Most analysts got Apple's Q3 2021 wrong -- here's what they predicted

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in AAPL Investors
Apple reported Q3 2021 revenue and earnings that smashed expectations -- meaning a lot of analysts were wrong. Here's what analysts predicted for Apple's June quarter, versus what Apple actually reported.

Credit: AppleInsider
Credit: AppleInsider


The Cupertino tech giant obliterated Wall Street consensus with June quarter revenue of $81.4 billion, marking year-over-year growth of 36.3%. That number was also well above the consensus of $73.3 billion.

Apple was up pretty much across the board. The company reported iPhone revenue of $39.6 billion, up 52% year-over-year. It also had iPad revenue of $7.4 billion, up from $6.6 billion in 2020, and Mac revenue of $8.2 billion, up from $7.2 billion.

Services also hit $17.5 billion, up significantly from $13.2 billion in 2020. Wearables, Home, and Accessories also rose 36% year-over-year to $8.8 billion.

Apple's gross margins clocked in at 42.29% during the quarter, up 38% from 2020. Net profit grew to $21.7 billion, up 93% year-over-year. Lastly, Apple's earnings-per-share was $1.30 for the quarter, smashing expectations.

With how staggeringly wrong everybody was about the June quarter, here's what individual analysts predicted for the fiscal period.

Katy Huberty, Morgan Stanley

Analyst Katy Huberty of Morgan Stanley forecast Apple revenue of $74.7 billion for the June quarter, slightly higher than consensus but still far below what the company actually reported.

The analyst also predicted that Apple would report gross margins of 41.8% for Q3 2021. That was also below the actual percentage of 43.29%. Huberty predicted Apple services to reach $16.7 billion. Again, that was below the actual number of $17.5 billion, though it wasn't as off as her total revenue.

Gene Munster, Loup Ventures

Loup Ventures partner and cofounder Gene Munster predicted Apple Q3 2021 revenue of $74.80 billion and earnings-per-share of $1.04.

Interestingly, Munster specifically anticipated an impact of about $3 billion to $4 billion on iPad and Mac sales because of component shortages and supply constraints. Apple did warn that supply issues would affect those lineups in the June quarter.

In actuality, it doesn't appear that supply constraints had much of an impact. Or, at least, it appears that Apple was able to mitigate them. Both segments were up year-over-year, with the iPad hitting its best Q3 in a decade and the Mac marking its best June quarter ever.

Samik Chatterjee, JP Morgan

JP Morgan analyst Samik Chatterjee predicted that Apple would report quarterly revenue of $75.69 billion in Q3 and earnings-per-share of $1.05. Chatterjee's estimates were off by about $6 billion and $0.25, respectively.

The analyst also predicted that Apple would report iPhone revenues of $36.55 billion, below the actual number of $39.6 billion.

Chatterjee's Services expectations of $17.02 billion were not too far off the actual number of $17.49 billion, however.

Daniel Ives, Wedbush

Daniel Ives from Wedbush, which is typically an Apple bull, does not appear to have updated his Q3 2021 forecast ahead of earnings.

In a research note, he said Wall Street consensus of $73 billion was "far too conservative," but the note predicted Apple revenue of $67.58 billion. It's likely that his actual prediction numbers were simply never inputted.

Ives was technically correct in his "far too conservative" forecast. He cited the underlying strength of the iPhone and Services momentum as reasons why the company neutralized any short-term weakness heading into earnings.

Rod Hall, Goldman Sachs

Despite claiming that Apple would report "solid revenue and earnings" for the June quarter, Goldman Sachs' Rod Hall managed to land on the lower side of Apple Q3 2021 forecasts. He predicted revenue of $72.5 billion and earnings-per-share of $0.99.

He did manage to get closer to Apple's actual gross margin number. Hall forecast gross margins of 42.1%, which was closer to the actual percentage of 43.29% than other analyst predictions.

Hall did say that a surge in iPhone demand in the U.S. and positive build numbers would contribute to a good June quarter. That vague prediction turned out to be accurate, since Apple reported continued strong demand for its iPhone lineup.

T. Michael Walkley, Canaccord Genuity

Ahead of Apple's earnings call on Tuesday, T. Michael Walkley of Canaccord Genuity raised his Apple forecast across the board. Despite that, however, the analyst still managed to come in far below what Apple actually reported.

Walkley, for example, predicted Apple revenue of $74.94 billion and earnings-per-share of $1.03. His updated iPhone revenue forecast of $35.78 billion also came in below Apple's actual revenue for the quarter.

