The day has come for Apple to release its fiscal second quarter results. Will the company deliver a beat? Will investors be impressed? What will happen to Apple stock?
The Apple Maven will closely monitor the results and conference call discussions. Starting at around 4 p.m. EST, on April 28, our live coverage of Apple’s earnings day will kick off. The press release usually comes out at 4:30 p.m. EST, and the earnings call is scheduled to start at 5:00 p.m. ET.
We have published several earnings preview articles, all of which can be found on thestreet.com/apple. Below is a summary of the key points. To skip the preview, scroll straight down to the "Live Coverage Starts Here!" section for real time insights.
Previewing Apple’s earnings day
- Wall Street analysts seem thrilled. The sell side expects Apple’s sales to climb 32% year-over-year, while earnings per share could increase 53% over year-ago levels.
- I doubt that any of Apple’s segments will struggle. But the iPhone should stand out, as it benefits from a solid product lineup and easy comps. Growth of over 50% is not out of question.
- The Mac is likely to catch investor’s attention too. Apple’s PC sales could also increase by 50% or more, beating easy 2020 comps as well.
- Not struggling, but probably facing more of an uphill battle, will be the iPad. Tablet unit sales across the industry are estimated to have fallen double digits in the first calendar quarter. However, Apple probably did much better than peer average.
- Recent history suggests that owning Apple ahead of earnings might make sense. Apple stock has gained three times more in the two weeks following earnings day than during other, non-earnings related weeks.
For reference, below is how each of Apple’s product/service and geographic segment performed last quarter, in the holiday period. Use it as a benchmark to compare fiscal second quarter results.
Live coverage starts here!
3:00 a.m. PST: Please stand by for Apple’s earnings release! Please refresh your browser for updates below, if it does not do so automatically.
8:02 a.m. PST: Good morning, everyone! Quick check on market action this Wednesday.
8:05 a.m. PST: Apple stock is down modestly, and so is the rest of the market.
8:06 a.m. PST: It feels a bit like déjà vu. Microsoft behaved the same way yesterday, ahead of its earnings, when the stock started the day weak, improved throughout the session and sold off after hours. Let's hope Apple shares do better after the closing bell today.
8:10 a.m. PST: I will check back for more market action later today. And at 4 p.m. EST, live and uninterrupted blog coverage will begin!
12:00 p.m. PST: We are one hour away from the closing bell! And about 90 minutes from seeing Apple's fiscal second quarter numbers.
12:03 p.m. PST: Below is where Apple stock currently is, following the Fed's (expected) announcement that short-term interest rate will remain at or near zero. Nice intraday recovery!
12:04 p.m. PST: I will be back for the closing bell. Hang tight!
1:00 p.m. PST: The closing bell has rung! Welcome to uninterrupted coverage of Apple's fiscal second quarter earnings!
1:02 p.m. PST: Stocks lost steam in the last minutes of trading. The S&P 500 ended the day flat, while the Dow and the Nasdaq were down -0.5% and -0.3%, respectively.
1:04 p.m. PST: Apple stock had a nice mid-day rally, followed by a U-turn that sent shares down -0.6% in the end. See chart below:
1:05 p.m. PST: Facebook is also set to report earnings today, any moment now...
1:06 p.m. PST: Actually, here comes Facebook's report. Stock is up big time in after-hour trading: +6%!
1:07 p.m. PST: Not sure if we can call this an earning season trend in Big Tech yet. But more modestly-valued stocks have been doing much better than more richly-valued ones. Alphabet and Facebook did great, but Tesla and Microsoft dipped after delivering equally solid numbers.
1:10 p.m. PST: As a reminder, Apple's earning release comes out in about 20 minutes. Get ready!
1:11 p.m. PST: Interestingly, Apple stock is up +0.6% in after-hours trading, erasing the regular session losses. But don't get too emotionally attached to these tiny gains, anything can happen at 4:30 p.m. EST!
1:13 p.m. PST: We have time for one more recap of what to expect before we hear from Cupertino. Let's do this:
1:14 p.m. PST: Wall Street is looking for revenues of around $77.2 billion and EPS of $0.98. These would represent massive YOY growth of 32% and 53%, respectively.
1:16 p.m. PST: In my view, the most likely outperformers will be the iPhone and Mac. In fact, I believe that both will beat consensus expectations on revenues by quite a lot.
1:18 p.m. PST: Wall Street is calling for iPad growth of 33%, which I think might be a stretch. Tablets in general have not had outstanding first quarter numbers, based on some third party data that I have come across. There could be risks here.
1:20 p.m. PST: Two potential sources of share price upside include an increase in dividend payments and/or the announcement of a large share buyback program.
1:22 p.m. PST: It is nearly guaranteed that dividends will go up today, since they usually do every four quarters. But by how much? The average of the past couple of years has been modest, at around 5%.
1:23 p.m. PST: On share buybacks, the Board authorized an increase of $50 billion in April 2020, and pretty much all of it should have been used up by now. What will the new number be for 2021?
