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         Apple's Q1 2022 Was Strong, but iPad and Japan Raise Questions

   Michael E. Cohen

   As the world wheezes its way into the third year of the global
   pandemic, Apple has remained healthy. Reporting on its fiscal
   first-quarter 2022 financial results, Apple has announced profits of
   $34.6 billion ($2.10 per diluted share) on record-busting revenues of
   $123.9 billion. The company's revenues were up 11% compared to the
   year-ago quarter, with profits up over 20% (see '[1]Apple Weathers the
   Storm to Shatter Records in Q1 2021,' 27 January 2021).

   Not all was sunshine and rainbows in the quarter: iPad sales revenues
   were down 14.1% from last year's results, and revenues in Japan were
   also depressed by 14.2% compared to last year. Nonetheless, revenues
   from every other geographic segment rose, and Apple posted all-time
   revenue records for its iPhone, Mac, Wearables, and Services
   categories.

   As to why the iPad and Japanese sales slumped compared to Apple's
   otherwise stellar results, we hoped to find some answers in Apple's
   quarterly investor call, but, as usual, the analyst questions during
   the call tended to be highly technical and often seemed aimed at trying
   to fool Apple into revealing details it almost never reveals in those
   calls. Apple repeatedly blamed supply constraints in 'legacy
   nodes''whatever those are'even while being complimented on excellent
   quarterly numbers.

   While supply constraints are very much a real thing, especially in
   microprocessors, we would assume those constraints would affect device
   sales across the board, not just for the iPad and not just for Japan.
   Unfortunately, none of the analysts on the call would ask direct
   questions about why the iPad and Japanese sales slumped. In any case,
   Apple expects that supply chain constraints should ease somewhat in the
   current quarter.

   Otherwise, Apple's sales were tremendous. iPhone revenue was up 9.2%
   year-over-year, raking in $71.6 billion. Single-digit growth is fairly
   weak for iPhone, but Apple barely missed double-digits, and both CEO
   Tim Cook and CFO Luca Maestri blamed supply chain issues for the iPhone
   revenues not being higher, with Cook noting that demand for iPhones was
   very strong.

   The Mac saw an astonishing 25.1% increase in revenue growth'does it not
   experience legacy node supply chain constraints?'topping off what Apple
   called the Mac's six best quarters ever. In fact, this quarter was the
   first ever in which Mac sales exceeded $10 billion. Cook pointed out
   that much of this success was attributable to the new M1-based Macs.

   Apple's Services sector continues to be one of the fastest-growing in
   the company, seeing a 23.8% revenue increase year over year, bringing
   in $19.5 billion in the quarter. Active subscriptions (which provide a
   steady revenue stream) reached 785 million.

   Apple likewise saw strong growth in Wearables, with a 13.3% increase
   over the year-ago quarter. Apple said that ' of Apple Watch purchasers
   last quarter were new to the Apple Watch.

   Aside from the revenue decline in Japan, Apple continued to see growth
   in every other geographical segment. Greater China, in particular,
   brought in 21% more revenue than it did last year, and Cook noted that
   the percentage of switchers to iPhone in that region had reached
   double-digits even in the face of a strong market for domestic devices.

   Overall, Q1 2022 was a typically strong quarter for
   Apple'record-breaking, as Cook pointed out'and while weak sales numbers
   for the iPad and in Japan aren't cause for concern, they are puzzling.
   Did supply constraints force Apple to divert resources from the iPad?
   Or did sales drop as more K-12 schools reopen? The iPad had seen a
   rocky trajectory before the pandemic and perhaps this is a return to
   that. But what happened in Japan? The country hasn't been especially
   hard hit by COVID and Japan's economy has remained steady. If you have
   any insights, let us know in the comments.

References

   Visible links
   1. https://tidbits.com/2021/01/27/apple-weathers-the-storm-to-shatter-records-in-q1-2021/

   Hidden links:
   2. https://tidbits.com/wp/../uploads/2022/01/Category-revenue-Q1-2022.jpg
   3. https://tidbits.com/wp/../uploads/2022/01/iPad-Q1-2022.jpg
   4. https://tidbits.com/wp/../uploads/2022/01/iPhone-Q1-2022.jpg
   5. https://tidbits.com/wp/../uploads/2022/01/Mac-Q1-2022.jpg
   6. https://tidbits.com/wp/../uploads/2022/01/Services-Q1-2022.jpg
   7. https://tidbits.com/wp/../uploads/2022/01/Wearables-Q1-2022.jpg

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