The analyst believes Apple is "well-positioned" to take advantage of the 5G upgrade cycle. He also expects strong growth trends to contribute to services revenue, which could also increase Apple's margins.

David Vogt, UBS

Analyst David Vogt of UBS also increased his Apple forecast about a week ahead of the company's July 27 earnings call. Like other analysts who did the same, Vogt still came in below the actual numbers.

The analyst predicted Apple would report quarterly revenue of $74.7 billion, up from a previous forecast of $71.3 billion. His updated earnings-per-share prediction of $1.01 was just why of 30 cents off the actual numbers.

Vogt also raised his iPhone unit shipment forecast to 227 million for the 2021 fiscal year. Apple, however, no longer reports individual unit sales of its products.

What happened here?

Financial analysts can't actually predict the future any better than other people, and Apple isn't helping as it continues to not give guidance for the next quarter. While most of them were wrong about the June quarter, there were some good reasons to believe that Q3 2021 would end up closer to consensus.

For one, the June quarter is historically Apple's slowest. The company also specifically warned of iPad and Mac supply constraints -- two product lineups that have contributed to record-breaking quarters during the coronavirus pandemic.

There were also plenty of reasons to believe that iPhone sales would taper off ahead of new models in September. They typically do. But all signs now point to a strong and sustained cycle for the iPhone, likely because of the 5G, Android switchers, and financial incentives.

What Apple proved here was its resiliency. It's going to continue to grow. With a portfolio of increasingly attractive hardware and sustainable services, it's likely to keep growing at a pace above expectations.

The company has put a lot of time and money into improving its ecosystem. As the June quarter results indicate, it appears that the strategy has paid off.

Read on AppleInsider
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Comments

  • Reply 1 of 21
    Rayz2016Rayz2016 Posts: 6,957member
    Cybart and Dediu. 

    The only analysts worth reading. 

    Everyone else is just farting in a jam jar. 
    lkruppchasmp-dogthtwatto_cobrajony0
  • Reply 2 of 21
    melgrossmelgross Posts: 33,034member
    It’s hard to predict for a number of reasons. These are odd times, to say the least. With revenue being a bit over $59 billion a year ago, estimating anything in the mid $70 billion range is already a huge bump. How much higher to go than that? I don’t think anyone can really get that right.
    muthuk_vanalingamradarthekatwatto_cobrajony0
  • Reply 3 of 21
    And their stock goes down?  Go figure
    watto_cobra
  • Reply 4 of 21
    lkrupplkrupp Posts: 9,462member
    melgross said:
    It’s hard to predict for a number of reasons. These are odd times, to say the least. With revenue being a bit over $59 billion a year ago, estimating anything in the mid $70 billion range is already a huge bump. How much higher to go than that? I don’t think anyone can really get that right.
    The law of large numbers doesn’t seem to be in play with Apple.
    ArchStantonp-dogwatto_cobra
  • Reply 5 of 21
    fallenjtfallenjt Posts: 4,034member
    And their stock goes down?  Go figure
    All went down including those smashed the earning like Microsoft, Google and Facebook, but these company stocks were up after hour trading, except AAPL. WS still can’t like Apple! They continue to beat expectations years after years…ridiculously.
    jas99Alex_Vp-dogwatto_cobrajony0
  • Reply 6 of 21
    Analysts don't want to be too high with Apple (and a few other stocks). There's a belief that if you are outside the average and you overstay it, you are a suckup to that company, trying to make money. 
    As it stands right now Apple over performs almost every time. That means stock price will factor in higher than average performances. Good info to know...
    watto_cobra
  • Reply 7 of 21
    Fred257Fred257 Posts: 82member
    Considering Apple crippled iOS 14.6 on purpose it doesn’t surprise me.  We know you did this on purpose Apple….
  • Reply 8 of 21
    chadbagchadbag Posts: 1,470member
    Fred257 said:
    Considering Apple crippled iOS 14.6 on purpose it doesn’t surprise me.  We know you did this on purpose Apple….
    What you talkin' 'bout Wilbur?
    radarthekatMisterKitwatto_cobra
  • Reply 9 of 21
    chasmchasm Posts: 2,391member
    Fred’s back on the crack pipe, I see …
    edited July 28 Wgkruegerradarthekatp-dogwatto_cobra
  • Reply 10 of 21
    chasmchasm Posts: 2,391member
    The reason almost all analysts got this so wrong is the same reason they get it so wrong every quarter: they don’t know what they’re talking about. They don’t understand Apple, they don’t understand the appeal of the company, they probably don’t use Apple products for the most part (except iPhones), and they are utterly bewildered by a company that can cater to customers, not spy on them and sell their data, and yet make so much money — since that’s not the way most American tech businesses work.

    yes, it is difficult to estimate how much money Apple is going to make an advance. But Neil Cybart and Horace Dediu did the work and ”get” Apple. If you’re banking your retirement on the work of any of these other clowns, you’re not doing as well as you could be.

