Earnings

Apple earnings: Not just the iPhone company anymore

Apple logo
Apple
  • Q2 revenue: $58.3 billion (+0.5% YoY, -36.5% QoQ, vs. $54.5 billion expected)
  • Q2 earnings: $11.2 billion (-2.7% YoY, -49.4% QoQ, above expectations)
  • Q3 guidance: None given

The big number: Apple's cash cow has been the iPhone for more than a decade, generating up to three quarters of revenue for a given quarter. But the trend is shifting: Compared to the same quarter last year, iPhone sales were down nearly 7% in the last three months, to $28.9 billion. That's roughly 49% of Apple's total revenue. Total revenue was effectively flat year over year, and profits, of which the iPhone often makes up a considerable chunk, were down nearly 3%.

People are talking: "Despite COVID-19's unprecedented global impact, we're proud to report that Apple grew for the quarter, driven by an all-time record in Services and a quarterly record for Wearables," CEO Tim Cook said in a statement.

Opportunities: Despite the softness in Apple's iPhone business, the company still managed to grow a tiny bit over the same period last year, which is traditionally a slow quarter for the company. Much of that growth comes from a buffer that Apple has been steadily building over the last few years. Even as smartphone upgrade cycles have elongated, Apple has found a way to eke out more money from consumers, through a combination of new popular service offerings and hardware accessories.

Apple's services business, which includes sales of apps, games, movies and music, as well as TV, gaming and music subscriptions and Apple Pay fees, has ballooned in recent years. It's now easily the size of a Fortune 100 company on its own. The segment grew by nearly $2 billion over the same period last year, and there doesn't seem to be any indication of it slowing down. Similarly, increased sales of Apple AirPods and Apple Watches have helped offset some of the slack in iPhone sales. They're also helping spackle over the drops in Apple's other longtime businesses — the iPad and Mac — which saw drops over the same period a year ago, even as so many people move to working from home.

Threats: Apple has had to shutter all of its stores around the world as the pandemic has taken hold. Some in China have started to reopen, but most of the rest are still locked up. While Apple has made concerted efforts to push consumers onto online retail channels, some sales, such as people coming into a store for customer support and buying something while they're there, just can't be made up online. Apple actually saw a slight drop in sales for its Americas region in the quarter — its largest sales region by far — and if stay-at-home orders persist in the U.S. over the summer, it doesn't seem like much would change for next quarter.

The power struggle: Tim Cook has long been seen as the supply chain master, marshaling Apple's considerable global reach over the last two decades, but some things are just out of his control. Apple's manufacturing partners like Foxconn and Pegatron are ramping back up in China now, but even with facilities in other countries like Brazil and India, Apple's supply chain is still heavily reliant on China. The company is reportedly pushing back its production cycle for its next flagship iPhone by about a month. But Apple is still one of the richest companies on the planet, and will likely have few issues moving forward, even if its holiday sales are truncated by lengthened lead times. On the call, however, Cook said the company's supply chain was "back to typical levels" of production by the end of March after disruptions in February.

Entertainment

The (gaming) clones never stopped attacking

Clones keep getting through app review despite App Store rules about copying. It's a sign of the weaknesses in mobile app stores — and the weakness in Big Tech’s after-the-fact moderation approach.

Clones aren't always illegal, but they are widely despised.

Image: Disney

Two of the most fundamental tenets of the mobile gaming market:

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This past year has brought upon all businesses and enterprises an unparalleled change and challenge. This was the case at Honeywell, for example, a company with a legacy in innovation and technology for over a century. When I joined the company just months before the pandemic hit we were already in the midst of an intense transformation under the leadership of CEO Darius Adamczyk. This transformation spanned our portfolio and business units. We were already actively working on products and solutions in advanced phases of rollouts that the world has shown a need and demand for pre-pandemic. Those included solutions in edge intelligence, remote operations, quantum computing, warehouse automation, building technologies, safety and health monitoring and of course ESG and climate tech which was based on our exceptional success over the previous decade.

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Images: Ross Belot/Flickr; IGBD; BAYC

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Netflix’s latest hit show is a supernatural mystery horror mini-series, and I have to admit that I was on the fence about it many times, in part because the plot just often didn’t add up. But then the main character, Dan the film buff and archivist, would put on his gloves, get in the zone, and meticulously restore a severely damaged, decades old video tape, and proceed to look for some meaning beyond the images. That ritual, and the sentiment that we produce, consume and collect media for something more than meets the eye, ultimately saved the show, despite some shortcomings.

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The artist behind those Bored Apes

Remember how NFTs are supposed to generate royalties with every resale, and thus support artists better than any of their existing revenue streams? Seneca, the artist who was instrumental in creating those iconic apes for the Bored Ape Yacht Club, wasn’t able to share details about her compensation in this Rolling Stone profile, but it sure sounds like she is not getting her fair share.

Beat Saber: Update incoming

Years later, Beat Saber remains my favorite VR game, which is why I was very excited to see a teaser video for cascading blocks, which could be arriving any day now. Time to bust out the Quest for some practice time this weekend!

Correction: Story has been updated to correct the spelling of Gwyneth Paltrow's name. This story was updated Jan. 28, 2022.


Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

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Can Matt Mullenweg save the internet?

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Matt Mullenweg, CEO of Automattic and founder of WordPress, poses for Protocol at his home in Houston, Texas.
Photo: Arturo Olmos for Protocol

In the early days of the pandemic, Matt Mullenweg didn't move to a compound in Hawaii, bug out to a bunker in New Zealand or head to Miami and start shilling for crypto. No, in the early days of the pandemic, Mullenweg bought an RV. He drove it all over the country, bouncing between Houston and San Francisco and Jackson Hole with plenty of stops in national parks. In between, he started doing some tinkering.

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David Pierce ( @pierce) is Protocol's editorial director. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

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Mental health at work is still taboo. Here's how to make it easier.

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When the pandemic started, HR software startup Phenom knew that its employees were going to need mental health support. So it started offering a meditation program, as well as a counselor available for therapy sessions.

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Robinhood's regulatory troubles are just the tip of the iceberg

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It’s been a full year since Robinhood weathered the memestock storm, and the company is now in much worse shape than many of us would have guessed back in January 2021. After announcing its Q4 earnings last night, Robinhood’s stock plunged into the single digits — just below $10 — down from a recent high of $70 in August 2021. That means Robinhood’s valuation dropped more than 84% in less than six months.

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