Earnings

Apple Doubles Services Revenue

Apple building

Consumers might have cut back on spending during the pandemic, but that apparently didn’t apply to Apple products as the tech giant reported quarterly results Thursday (July 30) that exceeded analyst estimates across the board.

The iPhone returned to growth after diminishing for the last six consecutive quarters, generating $26.42 billion in revenue for Apple’s fiscal third quarter, which ended June 27. That’s well ahead of the $22.2 billion that analysts had expected, according to MarketWatch.

International sales accounted for roughly 60 percent of Apple’s latest iPhone revenue, according to a press release. In his comments on an earnings call with analysts, CEO Tim Cook credited the segment’s stronger-than-expected sales to the new iPhone SE’s release, coupled with government stimulus funds hitting consumers’ bank accounts.

Apple also reported that iPad revenue rose $6.58 billion from $5.02 billion last year, while revenue from Macs came in at $7.08 billion, compared with $5.82 billion a year ago, MarketWatch reported. Both results were significantly ahead of analysts’ estimates of $4.85 billion for iPad revenue and $6.03 billion in Mac sales.

Cook credited the significantly larger-than-expected growth in both product lines to the spike in employees working from home and students attending school remotely.

“It definitely has boosted Mac and iPad,” Cook told CNBC. “We see both of those likely picking up share and, in addition, being a tool of choice for their productivity.”

Apple’s services segment — home to offerings such as Apple Care, Apple Pay, Apple Subscriptions and the Apple Card — likewise saw revenue increase 14.9 percent to $13.16 billion year on year, CNBC reported.

Cook noted on the call that those numbers meant Apple hit its 2016 goal of doubling services revenue of $6.5 billion and did so six months ahead of schedule.

Revenue from wearables, accessories and home products also grew to $6.45 billion from $5.5 billion a year earlier. That came in ahead of analyst forecasts, which called for $5.98 billion, MarketWatch reported.

All told, Apple posted overall net income of $11.25 billion ($2.58 a share), up from $10.04 billion ($2.18 a share) a year ago, according to MarketWatch. That’s also well ahead of analysts’ estimate of $2.05 in earnings per share.

Revenues likewise increased to $59.7 billion from $53.81 billion a year earlier, according to the release. Once again, that came in well ahead of analysts’ forecasts of $52.24 billion, MarketWatch reported.

In addition, Apple reported $193.82 billion in cash on hand at the period’s end, up from the previous quarter, according to CNBC.

Cook also noted that 75 percent of Apple stores around the world are open. Additionally, he highlighted the success of adding installment payments to the company’s full product line via the Apple Card early in the quarter. Cook said on the call that when combined with Apple’s trade-in program, that makes upgrading iPhones more accessible for a much wider audience — and that the company is starting to see a “strong effect” from the two.

The solid overall results came at an unusual time for Apple, as its fiscal third quarter is typically the year’s slowest period. But this year, revenue was the highest the company has ever reported for its third quarter, CNBC reported.

“We’re conscious of the fact that these results stand in stark relief during a time of real economic adversity for businesses large and small, and certainly for families,” Cook said on the call.

As for what comes next, Apple — like many firms — held off on specific predictions for either the fourth quarter or for 2021, citing uncertainty around the pandemic. However, the company did confirm a long-circulating rumor that its next iPhone release, which would normally happen in late September, will likely be delayed a few weeks due to pandemic-related production delays, according to CNBC.

Still, the strong report sent Apple’s stock price soaring in after-hours trading. Beyond the solid results, investors apparently also liked news announced in the release that Apple approved a four-for-one stock split to make its share “more accessible.”

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The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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