    And if you think I’m being too harsh, look up a transcript from the call (or just listen to it) and get a load of the insanely stupid questions Tim Cook and Luca Mastri have to put up with quarter after quarter after quarter.
    DonEverestAlex_Vp-doglkruppaderutterwatto_cobra
  • Reply 11 of 21
    radarthekatradarthekat Posts: 3,395moderator
    lkrupp said:
    melgross said:
    It’s hard to predict for a number of reasons. These are odd times, to say the least. With revenue being a bit over $59 billion a year ago, estimating anything in the mid $70 billion range is already a huge bump. How much higher to go than that? I don’t think anyone can really get that right.
    The law of large numbers doesn’t seem to be in play with Apple.
    Here’s what I wrote about that in late 2015…
    (Still long and strong in the stock, though I did sell some shares in early 2020 to jump aboard Tesla.)

    Law of Large Numbers Debunked

    Among the arguments why Apple shares cannot outperform the market or its peers has been the oft repeated law of large numbers; the claim that Apple is too big to meaningfully grow and that its market cap, at over $600 billion, is so big that there aren't enough investment dollars to move the needle.

    But the most recent [October 2015] earnings unwittingly provided an irrefutable counter argument by taking the combined market caps of GOOGL and AMZN to $800 billion.  The market seems to have no trouble adding $80 billion to these two companies, whose combined profits are a fraction of Apple's, but won't allow the same for a single company.  It was Microsoft's year 2000 valuation, north of $600 billion at the peak of the dotcom bubble and stagnant for the decade thereafter, that has since been used as the poster child for what happens to the company with the world's highest market cap.  The street is convinced that will be Apple's fate. 

    What the market doesn't seem to understand is that vertically integrated Apple, in terms of the profits it generates and markets it addresses, is equivalent to the entire PC industry of the 1990s, including MSFT, Sony, Toshiba, IBM's PC division, Compaq, HP, and all the other PC makers.  Adjusted for inflation, MSFT's year 2000 valuation alone would today be $850 billion, against Apple's current $650 billion.  How much higher when you add in all the PC makers from 2000?

    Apple's market cap, given the scope of its business, and adjusted for inflation, is very conservative.  As usual, the market is wrong.

    edited July 28 roundaboutnowAlex_Vfirelockp-dog
  • Reply 12 of 21
    larryjwlarryjw Posts: 833member
    You know the Rational Economic Man -- the guy who makes rational economic decisions?

    He doesn't exist. 

    Here's what I've learned after 50 years of investing. 

    Nobody know what they're talking about. It's all verbal masturbation. 
    thtwatto_cobra
  • Reply 13 of 21
    chasm said:
    The reason almost all analysts got this so wrong is the same reason they get it so wrong every quarter: they don’t know what they’re talking about. T
    The old adage that the simplest answer is often the correct one. For example, the answer above :-). 

    They are having to "estimate" tens of millions iPhones sold around the world, how many Apps purchased in the App Store, numerous millions of Macs and iPads sold around the world, how many tens of millions of watches sold around the world, AirPods, beats products, music subscriptions, new AppleTVs, new Airtags. AppleCare contracts, mass of connectors and cables and accessories, ApplkeOne as well as arcade fitness news AppleTV+, how many third party paid subscriptions were sold or renegotiated.
    Apple only breaks down revenue streams in 5 categories: iPhones, iPads, Macs, Hearables/Wearables/Accessories, and Services. Analysts are looking at past sales, past performances then....wait for it....guessing from there. You'll here "checking supply chain" and Wireless carrier business etc. I.E. they are gathering largely public date then guessing. 
    Their huge misses are coming on Earnings per share. They are WAY off 3 quarters in a row, At least one has learned his lesson at Goldmans. He has adjusted his EPS for Apple Q4 up to 1.21 from 1.05. Maybe this time their guessing (not knowing what they are talking about) will be right. A broken clock gets it right twice a day. 

    watto_cobra
  • Reply 14 of 21
    lkrupplkrupp Posts: 9,462member
    chadbag said:
    Fred257 said:
    Considering Apple crippled iOS 14.6 on purpose it doesn’t surprise me.  We know you did this on purpose Apple….
    What you talkin' 'bout Wilbur?
    Leave him alone. He’s off his meds.
    watto_cobra
  • Reply 15 of 21
    mpantonempantone Posts: 1,609member
    And their stock goes down?  Go figure
    You don't understand the investment community: it is forward looking. 

