Apple Embraces Paying On Installment

iPhone growth continues to look sluggish, but Apple’s earnings report was a mostly story about growth once one got away from the figures on the firm’s flagship product. Particular areas of strength were Apple wearables and the services business line.

On the whole, Q4 was a strong enough showing that investors were satisfied and Apple stock price was up slightly in after-hours trading.  Apple CEO Tim Cook was (as usual) pleased with the results and enthusiastic that they auger well for a strong finish to 2019.

“We’re very optimistic about what the holiday quarter has in store,” Cook said.

By the numbers, Apple reported revenue of $64 billion, comfortably beating predictions of $62.99 billion made by analysts. Earnings per share were also a beat at $3.03 instead of $2.84. Total iPhone sales beat expectations, albeit narrowly, with sales of $33.36 billion vs. $32.42 billion expected.

But it was yet another quarter that iPhone sales have been in decline — down 9 percent year-on-year. The goods news, Cook pointed out, is mostly that it wasn’t worse news — there have been previous quarters wherein Apple has seen its flagship product’s revenue fall as much as 15 percent.

Apple’s overall revenue strength, however, is accounted for by the fact that while the iPhone is shrinking, everything else in Apple’s stable of goods and services managed to grow.

Services — the broad category that is home to Apple Care, Apple Pay, subscription apps, Apple Music and iCloud — was, overall, Apple’s MVP in Q4, with revenue growing year over year by 40 percent. All in all, Services generated $12.51 billion in revenue.

Also showing particular strength during the quarter was Apple growing line-up of wearables, which represented the firm’s fastest growing revenue stream in Q4 2019. Wearables is home to the Apple Watch and the AirPods. Revenues were up 54 percent to $6.52 billion in the quarter, driven largely by the release of a new, more expensive Apple Watch and the latest edition of AirPods.

Tim Cook further noted that Apple’s wearables business grew in every market around the world that it tracks — though Apples wearable growth, like most of the rest of its growth, came from sales in the U.S.  Sales in Europe, Japan and China were down slightly from this time last year.

And according to an announcement made by Apple yesterday, it plans to be working hard going forward to make both its iPhone products and its wearbles more accessible to its customers — if those customers happen to have gotten to the new Apple credit card.

Apple will not be lowering prices or offering a discount; instead, Tim Cook explained, it will be embracing paying for Apple products on installment. According to Apple, card holders will be able to purchase their new iPhone and pay for it over it over 24 months with zero interest.

“One of the things we are doing is trying to make it simpler and simpler for people to get on these sort of monthly financing kind of things. That’s a part of what we announced with the Apple Card earlier in the call, and so we are cognizant that there are lots of users out there that want sort of a recurring payment like that, and the receipt of new products on some sort of standard kind of basis, and we are committed to make that easier to do than perhaps it is today,” he said.

The process begins with the phone, though many market watches believe Apple’s embrace of payments on installment will likely expand through the rest of its expensive product line, particularly if the program is a success with the iPhone.

As for what’s next, Apple’s predictions for the holiday quarter were largely unchanged, though the firm was enthusiastic about it.  There have been some rumors that Apple could break the $88.3 billion in revenue record it posted in the quarter ending December 2017 — though Apple’s China sales once again were down in Q4, so that remains to be seen. Cook was optimistic, noting “the tone around tariffs has changed significantly,” during the earnings call — but the tone around tariffs has changed a few times in 2019, so it’s probably best to keep one’s eyes open.



The September 2020 Leveraging The Digital Banking Shift Study, PYMNTS examines consumers’ growing use of online and mobile tools to open and manage accounts as well as the factors that are paramount in building and maintaining trust in the current economic environment. The report is based on a survey of nearly 2,200 account-holding U.S. consumers.