How Apple made money in the middle of a crushing pandemic

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Apple reports another quarter of record revenue for Q3 2020. Can nothing stop the Cupertino juggernaut?
Can nothing stop the Cupertino juggernaut?
Photo: Bill Oxford/Unsplash CC

People around the world turned to Apple products at the beginning of the COVID-19 crisis. And the result was an 11% increase in Apple revenue during the June quarter. Some products contributed to that growth more than others.

The pandemic sent people buying Mac and iPad in huge numbers. But it hurt handset sales, despite a relatively strong launch for the iPhone SE. And Apple services experienced something of an off quarter, too.

During Thursday’s Q3 2020 earnings call, Apple CEO Tim Cook summed up how COVID-19 affected sales of the company’s various products. “There’s clearly some amount of work from home and remote learning that affects the results of Mac and iPad positively,” he said. “They probably affect wearables and iPhone the other direction.”

Mac sales increased 22%

Mac sales hit $7.1 billion in the quarter, up a whopping 22% year-over-year. In fact, 2020 brought the strongest Q3 the company ever experienced when it comes to laptop and desktop sales — by a wide margin.

Mac Revenue Q3 2020: Mac sales grew substantially in the April-to-June quarter
Mac sales grew substantially in the April-to-June quarter.
Chart: Ed Hardy/Cult of Mac

But it wasn’t just the pandemic. “Customer response to our new MacBook Air and MacBook Pro launches has been extremely strong,” said Luca Maestri, Apple’s chief financial officer, during Thursday’s call with investors.

Since Apple’s financial year isn’t the same as the calendar year, the results announced Thursday are for Apple’s fiscal Q3 2020. (Everyone else calls that period Q2.) Just look at the numbers in red on the charts to see the most important figures. Also, all the figures listed are in thousands.

iPad sales up an amazing 31%

iPad sales during the April-to-June period totaled $6.6 billion, a 31% rise year over year.

Apple iPad Revenue Q3 2020: Plenty of people turned to iPad during the pandemic
Plenty of people turned to iPad during the pandemic.
Chart: Ed Hardy/Cult of Mac

This marked the highest Q3 quarterly revenue from iPad sales in eight years. “Demand was strong around the world, with double-digit growth in each of our geographic segments, including a June quarter record in Greater China,” said Maestri.

Wearables revenue increased 17%

Revenue from Apple Watch, AirPods and other wearables hit $6.5 billion in Apple’s last financial quarter, a jump of 17%. That’s despite Apple Stores being closed, preventing new customers from trying these devices before they buy them — an important factor for wearables.

Apple Wearables Revenue Q3 2020: It’s not clear if this increase comes from Apple Watch, AirPods, etc
It’s not clear if this increase comes from Apple Watch, AirPods or what.
Chart: Ed Hardy/Cult of Mac

The company doesn’t break out how much each type of wearable contributed to the total. But Apple’s CFO did say, “Apple Watch continues to extend its reach, with over 75% of the customers purchasing Apple Watch, during the quarter, new to the product.”

iPhone sales rose just 2%

Revenue from iPhone sales totaled $26.4 billion during the quarter, up 2% annually. As Cook noted, the COVID-19 pandemic decreased demand for handsets.

Apple iPhone Revenue Q3 2020: Even the launch of a $399 iPhone couldn’t do much for handset sales during the pandemic
Even the launch of a $399 iPhone couldn’t do much for handset sales during the pandemic.
Chart: Ed Hardy/Cult of Mac

Still, the debut of the 2020 iPhone SE, which costs just $399, helped with this total. Maestri spoke of a “very successful launch of iPhone SE.”

Services grew, but not by as much

Apple services went up to $13.2 billion, an increase of 15%. But revenue in this category has grown steadily for years, so a year-over-year increase isn’t surprising. And this a rare quarter-over-quarter drop.

Apple Services Revenue Q3 2020: Services revenue was up year-over-year, but not as much as could be expected
Services revenue was up year-over-year, but not as much as could be expected.
Chart: Ed Hardy/Cult of Mac

That doesn’t look good for the company, especially as people sheltering in place would be expected to buy more games, watch more iTunes movies, etc., than they did before the pandemic started.