Apple’s profits nearly doubled in the latest quarter, showing that the world’s richest and most valuable public company is exhibiting little sign of slowing down.
Apple said Tuesday that its profits increased 93% to $21.7 billion in its fiscal third quarter compared with a year earlier, while sales rose 36% to $81.4 billion, both outpacing analysts’ expectations.
The company has posted growth rates in recent quarters that resemble a much smaller upstart rather than a corporate titan worth nearly $2.5 trillion. It has been fueled by people buying even more of its devices than usual during the pandemic, as they became more reliant on technology to work, study and socialize. Apple also makes billions of dollars each quarter by collecting a commission on other companies’ app sales, a rapidly growing part of its business that has attracted lawsuits and the attention of regulators.
Apple said its iPhone sales grew 50% to $39.6 billion over the quarter from a year ago, an increase that was high by even its lofty standards. The increase was particularly surprising considering the company is set to release new phones in September, which often causes many people to wait to buy new iPhones.
Sales of iPhones had declined in recent years in a saturated smartphone market, but the pandemic mostly changed that. The April-through-June period was the third consecutive quarter of double-digit increases in iPhone sales, with much of the growth coming from existing customers upgrading their phones.
Apple also sold more of all of its other products, including iPads, Macs and wearable devices such as the Apple Watch and AirPods. The company’s sales increased in every geographic area, led by its Greater China region, with 58% growth, the third consecutive quarter in which sales increased by more than 50% there.
Apple’s reliance on China to sell and manufacture its products has forced the company to make compromises there, including by storing its users’ data on Chinese government servers and censoring certain apps.
The company also posted one of its largest gross profit margins ever, at 43.3%, showing how efficient its enormous business has become.
In an earnings call, Luca Maestri, the company’s finance chief, attributed the widening margin to cost savings and a greater reliance on revenue from its internet-services business, which includes its take of other companies’ app sales and has an unusually high profit margin.
Maestri said Apple effectively keeps 70 cents for every dollar it earns in its services business, before accounting for certain operating expenses, such as research and development. He said Apple’s gross margins on its devices were 36% in the quarter.
One of the few challenges for Apple is the global shortage in computer chips, which its devices rely upon. The shortage is affecting the production of a wide array of products, from cars to washing machines. Maestri said that while Apple had mostly avoided a major impact, the company expected a lack of chips to hurt its iPhone and iPad sales in the current quarter.
Partly as a result, he said, Apple expected its sales growth to be slower in the current quarter, though it would still be in the double digits. That forecast sent Apple shares down 1.5% in after-hours trading.