1:27 p.m. PST: Lastly, will guidance be reinstated? I think there is a greater than 50% chance that it will. If so, Apple will be facing the following fiscal third quarter expectations: revenues of $68.6 billion and EPS of $0.82.
1:29 p.m. PST: Any moment now! Hold on to your hats! $AAPL up +1% in after hours for now.
1:30 p.m. PST: Stock is up +4% now! That's good! I have not seen the report yet...
1:31 p.m. PST: Killer numbers! Here we go!
1:32 p.m. PST: Revenue growth of 54% is impressive! EPS of $1.40 is head and shoulders above consensus $0.98.
1:33 p.m. PST: Quote from CFO Luca Maestri: "We are proud of our March quarter performance, which included revenue records in each of our geographic segments and strong double-digit growth in each of our product categories, driving our installed base of active devices to an all-time high."
1:34 p.m. PST: Dividend increase of 7% is good, but not exhilarating.
1:35 p.m. PST: 66% growth in iPhones! Remember this preview piece? Yes, it was a smashing quarter for smartphones.
1:36 p.m. PST: Ok, let me take a few minutes to plug in some numbers into the model.
1:39 p.m. PST: They say one picture is worth 1,000 words, right? Well, check out these two pictures:
1:41 p.m. PST: I don't think I have ever seen anything like this... all product segments, all geographic segments, all up year-over-year by at the very least 24%, and by as high as 94%!
1:43 p.m. PST: Apple stock is up about +3% in after hours, and I would say that bullishness has been driven by sheer, brutal force. The market could not ignore financial performance this strong, regardless of how high some might believe Apple stock's valuations to be.
1:46 p.m. PST: Worth noting, no mention of fiscal third quarter guidance! Pre-COVID, this information used to be printed on the report. Not this time. Unsure that guidance will be offered during the earnings call, probably not.
1:48 p.m. PST: Quick pause to admire both bar charts above... wow!
1:51 p.m. PST: Apple's Board has also authorized an extra $90 billion in share repurchases, vs. a $50 billion increase authorized in fiscal second quarter 2020. This is a large bump. Will Apple accelerate its share buybacks? Some after-hour bullishness could be justified by this factor as well.
1:53 p.m. PST: We have about 7 minutes before the conference call starts, which you can listen to on Apple's investor relations website.
1:56 p.m. PST: Another interesting piece of information: cash flow from operations of $62.7 billion up 43% year-over-year. Solid!
1:57 p.m. PST: Greater China also looked spotless. The region struggled to gain traction for years, and a revival began to take shape in the last fiscal period. This quarter's revenue growth of nearly 90% was impressive!
1:59 p.m. PST: Ok, I am ready for the earnings call!
2:00 p.m. PST: The call is set to start with Apple stock up +3.2% after hours. Let's see what happens.
2:01 p.m. PST: Call has started! Usual disclaimers first, which will be followed by CEO Tim Cook, then CFO Luca Maestri. Q&A is last.
2:03 p.m. PST: Tim Cook talks about record-setting fiscal second quarter numbers. Success across the board.
2:04 p.m. PST: iPhone did very well, no specific model singled out. 5G capability mentioned.
2:05 p.m. PST: iPad had the highest March quarter in nearly a decade. Mac's three past quarters have been the three best ever.
2:06 p.m. PST: Wearables up about 25%. Apple Watch reported to have been up in every geo segment.
2:06 p.m. PST: Same across-the-board performance in services. In the aggregate, segment revenues up 27%.
2:08 p.m. PST: CEO talks about most recent iOS update. Remember that this was a hot topic in the Apple vs. Facebook battle over user information, in the past few months.
2:11 p.m. PST: Tim Cook talks about sustainability. He tends to spend some time on the subject. He then shifts to developers, as we are a couple of months away from Apple's next WWDC event.
2:12 p.m. PST: Tim reminds everyone of the challenges of COVID-19. It sounds like the CEO is setting the stage for a "no guidance" announcement.
2:13 p.m. PST: CFO Maestri is up!
2:14 p.m. PST: Strong double digit growth in each product segment. New March quarter record in every geo segment.
2:15 p.m. PST: Services up in all geo segments and in "most" sub-categories.
2:15 p.m. PST: Gross margin up 100 bps in products, driven by cost control and some FX tailwinds. On the service side, 170 bps of expansion, due to service mix.
2:16 p.m. PST: iPhone up double digits in all geo segments.
2:17 p.m. PST: The CFO draws a line between the large, successful services (iCloud, Music, App Store, etc.) and the up-and-coming ones that are still ramping up (Arcade Fitness+, etc.)
2:18 p.m. PST: In wearables, record revenues in all geo segments. Apple Watch mentioned again as an outperformer. It makes me wonder about the AirPods: any issues there? In a quarter like this, it matters little.
2:20 p.m. PST: iPad up 79%, the largest growth rate among all main segments. My concerns about this product category in fiscal second quarter was way, way overstated.
