“It’s easy to overlook a reality of Apple’s financial performance amid the fanboy-led drooling over purple iPhones and beautiful iMacs.”
Full text of the first item in Peers’ “The Briefing,” mailed Friday to The Information subscribers:
Get ready. All five of the big tech companies—Alphabet, Apple, Amazon, Facebook and Microsoft—are reporting earnings next week. And just to keep us on our toes, Twitter and Pinterest are releasing their results as well. Of all the companies, the one that probably deserves the most attention is Apple.
It’s easy to overlook a reality of Apple’s financial performance amid the fanboy-led drooling over purple iPhones and beautiful iMacs, but the world’s most valuable company has been a mediocre performer when it comes to growth over the past few years. Between 2015 and 2020, Apple’s revenue grew just 17%, and its net income rose just 7.5%. And if you don’t believe that’s slow growth, consider that in the same five-year period, Alphabet’s revenue rose 143% and Microsoft’s top line expanded by 53%. And no one would say either Alphabet nor Microsoft had been rocket ships in recent years.
At the core of Apple’s uninspiring performance is softer iPhone sales: They dropped in 2015, and, aside from one good year in 2018, flatlined at a lower level through fiscal 2020. Meanwhile, sales of iPads and Macs have barely grown. The only things providing any uplift were wearable items like the Apple Watch—and services. That last item includes all those subscription offerings Apple keeps rolling out as well as the App Store. Little wonder, then, that Apple is fighting so ferociously to protect the App Store’s business in the face of legal assaults and congressional inquiries.
That gets us back to next week’s report, the second quarterly update for Apple’s 2021 fiscal year. Wall Street analysts are projecting that Apple will break out of its anemic growth this year, delivering a 22% revenue gain at $333.7 billion, according to S&P Global Market Intelligence. The first fiscal quarter delivered growth in line with that, mostly thanks to renewed growth in iPhone sales as well as an uptick in all other parts of the business. Next week will give us a sense of whether Apple is still on track to meet those expectations. Investors are uncharacteristically cautious: Apple stock is barely up so far this year, after a strong rally in 2020. The company reports on Wednesday. Stay tuned.
My take: Haters gotta hate, but Mr. Peers really had to twist himself into a pretzel to argue that after AAPL’s unexplained 80% gains in calendar 2020 and Apple’s record fiscal Q1 results that investors should “stay tuned” for some kind of disappointment on Wednesday. I expect better from The Information’s managing editor.