Technology blowout: Apple’s profits have almost doubled as iPhone sales surge

Technology sector update

Apple, Microsoft and Alphabet said on Tuesday that their latest revenue and earnings have exceeded the already optimistic expectations of the stock market, which confirms that as some countries begin to shake off the pandemic, demand for their digital services and gadgets continues to soar.

Apple

Due to the surge in iPhone sales and the unresolved problem of expected component shortages, Apple’s profit in the most recent quarter almost doubled to $21.7 billion.

Compared with the same period last year, Apple’s overall revenue increased by 36%, of which iPhone sales increased by 50%, driving a 93% increase in net income for the three months ended June 26.

Although the year-on-year growth rate is slightly lower than the previous quarter, Apple is still far ahead of Wall Street’s goals in almost all indicators.

Apple Treasurer Luca Maestri told the Financial Times that the quarter was “very, very strong” and pointed out that its service revenue set a new record.

Apple’s earnings at a glance

Actual Comparative estimate

income: $81.4 billion Compared to $73.3 billion

Net income: $21.7 billion Compared to 16.62 billion U.S. dollars

Earnings per share: 1.31 USD Compared to 1.01 USD

iPhone revenue: $39.57 billion Compared to 34.04 billion U.S. dollars

Service income: $17.49 billion Compared to 16.28 billion US dollars

Estimates from Refinitiv and FactSet

He said: “Our active device installation base has hit a record high in all regions,” which exceeds Apple’s internal forecasts in the United States and China.

Sales in the Americas increased by 33%, while sales in Greater China increased by 58%.

Three months ago, as the technology and automotive industries were struggling to cope with continued semiconductor supply constraints, Apple warned that due to component shortages, iPad and Mac sales would be hit by $3 to 4 billion. But Maestri said that the final impact was less than $3 billion, with iPad sales increasing by 12% and Mac by 16%.

Even if the blockade is lifted, Apple’s service revenue has increased by 33%, including the quarterly record set by the App Store in June and a strong rebound in advertising revenue.

“Now that the economy is reopening, we continue to see very strong demand for digital services,” Maestri said.

Microsoft

Microsoft performed strongly at the end of its fiscal year, with revenues up 21% because it saw a lot of new business in areas such as cloud computing, LinkedIn advertising, and business applications.

The US software company’s sales and earnings easily surpassed most official Wall Street estimates, but the stock price fell 2% after rising nearly 20% in the past two months, pushing its stock price to a record high.

Microsoft’s Azure cloud platform is one of its main engines for its recent rapid growth. Revenue growth has slowed in recent quarters because it has become a larger contributor to the overall business.

Microsoft’s earnings at a glance

Actual Comparative estimate

income: $46.2 billion Compared to 44.24 billion US dollars

Net income: $16.5 billion Compared to 14.53 billion US dollars

Earnings per share: 2.17 USD Compared to $1.92

Azure growth: 51% Contrast 42%

Commercial cloud revenue: $19.5 billion Compared to $18.7 billion

Estimates from Refinitiv, FactSet and Cowen

But in the three months to the end of June, Azure’s growth accelerated to 51%. This is higher than the 46% growth rate in the previous three months and the fastest expansion rate in five quarters.

CEO Satya Nadella said that these data show that “when we perform well in a large and growing market and meet customer needs in a differentiated way, we will generate growth. As we see in the commercial cloud”.

He also highlighted the strong performance of emerging businesses such as gaming, security and LinkedIn. The professional website’s revenue increased by 46%, while the Dynamics business application suite increased by 49%.

The surge in growth has increased Microsoft’s gross profit margin by nearly two percentage points to 69.7%. This was nearly a percentage point higher than expected, resulting in a 48% increase in earnings per share to $2.17.

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Alphabet CEO Sundar Pichai attributed profits nearly three times higher than the same period last year and attributed the “rising trend of online activity in many parts of the world” to this.

Expectations for Alphabet are already high. In the second quarter of last year, as the company responded to the beginning of the pandemic, global advertising spending fell sharply, which was hit hard.

Alphabet’s earnings at a glance

Actual Comparative estimate

income: $61.88 billion Compared to 56.16 billion U.S. dollars

Net income: $18.53 billion Compared to 13.07 billion US dollars

Earnings per share: 27.26 USD Compared to 19.34 USD

Advertisement Income: $50.4 billion Compared to 45.07 billion USD

Cloud revenue: US$4.63 billion Compared to 4.4 billion US dollars

Estimates from Refinitiv and FactSet

As Wall Street hoped, advertising sales on the platform surged in the second quarter, pushing net income to $18.53 billion, which was about 10% higher than analysts’ expectations. The revenue during the period exceeded 61.9 billion U.S. dollars.

FactSet’s data shows that Google’s advertising sales have increased by 69% over the same period in 2020, easily exceeding analyst expectations. Specifically, advertising on YouTube has seen a dramatic increase, with sales reaching $7 billion-an increase of more than 80% from a year ago.

“This quarter, publisher partners received more revenue from our network than ever before,” Pichai told investors. “We paid YouTube creators and partners more than any quarter in our history.”

As analysts predicted, as many office workers continue to work from home, the company has benefited from the pent-up demand for cloud services. The revenue of this division increased by 50% over last year, reaching 4.63 billion U.S. dollars, but still recorded an operating loss of 591 million U.S. dollars.

Stocks in after-hours trading rose slightly.

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