$111.4 billion. Yeah. Apple, the company that every market manipulator and pocketed click baiter loves to cast as doomed, so very legion of doomed, perpetually, flailing, failing, and sure to go under… just any product now… regardless of how those products are actually performing — just posted their Holiday quarter results and even now — in the midst of peak 2020-21, the Cyberpunk on last gen consoles of years, they crushed…
And you won’t believe how hard.
The iPhone was up 17%. Apple sold 65.6 billion dollars of them. Now, it’s important to remember that the iPhone shipped later than usual last fall, so instead of the initial surge being in the previous quarter, all of it was in this quarter. Just all the surge.
Same with all the new M1 Macs, but more on those in a scorching hot minute.
Prices on the base models were up, due to more expensive components like OLED and 5G modems, but the mix was also high, which means the people who bought into the iPhone 12 almost immediately, often bought into the more expensive models like the 12 Pro and 12 Pro Max.
Which, to me, just highlights how people keep insisting on reading the market wrong. Like I said in my launch-day review — it’s not that everyone is looking and saying, I can save a couple hundred bucks by not going Pro. It’s that they’re increasingly looking and saying, I can spend a couple hundred bucks and get the Pro.
It’s not that everyone wants the lowest dollar price. Increasingly, more people want what they feel is the best value priced package per dollar. And that includes not only what it can do, but how long it will last doing it. How long they get updates, even how high the resale prices sustain. And yeah, still the cachet.
Which is why, I think, switchers were up as well, meaning more people coming to the iPhone from Android, and upgraders were way up, meaning way more people going from an older iPhone to an iPhone 12.
Tim Cook was also still bullish because, despite there now being over a billion iPhones in our pockets, y’all, globally there are still more people without iPhones than with. And he’s is looking at them. Looking at you maybe. And thinks he can still get way more of the market, especially in places like India.
And what’s especially fascinating here is that Apple built themselves into an iPhone company. But then they used the iPhone to build up everything else. So, when the iPhone isn’t as strong, everything else picks up the slack. But when everything is strong, they force multiply each other.
Services were up 24%, to 15.8 billion dollars. Driven by record performances in App Store, Music, and Cloud, among others. When you include everything the App Store gets a cut of, Apple hit 620 million paid subscribers this quarter. Which… given how many of us are spending our time in lockdown, just makes the kind of sense that does.
In addition to the 1 billion iPhones, Apple has almost 1.7 billion devices total in active use, and that’s just a huge and still growing base to build services on. Like I said, a platform to build another platform or several on.
It’s also why, even though Apple’s margins haven’t really changed much since the Steve Jobs era, they’re at the high end right now. First, the mix towards the higher end products I just mentioned, but also more people getting in on more Apple services. My guess is Apple’s hardware margins continue to get driven down by Apple continuing to invest in more expensive components, but services margins just more than make up for that — allowing Apple to continue to make those hardware investments without eating into ancillary product profits or simply running on empty like some other companies do.
Apple retail hit also records, which given how many stores had to be closed or massively constrained is beyond impressive. Much of the business there shifted to online, but the logistical genius of Diedre O’Brien and crew in staying multiple steps ahead and handling everything from pick ups to support is… or will be… the stuff of legends. Even AppleCare was up during all… this. Which is amazing.
The iPad was up a whopping 41%, to 8.4 billion dollars, driven by the ongoing work-and-school-from-home reality so many have been facing for so long now. Also, the new iPad Air and entry-level iPad updates were compelling. And, like I said, while I think a lot of people who cover Apple still fail to realize the difference between cost and value, consumers are continuing to understand that better and better.
But what’s really remarkable is that around half the people buying iPads were first time iPad buyers as well, despite the tablet market essentially continuing to be an iPad market. And I think that goes back to work-from-home, but also to how badly most competitors continue to execute on tablets, especially in terms of software and ecosystem integration.
Apple Watch and AirPods
Apple frustratingly lumps Watch, AirPods, HomePods, and an all the extras into the same category so competitors can’t easily see how well any one of them is doing at any given time. But, taken together, they were up 30%, to 13 billion dollars.
A ludicrous 75% of Apple Watch customers were first time Watch buyers. I say ludicrous, because like the iPad, the Apple Watch essentially owns its market. But, that market is like the opposite of the phone market right now. Not that many people have smart watches, and so it’s just wide open, with tons of room to run. Especially with products like the lower priced but feature packed Apple Watch SE coming into the mix. And I wonder if Apple’s going to double-down-as-in-price-down on that this year to get even more people into the Watch, and then services like Fitness+.
AirPods continued to sell well, as did HomePod mini at launch, and while everyone was concerned about Lisa Jackson getting safely off the roof at Apple Park — she did! — I’m still concerned about Bob Borchers and team escaping that bottled house of Kandor in the Theater lobby. Hit intercom if you need help, Bob!
The Mac was up 21%, to 8.7 billion dollars, which doesn’t take a Mentat to figure had a lot to do with the release of M1, Apple’s first custom silicon for the MacBook Air, entry-level MacBook Pro, and new base model silver Mac mini.
Around half the people buying Macs were first-time Mac buyers, and since Apple still has only a tiny, tiny share of the PC market, there’s just tons and tons of room for more growth there as well. Especially as the next set of Apple Silicon Macs start coming out, the higher end Pros and iMacs, and over the next few generations of all of them.
In other words, legacy PC users, Apple thinks the combinations of industry leading performance, experience, and battery life are going to prove just way, way, way too compelling for you to ignore.