2:22 p.m. PST: On net cash, $83 billion in cash and equivalents, net of debt. $19 billion in share repurchases in the March quarter, which is quite a bit.
2:23 p.m. PST: Outlook for June quarter coming up, but no specific revenue guidance.
2:24 p.m. PST: Strong double digit growth in revenues, but the seasonal decline from March should be steeper than usual. Some timing issues, some supply chain challenges.
2:25 p.m. PST: Guidance for gross margin of 41.5% to 42.5%; operating expenses of $11.1 billion to $11.3 billion; and tax rate of 14.5%.
2:28 p.m. PST: Q&A has started! Tim Cook talked about the strength of the iPhone first. Luca Maestri is now discussing margin puts and takes.
2:29 p.m. PST: As I expected, the iPhone was a tailwind to margins. I bet it has to do with the mix shift to the higher end, more expensive models.
2:30 p.m. PST: Question to the CFO on services growth acceleration. Advertising and Apple Care mentioned as areas of strength. These are clearly beneficiaries of the reopening of the global economies.
2:32 p.m. PST: By the way, the stock remains up in after hours, but now by only +1.5%. The modest pullback happened shortly after guidance was provided.
2:33 p.m. PST: Tim Cook talks about the iPhone, and the "early days" of the 5G cycle.
2:34 p.m. PST: Morgan Stanley's Katy Huberty calls this quarter unbelievable, and asks a great question: how sustainable are these levels of demand?
2:36 p.m. PST: Tim Cook downplays this quarter's growth a bit on the back of easy pandemic-impacted comps. But he adds that demand feels very strong, and that much of the company's challenges is associated with meeting this strong demand in the short term.
2:37 p.m. PST: Apple Watch not mature yet, service growth accelerating.
2:40 p.m. PST: Question on content offerings, price increases and TV+ subs. Tim Cook likes the performance of the video streaming service, but provides no subs numbers, as expected.
2:41 p.m. PST: On pricing, nothing to announce. Also a predictable answer.
2:42 p.m. PST: Question on fiscal third quarter guidance. Luca Maestri reinforces what he had already said: timing of the launch of the iPhone causing some revenue shift, and supply chain constraints. Not much more information offered.
2:43 p.m. PST: By the way, Apple stock back up to +2.5% in after hours.
2:44 p.m. PST: Question on the iPhone mix. I like the question. CEO Cook says that Pro and Pro Max piece of the iPhone 12 portfolio performed best. Not a surprise to me, but interesting color provided by the executive.
2:46 p.m. PST: Question on when the supply chain constraint might ease. Tim Cook says that it is a difficult question to answer, and that it all depends on how much competition there is for the same legacy suppliers.
2:49 p.m. PST: Question on China. Tim Cook pleased with the region, strong double digits in each product category. Good response to iPhone 12 family. Also, country benefits from being ahead in the COVID-19 cycle. Good reception to recently-unveiled iPad Pro. Plenty of first-time buyers as well.
2:52 p.m. PST: Question on regulatory and App Store. Tim Cook mentions Apple's reduction in commissions for certain developers.
2:54 p.m. PST: Question about accessories, and how they suffer in a shutdown environment. Any improvement now, with normalization? Tim Cook talks about the benefit of the physical store. Apple in better shape in fiscal Q2, but some challenges remain. In a normal state, Tim sees accessories improving, even if results have been already good lately.
2:56 p.m. PST: Question on app tracker. We are reaching the bottom of the well, as far as key earnings questions are concerned. The stock remains afloat: +2.2% in after hours.
2:57 p.m. PST: Question on geo segment performance, particularly in Europe. As a reminder, Europe did better than the other developed markets, i.e. Americas and Japan.
2:58 p.m. PST: CFO Luca Maestri talks about lockdowns lasting longer in Europe, which is driving demand higher for Mac and iPads.
3:00 p.m. PST: Question on the large investment in the US announced recently, which is really a refresh (i.e. increase) of the commitment made in 2018. CFO Maestri mentions Apple having entered news businesses between then and now, including TV+. Expect opex to increase alongside the rest of the company, particularly in R&D.
3:01 p.m. PST: And that's a wrap!
3:02 p.m. PST: Ok, so... lot's of information. But it all boils down to the following:
3:03 p.m. PST: Apple presented outstanding fiscal second quarter numbers. There was not material weakness to be found anywhere. Revenues, earnings, all product and geographic segments performed better than nearly everyone anticipated.
3:05 p.m. PST: Clearly, Apple benefited from a bit of the stay-at-home tailwinds pushing iPad, Mac, iPhone and Services sales higher. Also, the delayed timing of the iPhone 12 release served as somewhat of a tailwind. But the strong performance can not be credited only to these one-off factors.
3:06 p.m. PST: Apple ends the day down -0.6% during the regular session and up +2.3% in after-hours trading, for a net gain of about 150 basis points over the S&P 500.
3:07 p.m. PST: Thanks for joining the Apple Maven this evening. See you soon!