Apple Inc. (AAPL) in the past fiscal year has posted dramatic growth in earnings, revenue, and in sales of iPhones, its flagship product. This growth came amid a global supply shortage that hurt Apple’s production capacity during the pandemic. But signs have emerged that the company’s growth is slowing. Apple has told component suppliers that demand for its iPhone 13 line has weakened, and the company has cut its iPhone 13 production goal by as much 10 million units for this fiscal year.
Investors are likely to look at how these and other recent developments have impacted Apple’s earnings and revenue performance when the company reports earnings after market on Jan. 27, 2022 for Q1 FY 2022. Apple’s Q1 coincides roughly with the calendar fourth quarter of 2021. Apple’s fiscal year ends in September. Analysts expect that the company will report year-over-year (YOY) growth in both earnings per share (EPS) and revenue. However, they are predicted to grow at slower rates than the previous four quarters.
Investors will also focus on Apple’s key metric of iPhone revenue. The iPhone is Apple’s most popular product. After torrid sales in each quarter of FY 2021, analysts expect iPhone revenue grow to drastically decelerate in Q1 FY 2022.
Although Apple’s earnings and revenue have grown at a considerable pace throughout the past year, the company’s stock has generally underperformed the broader market. Apple shares fell below the market in January 2021 and continued to lag for most of the year. The stock began a sustained rally in October 2021, closing the performance gap and eventually outperforming the S&P 500 in December and into the new year. However, in January 2022 Apple shares have tumbled along with the broader market. As of Jan. 25, Apple has provided 1-year trailing total returns of 12.5%, just behind the S&P 500’s total returns of 13.0%.
Source: TradingView.
Apple Earnings History
Apple is one of the rare companies to avoid consistent declines in EPS during the COVID-19 pandemic. The company has posted YOY EPS declines in just three of the past 15 quarters: Q2 and Q3 FY 2019 and Q4 FY 2020. Otherwise, Apple EPS has consistently grown YOY, although it has ranged dramatically, from 3.8% in Q2 FY 2020 up to 118.6% in Q2 FY 2021. The three most recent quarterly periods have seen the most dramatic EPS growth in nearly four years. Analysts now predict that Q1 FY 2022 EPS growth will slow to 11.9% YOY, only a third of the growth rate in the same quarter a year earlier. It’s also a fraction of the pace of growth in the most recent three reported quarters.
Apple’s revenue growth has been more consistent. Q1 and Q2 FY 2019 are the only quarters in the past four years to see YOY declines and they were both relatively modest. Apple’s revenue growth has fluctuated dramatically. The company posted increases of less than 2% YOY, for example, during the six quarters between Q3 FY 2019 and Q4 FY 2020. But growth has accelerated significantly in the past four quarters, to a high of 53.6% in Q2 FY 2021. For Q1 FY 2022, analysts estimate that Apple’s revenue rose by 6.6%, a sharp deceleration from previous quarters.
| Apple Key Stats | |||
|---|---|---|---|
| Estimate for Q1 FY 2022 | Q1 FY 2021 | Q1 FY 2020 | |
| Earnings Per Share | $1.88 | $1.68 | $1.25 |
| Revenue (B) | $118.7 | $111.4 | $91.8 |
| iPhone Revenue (B) | $68.4 | $65.6 | $56.0 |
Source: Visible Alpha
The Key Metric
As mentioned, a key metric investors will focus on is Apple’s iPhone revenue. iPhone sales are a substantial portion of Apple’s revenue and historically have accounted for about half or more of the company’s annual revenue. Apple’s coming report for fiscal Q1 FY 2022 includes the November-December holiday sales period. Apple’s iPhone sales have often benefited from a strong general retail industry environment. During the 2021 holiday shopping season, retail industry sales were up more than 14% YOY to a record $886.7 billion, according to the National Retail Federation. That strength came despite inflation, supply chain issues and the pandemic.
Apple’s iPhone revenue has been more erratic compared with its overall revenue performance in recent years. The company’s iPhone revenue declined during six of the eight quarters between Q1 FY 2019 through Q4 FY 2020. The worst performance during that period was a 20.7% drop in sales in Q4 FY 2020. Beginning in Q1 FY 2021, however, iPhone revenue began to rebound. Sales climbed by 17.2% YOY in Q1 FY 2021, and by 65.5%, 49.8%, and 47.0% for Q2, Q3, and Q4, respectively. Analysts expect a sharp slowdown in iPhone revenue growth for Q1 FY 2022. That rapid growth may be near and end. Despite record holiday sales for the broader retail industry, analyst estimate that iPhone revenue grew a scant 4.3% YOY in Q1 FY 2022. That’s a quarter of the growth rate compared to the same quarter a year ago. Shortages and delivery delays were a big factor constraining consumer sales, preventing Apple from having the blowout quarter predicted by analysts.
