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Apple doubles down on ad-tracking transparency feature; records bumper revenues

Apple CEO Tim Cook said that its Apple Tracking Transparency (ATT) feature is aimed at giving users greater autonomy and decision making power over the company’s tracking capabilities. The company reported revenues of $89 billion — 54% year-on-year increase — in the first quarter of 2021.

The ATT feature will be a part of OS 14.5 update, through which APP requires apps to seek consent of users for tracking them for personalised ads.

“ATT’s focus is really on the user and giving the user the ability to make a decision about whether they want to be tracked or not. And so, it’s putting the user in the control. Not Apple, not another company, but the user of where it should be. And so, that’s really the focus of it.” — Tim Cook, Apple CEO

Though indirect, Cook’s response was a potshot at Facebook, which has been extremely critical of the ATT feature. Cook claimed that the feedback to the feature had been “tremendous”, in a way refuting Facebook’s claims that it would be detrimental to the interests of small and medium sized businesses advertising on Facebook.

Cook also said that even if it was only a very few people among its users who did not want to be tracked, the feature was still worth implementing since they should have the choice to be tracked or not.

The tech giant’s iPhone sales were strong, contributing to more than half of the overall revenues. Sales of its Mac and iPad devices were also strong — both were up 70% and 79% YoY, respectively. However, the company warned that the global chip shortage could play spoilsport in the near future.

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“These results allowed us to generate operating cash flow of $24 billion and return nearly @23 billion to shareholders during the quarter,” said Luca Maestri, Apple’s CFO in the earnings press release. The company’s board also authorised an increase of $90 billion to its existing share repurchase program.

Regulatory headwinds: On possible regulatory scrutiny, Cook said that the company is ready to move and “flexible with the times”. He was responding to an investor question about how Apple will handle regulatory risk and whether public disclosures about its business such as the App Store would help address those concerns. The investor also asked whether publishing such details might be bad for Apple’s competitive edge.

“I think with the regulatory questions and scrutiny, we have to make sure that we’re telling our story and why we do what we do, and we’re very focused on doing that. If we feel that more disclosure would help, we would obviously move in that direction. The App Store and other parts of Apple are not cast in concrete. And so, we can move and are flexible with the times” — Tim Cook, Apple CEO

Cook also referred to the company’s recent reduction of App Store commission rates. “So that was example of moving with the times, and we’ve gotten a great, great reception to that. And so, we continue to learn, and I think it’s very important that we’re very clear about why we do what we do.”

Other key takeaways:

  • Apple’s services have more than 660 million paid subscriptions across its platform; 40 million were onboarded in the Q1 2021.
  • M1 chip, its replacement for earlier Intel chips, has fuelled product sales and growth
  • Too early in the 5G cycle; most of iPhone sales don’t seem to be because of its 5G offerings
  • A lot of sales are from new-buyers — people entering the ecosystem. Nearly three out of four Apple watch buyers are first-time buyers.

Financial Highlights:

  • Revenue: $89.58 billion (up 53.7% YoY)
  • Revenue (iPhone): $48 billion (up 66% YoY)
  • Revenue (Services): $17 billion (up 26.7% YoY)
  • Revenue (Mac): $9.1 billion (up 70% YoY)
  • Net income: $23.63 billion (up 110% YoY)
  • Earnings per share: $1.41

Earnings press release | Financial statement |Investor call transcript

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