AAPL earnings more proof

So as in MSFT on Tuesday and NOW(ServiceNow) on Weds., AAPL reports not only a great quarter, but an historic quarter. As far as the cloud names, and any slowing growth in the sector, AAPL isn’t seeing any. Look at their 19.5 billion in services number.

To me this once again confirms that this tech correction is off base. That the DDOG’s, the SNOW’s, the NET’s of the space are going to show robust numbers. That this sell off is to be bought, not sold. Looking forward to the next round of earnings reports and to get this overdone sell off behind us.

Apple (AAPL) reported its Q1 earnings on Thursday, blowing away Wall Street’s expectations with a historic quarter on strong demand for the iPhone 13 and services.
Here are the most important numbers from the report compared to what analysts were expecting from the company as compiled by Bloomberg.
Revenue: $123.95 billion versus $119.05 billion expected.
Earnings per share: $2.10 versus $1.90 per share expected.
iPhone: $71.6 billion versus $67.7 billion expected1.
iPad: $7.2 billion versus $8.1 billion expected.
Mac: $10.8 billion versus $9.5 billion expected.
Wearables: $14.7 billion versus $14.1 billion expected.
Services: $19.5 billion versus $18.6 billion expected.



I don’t think you can directly correlate SaaS to Apple earnings. Apple is a consumer electronics and services company, which had a great quarter based on consumer spending. Given the cash historic cash consumers received for Covid relief, it should not surprise us that consumers bought a lot of iPhones with the extra cash.

MSFT has a large SaaS base, so that may be more relevant than Apple, but MSFT has HUGE free cash flow, and doesn’t have to rely on bonds or venture capital, so they are not so rate sensitive. They too likely benefitted from the Covid relief cash.

SaaS cos are mostly B2B services, and high-growth SaaS companies, especially those that are not yet profitable, tend to burn through cash to fuel growth and R&D. Many SaaS cos experienced hyper growth in the COVID recession, and some went hyperbolic in late 2021 without supporting news (for example Cloudflare went from $115 to $220 in 6 weeks from November through mid December). That was not sustainable, their earnings and growth rates were not expanding at the rate their shares were.

I follow some sector ETFs in spare time to keep an eye on rotations, and it is clear that Cloud, Software, and Software Services ETFs, and even Healthcare equipment, were experiencing huge outflows since December. Meanwhile, Energy, consumer staples, financial services, Healthcare select services, select real estate, and similar sectors were all seeing increasing inflows. That’s classic rotation, cash in your big winners, and buy the laggards to position for the next cycle. The Fed rate tightening warnings may have been the trigger, but IMPO it doesn’t seem to be based on anything other than positioning for the next wave of alpha.