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Earnings Results: Apple reports record earnings and sales for a non-holiday quarter

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Apple Inc. continued its hot streak Wednesday, posting better-than-expected revenue across all of its product categories for the March quarter while boosting its buyback program by $90 billion and raising its dividend by 7%.

Shares were up 2.5% in after-hours trading.

The company reported fiscal second-quarter net income of $23.6 billion, or $1.40 a share, up from $11.2 billion, or 64 cents a share, a year earlier. Analysts tracked by FactSet were expecting 99 cents a share in earnings.

Apple’s
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revenue for the quarter rose to $89.6 billion from $58.3 billion, while analysts were projecting $77.1 billion. The revenue total was a record for a non-holiday quarter.

The company saw iPhone sales climb to $47.9 billion from $29.0 billion a year ago, above the FactSet consensus, which called for $41.4 billion. The March quarter marked the first full quarter of availability for Apple’s iPhone 12 line.

Apple saw “actually a record number of upgraders” for a March quarter, Chief Executive Tim Cook said on Apple’s earnings call. While countries such as China are farther ahead in 5G penetration, many other regions aren’t, suggesting that “a lot of the 5G upgrades will be in front of us, not behind us.”

Apple’s iPad and Mac businesses continued to stay hot as consumers looked for technology that could help them work and study from home. Revenue from iPads rose to $7.8 billion from $4.4 billion and came in far ahead of the FactSet consensus of $5.6 billion. Revenue from Macs increased to $9.1 billion from $5.4 billion, whereas analysts were expecting $6.8 billion.

“The last three quarters of Mac have been the best three quarters ever in this history of the product,” Cook said. “So we are experiencing an incredible level of demand, which certainly is favored by [the] working-from-home and learning-from-home environment, but also by the incredible amount of new products and innovation we’re putting into the products that we launched during the last couple of quarters.”

See more: Apple puts its custom chips into colorful new iMacs, upgraded iPad Pro

The company’s strong hardware results show that the company “can get ahold of components while others cannot,” said Pat Moorhead, an analyst with Moor Insights. The iPad and Mac categories each grew revenue by at least 70%, indicating that Apple’s “supply-chain team excelled when many others didn’t” as Apple “makes strategic, multi-billion capital expenditures to increase its chances of getting enough chips and displays,” he said.

Apple is still feeling some effect from supply constraints, which it estimates could have a revenue impact of $3 billion to $4 billion in the June quarter. The supply constraints mainly affect the iPad and Mac businesses, so Apple anticipates that it will be “supply gated, not demand gated,” according to Cook.

See also: The semiconductor shortage is here to stay, but it will affect chip companies differently

The company generated $7.8 billion in revenue from its wearables, home and accessories category, up from $6.3 billion a year prior and ahead of the FactSet consensus, which called for $7.4 billion. Revenue from Apple’s services segment grew to $16.9 billion from $13.3. billion, while analysts were looking for $15.5 billion.

“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,” Chief Financial Officer Luca Maestri said in a statement.

On Apple’s earnings call, he declined to offer a traditional financial outlook. He expects June-quarter revenue to grow “strong double digits” on a year-over-year basis, though the sequential revenue decline from the March to June quarters could be steeper than in past years.

The later launch time of Apple’s iPhone sales meant that Apple “only achieved supply-demand balance during the March quarter,” Maestri said, which is expected to contribute to the greater-than-usual sequential decline in revenue heading into the June quarter.

Cook suggested that while the pandemic has boosted Apple’s iPad and Mac businesses, the categories could still see momentum as COVID-19 conditions improve.

When the pandemic ends, “it seems like many companies will be operating in a hybrid kind of mode, and so it would seem that work from home and the productivity of working from home will remain very critical,” he said on the earnings call.

The company added $90 billion to its stock-buyback authorization and raised its dividend by 7% to 22 cents a share. Both are bigger increases than the company made a year ago, when it boosted its buyback program by $50 billion and upped its dividend by 6%.

“We continue to believe there is great value in our stock and maintain our target of reaching a net-cash-neutral position over time,” Maestri said on Apple’s earnings call. Apple “continue[s] to plan for annual increases in the dividend going forward.”

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