Apple Just Had a $111 Billion Holiday Quarter Thanks to the iPhone. That’s Not Even the Most Impressive Part

Apple just had its biggest quarter ever. Actually, it just had the biggest quarter for any company that isn’t a Saudi Arabian state-run oil giant. On Wednesday, Apple reported its results for the quarter that ended December 31 of over $111 billion in revenue, up 21 percent compared with the holiday season last year.

Maybe more remarkable is the fact that the company’s CEO, Tim Cook, says that except for the Covid-19 pandemic–which forced the closure of Apple’s iconic retail stores throughout the year and disrupted its manufacturing partners–it would have been even bigger. While you let that think in, consider that the top-line number isn’t even the most impressive part.

Apple’s net income of $28.76 billion means that Apple just had the most profitable quarter of any company ever. Well, technically Fannie Mae reported a $58 billion profit in 2013, but that was mostly due to a one-time accounting move related to reduced tax liability. Apple’s profit, on the other hand, was actually due to the products it sells–mostly iPhones. 

On its call with analysts, Cook said that Apple now has more than 1 billion active iPhones, and more than 1.65 devices in total. Still, I say it was mostly due to iPhones because I think there’s an important point to make–two of them, actually. iPhone revenue was up 17% year-over-year. Apple’s services division, on the other hand, was up 24%. 

And, Apple says that its wearables division, which includes the Apple Watch, AirPods, and smart home accessories, is now as large as a Fortune 100 company on its own, accounting for almost $13 billion in revenue last quarter. “We could not have turned a performance like we did with only iPhone,” said Cook, highlighting that the strong results from every division exceeded expectations.

As for services, that division is still relatively small compared to the iPhone in terms of pure numbers compared, but it’s bigger than the Mac, the iPad, and that fast-growing wearables division. It’s also the most profitable. 

Apple has always been known for its profit margins. This quarter was no different. Apple reported its overall gross margin was 39.8 percent. Apple’s margin for its services division, however, which includes the App Store, AppleCare, Apple TV+, Apple Music, Arcade, and iCloud, is 68.5 percent. And Apple thinks there’s a lot of room to grow.

That’s a big deal considering Apple has made its services division a priority. Considering that almost everyone has a smartphone, it makes sense that the company is looking to grow areas of its business that have the most upside. Both wearables and services fit that category.

“I still think that we’re in the early stages of those products,” said Cook about the company’s services. That makes sense, considering Apple isn’t the largest player in any of those product categories, and only recently introduced its Apple One services bundle. When asked about how that all-in-one subscription is performing, Cook said the company considers it a success so far in that it was a direct response to customers wanting Apple to make its services “very easy to subscribe to.”

“We’ve made that very simple, and it’s clear from the early going that it’s working,” said Cook. “But we’ve just gotten started.”