Apple delivers blowout earnings, strong iPhone revenue despite Covid-19

A municipal police officer walks past the Champs-Elysees Apple store in Paris, France, in April 2020.
A municipal police officer walks past the Champs-Elysees Apple store in Paris, France, in April 2020.PHOTO: REUTERS

NEW YORK (REUTERS) - Apple on Thursday (July 30) delivered blowout quarterly results, reporting year-on-year revenue gains across every category and in every geography as consumers working and learning from home during the Covid-19 pandemic turned to its products and services.

The report topped Wall Street expectations, with even some long-overshadowed categories like iPads and Macs getting fresh boosts.

The results, which included iPhone sales some US$4 billion (S$5.5 billion) above analyst expectations, came on the same day that US gross domestic product collapsed at a 32.9 per cent annualised rate last quarter, the nation's worst economic performance since the Great Depression.

Other major tech companies Amazon.com and Facebook also posted results that topped Wall Street targets, sending their shares up.

With 60 per cent of sales coming from international markets, the Cupertino, California-based company posted iPhone revenues of US$26.42 billion, US$4 billion above analyst expectations of US$22.37 billion, according to IBES data from Refinitiv.

In an interview with Reuters, CEO Tim Cook said that after disruptions in April, sales began to pick back up in May and June, helped by what he called a "strong" launch for the US$399 iPhone SE introduced in April.

"I think the economic stimulus that was in place - and I'm not just focused on the US, but more broadly - was a help," Cook told Reuters.

The results underscore that Apple offers devices and services that customers flocked to despite stores re-closing in some US markets. Apple posted rising sales for accessories such as AirPods and services such as the App Store.

The continued growth in services and accessories also showed the durability of the company's brand, which has prompted investors to view it as a comparative safe haven and pushed up share prices since March.

The company also saw strong sales in its greater China region, where aggressive pricing during a June holiday shopping season and lower-priced iPhone SE model released in April helped boost sales 2 per cent to US$9.33 billion from US$9.16 billion a year earlier.

Apple also announced a 4-for-1 stock split.

Apple's fiscal third-quarter revenue and profits were US$59.69 billion and US$2.58 per share, compared with analyst expectations of US$52.25 billion and US$2.04 per share, according to IBES data from Refinitiv.

Sales in its services segment, which also includes offerings such as iCloud and Apple Music, rose 14.8 per cent to US$13.16 billion, compared with US$11.46 billion a year ago and analyst expectations of US$13.18 billion. Cook told Reuters that Apple has 550 million paying subscribers on its platform, up from 515 in the previous quarter.

Sales in the wearables segment that includes the Apple Watch rose 16.7 per cent to US$6.45 billion, compared with US$5.53 billion a year ago and estimates of US$6 billion, according to Refinitiv data.

Apple did not give a fiscal fourth-quarter forecast.

Apple's results come as most analysts expect the release of at least some of its new iPhone models this fall to be delayed after several major Apple suppliers such Broadcom Inc and Qualcomm have given forecasts that included a delayed fall launch from a major customer.

Apple is likely to delay the release of some models until November due to supply chain disruptions from the coronavirus, according to a senior official at a major iPhone supplier with direct knowledge of the matter.

Apple benefited from remote work and learning trends, reporting sales in its iPad and Mac segments of US$6.58 billion and US$7.08 billion, which beat expectations of US$4.88 billion and US$6.06 billion, according to Refinitiv data.

"Both had some really significant product announcements at the end of March, beginning of April. I think we have the strongest product line in both areas that we've ever had," Cook told Reuters.

"You combine that with the work from home and remote learning, and it's yielded really, really strong results."

But the global smartphone market was already stagnating before the novel coronavirus caused it to contract, and Apple has leaned heavily into growing its services business, which is where the company's fastest revenue growth occurred during the fiscal third quarter. The biggest component of that business is the App Store, where Apple generates commissions between 15 per cent and 30 per cent on some sales.

On Wednesday, Cook faced questions from US lawmakers about Apple's practices related to the store, which have come under fire from independent app developers who say its rules and unpredictable approval process put them at a disadvantage against the iPhone maker.