Key points to remember
- Adjusted EPS was $1.68 versus $1.37 expected by analysts.
- Revenues far exceeded analysts’ forecasts.
- Services revenue was above consensus estimates.
- Apple posted all-time revenue records in each of its geographic segments, driven by double-digit growth in each of its product categories.
Apple smashed analyst expectations for adjusted EPS, total revenue and services revenue for the first quarter of fiscal 2021. The company’s services revenue of $15.8 billion marked a 24.0% year-over-year increase and was above the $14.9 billion forecast by analysts. Adjusted EPS rose 34.4% year-on-year to $1.68, and Apple posted record revenue of $111.4 billion. The company attributed this performance to double-digit growth in each of its product categories and all-time revenue records in each geographic segment.
(Below is the original Earnings Snapshot from Investopedia, published January 25, 2021.)
What to look for
Apple Inc. (AAPL) has seemed impervious to bad news over the past year. Shares of the company have more than doubled since their annual low in early 2020 as demand for Apple products and services has increased with more people working from home amid the COVID-19 pandemic. The stock has even risen in recent months despite a major antitrust lawsuit filed by the US Department of Justice against Alphabet Inc. (GOOGL) that directly threatens Apple’s lucrative partnership with its fellow tech giant.
Investors will be watching closely if Apple can sustain its performance when it reports results on January 27, 2021 for the first quarter of fiscal 2021.Analysts predict that Apple will post increases in both adjusted earnings per share (PES) and revenue, with adjusted EPS growing at a slower pace than in the first quarter of fiscal 2020 and revenue at a slightly faster pace.Apple’s last fiscal year ended in September 2020.
Investors will also look at another key metric, Apple’s Services revenue, which is a key part of Apple’s strategy to diversify its revenue mix. Analysts expect revenue from services, which have rich profit margins, to post their strongest growth in five quarters.
The strong performance of Apple’s services revenue has helped the stock outperform the broader market, even though the stock fell sharply last March and moved largely sideways between early September. and December. Over the past 12 months, however, Apple shares have provided a total return of 76.6%, about 5 times the S&P 500’s total return of 15.7% over the same period. All figures are as of January 24, 2021.
Apple’s revenue has increased year-over-year (YOY) for 14 of the past 16 quarters, with Q1 and Q2 of fiscal 2019 being the only periods with a year-over-year decline. Yet revenue gains in many recent quarters have been anemic: revenue grew less than 2% year-over-year in 4 of the past 6 quarters. For the first quarter of fiscal 2021, analysts expect that to change. They see a robust 11.1% year-on-year increase, the biggest quarterly improvement in revenue since the fourth quarter of fiscal 2018.
The company’s adjusted earnings have also been mixed in recent quarters. After three quarters with year-over-year gains of more than 30% in fiscal 2018, Apple’s Adjusted EPS growth has been erratic over the past 8 quarters. Three of those 8 quarters saw year-over-year declines, including Q4 Fiscal 2020. For Q1 Fiscal 2021, analysts estimate adjusted EPS growth of 9.9%. That’s a significant improvement on a sequential basis, but a much slower pace than the 19.3% increase in the same quarter a year earlier.
|Apple key metrics|
|Q1 FY 2021 (Estimated)||Q1 2020||Q1 2019|
|Adjusted earnings per share ($)||1.37||1.25||1.05|
|Service revenue ($B)||14.9||12.7||10.9|
Source: visible alpha
As mentioned, one of the main focus for investors this quarter could be Apple’s services revenue. The company shifted to services as sales of hardware devices, including the flagship iPhone, slowed. Apple’s services include streaming services such as film and TV entertainment provider Apple TV+, video game vendor Apple Arcade, news services and digital content stores, including ‘iTunes Store and the App Store, as well as Apple Pay, and Apple Care. It also includes a variety other services that support Apple hardware devices. Revenues from Apple’s services business tend to be more stable and predictable than revenues from its products, and services also have considerably higher margins.
Analysts expect Apple’s services revenue to hit $14.9 billion in the first quarter of fiscal 2021, its highest level in at least four years. The company’s services revenue has grown significantly in recent years, growing from a low quarterly growth rate of 12.6% to a high of 40.0% between fiscal years 2018 and 2020. services now account for more than 22% of Apple’s total fourth-quarter revenue. Fiscal 2020. For the first quarter of fiscal 2021, analysts estimate revenue will grow 17.3% year-over-year and 15.6% for full fiscal 2021.
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