After an Explosive Q4, What Could Possibly Stop Apple?

Apple (AAPL 2.20%) crushed its fiscal 2022 first-quarter earnings results, notching all-time record revenue of $124 billion. In this episode of "3 Minute Stocks Updates" on Motley Fool Live, recorded on Feb. 2, Fool.com contributors Brian Withers and Toby Bordelon discuss if it looks like the tech giant faces any speed bumps on the way to breaking yet more records.

Brian Withers: It's been 15 years since Steve Jobs just introduced the iPhone. Yes. I'm talking about that small little fruit company, Apple, ticker symbol AAPL, worth a couple of trillion dollars today. This one device, the Apple iPhone, has catapulted the company into one of the largest tech companies in the world. Let's look at how the recent quarter came out. It was a blowout. All-time record revenue, 124 billion in one quarter. That's up 11 percent last year and better than management had expected, 71.6 billion of that is iPhone sales. Almost a billion dollars a day from iPhone sales, up 9 percent year over year, all-time record for the company. Services, its second-largest segment, with 19.5 billion in revenue. Just this quarter up 23 percent with gross margins of 72 percent up from 68 percent a year ago. iPad, despite being supply chain constrained, did 7.2 billion in sales, down a bit from 8.4 billion a year ago. They reported an active install base of devices now at a new record of 1.8 billion devices. Overall, gross margins increased to 43.5, up 39.8 percent driven by operational efficiency in both products and services despite supply chain constraints and rising prices. Apple TV is rocking it with 200 award wins from more than 890 nominations. Apple Watch continues to extend its reach with over two-thirds of customers. This is amazing stat: Two-thirds of customers purchased an Apple Watch during the quarter were first-time Apple Watch buyers. Macs are making a run-in with businesses as well. Shopify is standardizing on the new M1 Mac, and Deloitte is offering the M1 Mac as part of its employee choice program. Just everything is firing on all cylinders with Apple this quarter.

Toby Bordelon: It seems like there's a great quarter, Brian. They are crushing it. There's no other word for that, unbelievable. What can stop their growth? That's the question you asked. I think when you see some company doing so phenomenally well like this, what could stop them?

Withers: That's really a great question, Toby. Apple's built a tremendous following with its ecosystem, and then I think that's why you're seeing such great results this quarter. It's got a set of products that work well, supported by its software and services business. But when you look at the revenue, 84 percent of the revenue was tied to a product sale with no implied... you could buy an iPhone and not buy any software and services after the fact, so there's no guarantee that that initial hardware purchase will lead to additional purchases. The company needs to continue to innovate and release new models across all of its products, new iPads, new iPhones, new Macs, you name it, the iPod or the little Pod thing, the Siri Pod. When you look at these products and the innovation that's happened over the years, just look at the camera, for instance. The camera has gotten way more complicated, but also the software to support that camera has gotten way more complicated. It used to just be one little lens, and it took 1 megapixel pictures or whatever. Now, there's three lenses. The pictures are more richer, and you can do more things with them. Just the software to combine those three lenses into a great image is just super, super powerful. They need to continue to innovate on the hardware side, but it's got to be supported by great software. They have a tremendous history of doing that. I'm pretty comfortable they can continue to grow for the current future.