Facebook and Apple report strong earnings amid war of words

29 Apr 2021

Image: © sitthiphong/Stock.adobe.com

Apple doubled profits on foot of new iPhone sales, while Facebook warned that iOS updates could hamper its ad revenue.

While Facebook and Apple butt heads over privacy, the companies’ balance sheets aren’t hurting. Both of the tech giants reported strong earnings and a doubling in profits for the last quarter.

Facebook reported $26.1bn in revenue with net income of $9.5bn, almost double that of Q1 2020. Advertising, which makes up the lion’s share of revenue, was up 46pc year-over-year.

Facebook said it expects second-quarter revenues to “remain stable or moderately accelerate”.

But chief financial officer David Wehner acknowledged challenges ahead for its advertising revenue, namely due to the recent privacy changes to Apple’s iOS that Facebook has publicly lambasted.

This week Apple rolled out an update for iOS that greatly curtails the ability of apps like Facebook to gather the vital data that powers ad targeting.

“We continue to expect increased ad targeting headwinds in 2021 from regulatory and platform changes, notably the recently launched iOS 14.5 update, which we expect to begin having an impact in the second quarter. This is factored into our outlook,” Wehner said.

While Facebook added users in the quarter, the increases were slightly below Wall Street expectations. It now has 1.88bn daily active users and 2.85bn monthly active users.

Wehner added that the regulatory hurdles Facebook is encountering in Europe around the Schrems II ruling and the legal flow of data between Europe and the US leaves a lot of lingering questions for the company.

“There is also continuing uncertainty around the viability of transatlantic data transfers in light of recent European regulatory developments, and like companies across a wide range of industries, we are closely monitoring the potential impact on our European operations as these developments progress,” the CFO said.

Soaring profits

Demand for new iPhones sent Apple’s revenue and profits soaring in the quarter.

Apple booked sales of $89.6bn, an increase of more than 50pc year on year. The figure may be down from the previous quarter where Apple hit $100bn in revenue, but that quarter included the Christmas period.

It ended the last quarter with profits of $23.6bn – a sizeable increase of more than 100pc from the same period last year and exceeding analyst forecasts.

“This quarter reflects both the enduring ways our products have helped our users meet this moment in their own lives, as well as the optimism consumers seem to feel about better days ahead for all of us,” Apple chief executive Tim Cook said.

“Apple is in a period of sweeping innovation across our product line-up, and we’re keeping focus on how we can help our teams and the communities where we work emerge from this pandemic into a better world.”

Interest in 5G iPhones helped push the volume of sales up, with sales in China doubling, while last week Apple unveiled a suite of new products including a redesign of the iMac.

But Apple is facing its own share of regulatory scrutiny as well. This week the Financial Times reported that the European Commission is preparing fresh antitrust charges against the iPhone maker, which would add to a number of probes and disputes ongoing in Europe and the UK.

Jonathan Keane is a freelance business and technology journalist based in Dublin