    AAPL dropped after the earnings announcement because Apple's leadership did not give firm guidance on the current quarter. They also warned on possible supply constraints.
  • Reply 16 of 21
    mpantonempantone Posts: 1,609member
    chasm said:
    The reason almost all analysts got this so wrong is the same reason they get it so wrong every quarter: they don’t know what they’re talking about. 

    ...

    And if you think I’m being too harsh, look up a transcript from the call (or just listen to it) and get a load of the insanely stupid questions Tim Cook and Luca Mastri have to put up with quarter after quarter after quarter.
    That's why they are often referred to as ANAL-ysts.

    Look at that utterly retarded question about when Apple introduces their own technology. Tim Cook gave the only answer he could have: when Apple thinks they can do a better job.
    edited July 29 watto_cobra
  • Reply 17 of 21
    lkrupp said:
    melgross said:
    It’s hard to predict for a number of reasons. These are odd times, to say the least. With revenue being a bit over $59 billion a year ago, estimating anything in the mid $70 billion range is already a huge bump. How much higher to go than that? I don’t think anyone can really get that right.
    The law of large numbers doesn’t seem to be in play with Apple.
    Here’s what I wrote about that in late 2015…
    (Still long and strong in the stock, though I did sell some shares in early 2020 to jump aboard Tesla.)

    Law of Large Numbers Debunked

    Among the arguments why Apple shares cannot outperform the market or its peers has been the oft repeated law of large numbers; the claim that Apple is too big to meaningfully grow and that its market cap, at over $600 billion, is so big that there aren't enough investment dollars to move the needle.

    But the most recent [October 2015] earnings unwittingly provided an irrefutable counter argument by taking the combined market caps of GOOGL and AMZN to $800 billion.  The market seems to have no trouble adding $80 billion to these two companies, whose combined profits are a fraction of Apple's, but won't allow the same for a single company.  It was Microsoft's year 2000 valuation, north of $600 billion at the peak of the dotcom bubble and stagnant for the decade thereafter, that has since been used as the poster child for what happens to the company with the world's highest market cap.  The street is convinced that will be Apple's fate. 

    What the market doesn't seem to understand is that vertically integrated Apple, in terms of the profits it generates and markets it addresses, is equivalent to the entire PC industry of the 1990s, including MSFT, Sony, Toshiba, IBM's PC division, Compaq, HP, and all the other PC makers.  Adjusted for inflation, MSFT's year 2000 valuation alone would today be $850 billion, against Apple's current $650 billion.  How much higher when you add in all the PC makers from 2000?

    Apple's market cap, given the scope of its business, and adjusted for inflation, is very conservative.  As usual, the market is wrong.

    Unlike MSFT, Apple is a disruptor. Apple is changing people's life before they know. Of course the market don't know until it sees how people's life has been changed by Apple. In this respect, Google and Amazon are disruptors too. 
  • Reply 18 of 21
    danoxdanox Posts: 599member
    Apple is doomed I heard it from Mr. Santos on Seeking Alpha   :D
    watto_cobra
  • Reply 19 of 21
    melgrossmelgross Posts: 33,034member
    And their stock goes down?  Go figure
    Lots of reasons. I listened to the conference call. Mac and iPad sales limited by supply issues. Next quarter, strong double digit growth, but not as good as this quarter. That’s enough to get investors, particularly day traders who account for a large percentage of trading, to get nervous.
    muthuk_vanalingam
  • Reply 20 of 21
    melgrossmelgross Posts: 33,034member
    lkrupp said:
    melgross said:
    It’s hard to predict for a number of reasons. These are odd times, to say the least. With revenue being a bit over $59 billion a year ago, estimating anything in the mid $70 billion range is already a huge bump. How much higher to go than that? I don’t think anyone can really get that right.
    The law of large numbers doesn’t seem to be in play with Apple.
    Suppose it depends on what you mean by that. Will Apple grow 50 to 60% annually again? Probably not
    muthuk_vanalingam
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