Apple second-quarter revenue beats estimates in tough pandemic period

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Tim Cook Apple 2020 Q2 earnings results: Even during a pandemic, Apple is a money machine.
Even during a pandemic, Apple is a money machine.
Image: Killian Bell/Cult of Mac
Apple reported $58.3 billion in revenue in its fiscal second-quarter earnings results Thursday, a 1% year-over-year increase, during a quarter in which the COVID-19 pandemic negatively impacted supply and demand for its products.

In a prepared statement, Apple also reported earnings of $2.55 per share, up 4%. The gross profit margin for the quarter was 38.4%, compared to 37.6% a year ago. International sales accounted for 62% of the quarter’s revenue.
“Amid the most challenging global environment in which we’ve ever operated our business we’re proud to say that Apple grew during the quarter,” Apple CEO Tim Cook said during a call with analysts.

As for revenue by each group, Apple reported:

  • iPhone revenue: $28.96 billion (down 7% year-over-year)
  • Services revenue: $13.34 billion (up 17% year-over-year, a record all-time high)
  • Wearables, Home, and Accessories revenue: $10.01 billion (a new quarterly revenue record)
  • Mac revenue: $5.35 billion
  • iPad revenue: $4.36 billion

Total revenue growth for the quarter decreased to 0.5% from 9% in the 2019 second quarter.

The Wall Street analyst consensus on Apple’s revenue for the second quarter was $54.6 billion, with guesstimates from the various analysts between $45.6 billion and $58 billion. The consensus Apple earnings forecast was $2.10 a share. The range of estimates ran from $1.73 to $2.73 a share.

As was expected, Apple also declared an increased quarterly dividend payment of $0.82 per share, up from $0.77. The dividend is payable on May 14 to shareholders of record as of May 11.

Services a major positive for the quarter

Apple reported its services sector set a record all-time high with revenue of $13.34 billion.
Cook said Apple News had 125 million monthly users in the quarter while ‌FaceTime and iMessage both saw record use as people sheltered in place and began to work from home.
App Store‌ revenue saw double-digit growth, but Cook gave no further details.
Apple’s services business includes iTunes, Apple TV+, Apple Music, the App Store, the Mac App Store, Apple Pay, Apple News+, and the Apple Arcade.

No third-quarter guidance

Apple did not issue guidance for the fiscal third quarter, as it usually does every three months. More than two months ago in mid-February, Apple warned that the coronavirus would seriously impact supply and demand for its products – especially the iPhone – in the second quarter.

“In the short-term, it’s hard to see out the windshield to know what the next 60 days look like, and so we’re not giving guidance because of that lack of visibility and uncertainty,” Cook told CNBC after the Thursday market close.

Cook: Apple TV+ ‘doing well’ with Mac and iPad benefiting from pandemic

Cook said that the company’s TV subscription service, Apple TV+, was “doing well” as more people watched content while under lockdown, and that people were turning to iPad and Mac in increasing numbers.

“If you look at TV+ as an example, we’ve seen a significant uptick in the number of people that are viewing content as well as the engagement with content,” Cook commented.

Neither Cook or Apple CFO Luca Maestri elaborated during the conference call on actual Apple TV+ subscriber numbers.

With people staying home due to the pandemic, Cook believes that is having a positive impact on revenue of iPad and Mac sales.

“It’s clearly helping the iPad and the Mac and, for that reason … we envision both of those to have improving year-over-year performances in this current quarter,” Cook told CNBC.

“Importantly, around half of the customers purchasing Macs and iPads around the world during the quarter were new to that product, and the active installed base for both Mac and iPad reached a new all-time high,” he told analysts.

Cook: Things could have been worse, but will get better

Cook explained to analysts that overall sales saw a steep decline throughout March and early April as the shelter in place orders began to go into affect worldwide.

Apple offset declines in China with strong sales in the U.S. and Europe, where shutdowns and store closures didn’t begin until the final weeks of the March quarter.

It was the second half of April – part of the current quarter – that Apple sales began to slowly improve, even with the majority of Apple retail stores shuttered. Reasons he gave for that improvement included new product releases like the second-generation iPhone SE and consumers buying electronics to better work from home.

Cook struck an optimistic chord that the worldwide economy will recover from the pandemic and that the company’s businesses will slowly improve.

“We have great confidence in the long-term of our business,” Cook commented. “It was a very unique quarter. I’ve never had anything quite like this. I hope to never have it again, but I’m incredibly proud of the company and what was achieved during that period of time.”

Apple stock closed Thursday up $6.07, or 2.11%, to $293.80. Apple stock is now at its highest level since March 6, when it closed at $289. The stock is essentially flat year-to-date.