What to expect from Apple’s pandemic-afflicted earnings report

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Apple Q3 2020 earning results come out July 30.
Apple Q3 2020 earnings were almost certainly pushed up by the iPhone SE and weighed down by COVID-19.
Photo: Ed Hardy/Cult of Mac

When Apple reports its fiscal third-quarter earnings Thursday, the world will learn how the company is doing in the middle of a global pandemic.

Analysts predict a drop in revenue. But Apple itself previously said it’s seeing an increase in Mac and iPad sales. And investors have pushed the stock up almost 30% this year.

Just so no one gets confused, Apple will report results for the April-through-June quarter on Thursday. To everyone else, this is Q2. But it’s Apple’s fiscal Q3 because the company begins its fiscal year on October 1.

Apple faced challenges in Q3 2020

The consensus among analysts is that Apple’s quarterly revenue dropped 2.3% compared to the same period in 2019, according to SeekingAlpha. Much of the projected drop can probably be blamed on COVID-19.

Apple shuttered its retail stores around the world during the April-to-June span to slow the spread of the disease. This almost certainly had a negative effect on the company’s sales. Also, millions of Americans lost their jobs because of the pandemic, possibly reducing demand for Apple products.

However, another potential negative for the company last quarter is unrelated to COVID-19. It’s an open secret that the first 5G iPhone will debut this autumn, even if no one can agree whether it’ll arrive in September or October. There’s reportedly pent-up demand for a handset capable of ultrafast internet connections, which is good news for Apple down the road. Last quarter, though, that anticipation could have lowered demand for current 4G-only iPhone 11 Pro models.

Analysts predict Q3 iPhone revenue will come in at $22 billion. The company saw $26 billion in revenue from handsets in the same quarter of last year.

Apple upsides in Q3 2020

COVID-19 forced people around the world to stay home. And many of these people needed computers so they could work or attend classes remotely. Apple could well have benefited.

During its last earnings call in April, Luca Maestri, Apple’s chief financial officer, said, “On iPad and Mac, we expect the year-over-year revenue performance to improve in the June quarter.” That’s how a CFO predicts his company will experience increased demand for tablets, laptops and desktops.

Another boost to Apple revenue could come from the updated iPhone SE, which launched during the April-to-June period. This $399 model is “selling above expectations,” according to an industry-analysis firm.

Services could be stronger because of COVID-19 lockdowns, too. They give people more time to play games, watch movies, read ebooks … all products Apple profits from. That said, even a global pandemic is reportedly not doing much for Apple TV+ or Apple Arcade.

Analysts predict the company brought in $13.13 billion in services revenue. Compare that to the $11.5 billion in services revenue it took in during the same quarter last year. That said, revenue in this category has grown steadily for years, so a year-over-year increase isn’t surprising. But if the analysts are correct, this would be a rare quarter-over-quarter drop.

We’ll know tomorrow

Again, analysts predict a slightly down Q3 2020 for Apple overall. But the company beat analysts’ revenue estimates in every single quarter of the past two years. It could easily happen again.

Anyone who wishes can tune into the earnings call on Thursday, June 30. A livestream will be available from Apple at 2 p.m. Pacific.