spending, and Microsoft Corp. saw its quarterly sales increase 19%.

Even as the world’s biggest tech companies continue to post record results, they remain in the crosshairs of regulators and investigators who are scrutinizing how they wield market power. Apple’s strength in the market is being questioned by smaller tech companies.

Apple this week rolled out software changes to iPhones and iPads to make it harder for apps to track users across the internet, a measure touted by Mr. Cook as a consumer safeguard. Facebook Inc. and others have questioned Apple’s motives in the matter.

Apple is on the eve of going to trial in federal court to defend itself against claims by the maker of the popular videogame “Fortnite” that the iPhone company is engaged in anticompetitive behavior in its app store. Apple has denied wrongdoing. Observers are also watching for regulators in the European Union to reveal results soon of their investigations into claims of Apple’s monopoly behavior. Apple has said the complaints are baseless and defended its role in promoting businesses on its App Store.

Apple stopped providing detailed guidance about coming quarters last year, as Covid-19 upended daily life around the world and initially sent markets falling amid fears of a global recession.

The latest update to the iPhone’s operating system features a new privacy feature called App Tracking Transparency. WSJ’s Joanna Stern spoke exclusively with Apple’s Craig Federighi about the decisions behind the feature, as well as Apple’s interest in mixed reality—and the possibility he’ll replace Tim Cook as CEO. Photo illustration: Alex Kuzoian for The Wall Street Journal

Much of the growth last year was fueled in unexpected places. Apple saw record demand for Mac computers and an 11% rise in iPad tablet sales. That growth continued in the March period. On Wednesday, Apple said Mac sales rose 70% to $9.1 billion and iPads increased 79% to $7.8 billion. That beat analyst expectations for increases of 27% and 29%, respectively.

The real engine of 2021 is the latest iPhone: Overall iPhone revenue rose 65% to $47.9 billion. Analysts had expected a 42% rise.

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Higher-end versions of the iPhone 12 appear to be boosting that figure. The average retail price in the U.S. during the past three months rose $52 to $847 from a year earlier, according to data from Consumer Intelligence Research Partners LLC, which surveys buyers.

The most expensive version, the Pro Max with a 6.7 inch display that starts at $1,099, saw its share grow to 20% of sales from 13% a year earlier, the survey found.

The addition of faster 5G cellular connections to this year’s phone was expected to help Apple in China, where competitors had beaten Mr. Cook to market with more advanced phones. Greater China sales nearly doubled to $17.7 billion.

Write to Tim Higgins at [email protected]

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Published at Wed, 28 Apr 2021 20:30:00 +0000

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