Apple released a robust set of results for the first quarter of 2022, disproving analysts and consensus forecasts which were proven to be way off course, with strong beats on both revenue and profit.
Revenue grew of 11% year-on-year, operating cash flows were up $8bn, and free cash flow (FCF) escalated by 25% to $44bn. Cash on the balance sheet increased by $14bn, in spite of substantial share buy backs.
Revenue for the quarter came in at $123.9bn, resulting in net income growth of 20% and EPS increasing by 25%. EPS came in at $2.10 vs estimates of $1.89, an increase of 11% in a challenging operating environment with global supply chain issues resulting in a shortage of microchips, and an inability to fully satisfy demand for the product.
However, management expects supply chain issues to ease in the next quarter ended March 2022, which should enable Apple to expand profit margins on the back of increases in sales volumes. This will result in an escalation in revenue growth.
Apple segmental results were driven by better-than-expected revenue growth in iphone, Mac, Services and Wearables Home and Accessories. However, ipad sales fell below estimates as supply chain disruptions impacted on product availability.
IPhone revenue of $71,6bn was up only 9%, again due to supply constraints. Mac revenue of $3.9bn was up 25%, above expectations as were services revenue, up 24%. Mac, a high gross margin operation should be a driver of future growth for group profits.
Apple did not provide explicit revenue guidance for the next quarter, however, it expects to grow revenue year on year to record levels. Apple shares are the largest single share investment in the Berkshire Hathaway portfolio, having been a sterling performer for the fund over the long term.
The company is expected to announce the rollout of innovative new products, as well as new iphones and Mac devices, in the second half of 2022 which should provide another leg for growth. I have been an investor in Apple shares in managed portfolios, and remain a long term investor, despite the high level of volatility associated with the IT sector currently.