We are adding to our Apple Inc. position after we analyzed the company’s latest earnings result. Despite harsh economic conditions since the turn of the year, the smartphone giant recorded impressive returns, a testament to Apple’s resilience and a validation of our investment thesis on the company.   

At the end of first quarter, March 2022, Apple Inc. recorded $97 billion in revenue, representing a 9% jump from the $90 billion it had recorded 12 months ago, March 2021. Meanwhile, supporting its better than expected financial performance is the Iphone maker’s Services business segment which made $19.31 billion. This is the highest Apple has recorded of all time in its Service Segment. Improved customer demand for iPhone, Mac, Wearables, Home and Accessories helped the company achieve an all-time high for its installed base of active devices.

The wearables category also contributed greatly to the company overcoming inflationary pressures and Fed rate hikes as Apple made $8.8 billion from sales of things like AirPods and watches, compared to the $7.8 billion it made this time last year. 

“Our wearables business has doubled in three years and is nearly the size of a Fortune 100 business. If you’re keeping track, that means the Services category made Apple almost twice as much money as Macs, which is the next closest category”   –  Luca Maestri, Chief Financial Officer (CFO) at Apple Inc.  

Rise believes that despite harsh economic realities such as record inflation, hiked interest rates, and supply chain logjams across the US and other markets, Apple, having established itself as an industry leader through its relentless focus on innovation and ability to create the best products and services in the world will still continue to experience future growth. 

Like we said in our Q1 report of the company’s performance, Rise believes that the trend of working from home and learning remotely, has reinvigorated growth for the iPad and Mac. We understand that these products are much more important now as we continue to make our way through the post-pandemic era, changing Apple’s offerings story from being just a story about the iPhone to including tablets, Macs and services.

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Financial RatiosQ2 2021Q2 2022
Return on Asset7.01%7.13%
Return on Equity34.16%37.11%
Gross Margin42.51%43.75%
Net Margin26.38%25.71%
Net Sales by CategoryQ2 2021Q2 2022% growth
Wearable. Home and Accessories7,8368,80612.38%