Two years ago, [hotlink]Apple[/hotlink] CEO Tim Cook made peace with [hotlink]Qualcomm[/hotlink] to end an acrimonious patent dispute, agreeing to pay high royalties for the chipmaker’s technology. He then turned around and bet big on Qualcomm’s best 5G chips for superfast mobile connections, adding them to all of last year’s iPhone 12 line up.
Cook’s bet paid off.
Apple on Wednesday announced earnings for the first three months of 2021 that crushed Wall Street’s forecasts, sending the company’s shares up 4% in after-hours trading. Overall sales rose an astounding 54% to $89.6 billion, blowing past the average analyst estimate of $77 billion. Profits came in at $1.40 per share, also well above the average estimate of 98 cents.
IPhone sales led the way, rising 66% to $48 billion.
That came despite the big wireless carriers doing little to get consumers excited about 5G, which is up to 10 to 100-times faster than average 4G speeds. Moreover, most parts of the country don’t even yet have access to the highest speeds.
So if consumers don’t care much about 5G, or don’t have access to it, how did Cook’s bet pay off? It’s the carriers who care, and they dug deep into their wallets and subsidized iPhone sales in a big way.
“The carrier deals in the U.S. are super-charging the demand in the U.S.,” Cook told CNBC after the results came out. “It is a highly competitive marketplace, and you see iPhone doing extremely well around the world.”
When the iPhone 12 line up with four models went on sale in October, list prices started at $700 for the iPhone 12 Mini and up to $1,100 for the iPhone 12 Pro Max. But AT&T gave customers a free iPhone 12 with a trade in of an iPhone from the past few years. Meanwhile, [hotlink]Verizon[/hotlink] charged less than $300 with a trade in.
Other parts of Apple’s did well too in the most recent quarter. Partly because of many people still working and learning from home, sales of Mac computers rose 70% to $9.1 billion while sales of iPad tablets increased 79% to $7.8 billion.
Additionally, segments that had been leading Apple’s growth before the pandemic are still doing well. Sales in Apple’s services unit, which includes everything from app sales and movie rentals to Apple Fitness Plus, increased 27% to $16.9 billion. And the wearables unit, primarily sales of the Apple Watch and AirPods, rose 25% to $7.8 billion.
Given the results, Apple was not hurt by the global semiconductor shortage that has ravaged many similar companies and held back car sales. CEO Cook told analysts that Apple wound up “collapsing all of your buffers and offsets” in its supply chain to find enough chips.
But that won’t work for the next quarter. CFO Luca Maestri said Apple would lose out on $3 billion to $4 billion of sales next quarter due to the chip shortages hampering the company’s ability to make enough Macs and iPads to meet demand. “We wish we had more inventory of iPad and Mac,” the CFO told analysts.
Cook said given the widespread, global nature of the shortage, he could not predict when it would end.
This story was originally featured on Fortune.com