7 nuggets of truth from Apple’s latest earnings call

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All-time high Mac sales power Apple to new heights, if not record earnings.
All-time high Mac sales power Apple to new heights.
Original photo: Markus Spiske/Unsplash CC

COVID-19 both helped and hurt Apple earnings in the company’s most-recent financial quarter. CEO Tim Cook and CFO Luca Maestri discussed the nitty-gritty details of the results Thursday. They also shared what’s really going on with Apple as it tries to keep releasing best-selling products in the middle of a pandemic that’s upended the world economy and ordinary people’s lives.

Here are seven things we learned from Apple’s Q4 2020 earnings call.

Somehow, Apple keeps smashing records

Despite all the difficulties, Apple broke revenue records in multiple areas. Both hardware and services.

With so many people forced to attend work or school from home, sales of Macs last quarter went through the roof. “The September quarter was the all-time high for Mac in the history of the company. And by not by little bit. By $1.6 billion,” gushed Cook. That’s a 30% increase over the same quarter in 2019.

The total number of Apple users broke new ground, too. “As a result of this level of sales performance, and the unmatched loyalty of our customers, our installed base of active devices, reached an all-time high in aggregate, and in each of our major product categories,” said Maestri.

Services revenue also hit an all-time high. It reached $14.5 billion in the July-through-September period. That’s up significantly both from last quarter and from the same quarter of 2019.

The result was that Apple took in more revenue last quarter than in any previous July-through-September period. Another record.

Delaying the iPhone 12 (probably) didn’t hurt Apple earnings long term

The dark spot in Apple’s quarterly earnings report was iPhone revenue. It was, in a word, terrible (relatively speaking). And it demonstrated COVID-19’s worst impact on the company. The pandemic forced a delay in the release of the iPhone 12 by a month. So the first burst of sales didn’t show up in the September quarter like usual, and iPhone revenue dropped 7% year-over-year. That’s a $6.2 billion decrease.

Apple execs did the best they could to smooth this over, pointing out that people were still buying last year’s iPhone 11 in the September quarter, even with the new one coming soon. “Demand for iPhone remained very strong,” said Maestri. “In fact, through mid-September, customer demand for our current product lineup was up double digits, and was well above our expectations.”

The execs seem to expect that sales surge from the 2020 iOS handset has simply been delayed. After pointing out that this device is still rolling out now, and “is off to a great start,” Apple’s CFO said, “Given the tremendously positive response, we expect iPhone revenue to grow during the December quarter, despite shipping iPhone 12 and 12 Pro four weeks into the quarter and iPhone 12 mini and iPhone 12 Pro Max seven weeks into the quarter.”

Apple turns COVID-19 into a ‘win’

Let’s face it: 2020 sucked for almost everybody. But Cook says the challenges presented by the COVID-19 pandemic spurred Apple to new heights of innovation.

“When we first began to grapple with COVID-19, I said there are worse things for a company whose business is innovation than having to periodically do just about everything in an entirely new way,” Cook said. “This year, we not only launched our most powerful and compelling generation of hardware, software and services ever. We did it in a way that pushed us to reimagine every part of that innovation process, down to how we share these announcements with the world and how we get new products into our customers’ hands.”

Cook praised the members of Team Cupertino for their outstanding efforts during trying times.

“Working from kitchen tables and bedrooms, in distanced office settings and reworked labs and manufacturing facilities, the team rebuilt every part of the plane while it was midair, and the results speak for themselves.”

Apple can’t crank out enough hardware

While COVID-19 proved in some ways beneficial to Apple, the pandemic did wreak havoc on the supply chain. As a result, Apple can’t produce enough hardware to meet consumer demands — and Cook isn’t sure when that will change.

The fact that you can’t just stroll into your friendly neighborhood Apple store and pick up the iPhone 12 model you want isn’t too surprising. They just launched, after all, and such iPhone shortages are pretty typical, even without a global pandemic. But it’s not just iPhones that are in short supply — and there’s no end in sight.

“We’re supply-constrained on Mac,” Cook said. “We’re supply-constrained on iPad. And we’re supply-constrained on some Apple Watches as well…. We’re working really, really hard to remedy those as quickly as we can but at this point, I can’t estimate when we’ll be out of that.”

5G iPhone arrives at golden moment

Like with so many other smartphone features in the past, Apple wasn’t first to market with a 5G device. But Cook says he thinks Apple launched its iPhone 12 lineup — all four of which contain high-speed 5G modems — at “exactly the right time.”

“We’re working hard to provide the best experience for iPhone users,” Cook said when asked about 5G coverage, which remains spotty at best in the United States. “To do so, we’ve been collaborating closely with carriers all around the world to ensure iPhone has great throughput and coverage and battery and call quality.”

He said Apple already completed 5G testing with more than 100 carriers in more than 30 regions. The next-gen networking is “pretty pervasive around the world,” he said — noting that Chinese carriers plan to operate 600,000 5G base stations by the end of 2020 — but it’s only going to grow more commonplace.

“It will continue to roll out in more places as carriers continue to expand their coverage and this will happen every week,” he said, “and so it’s just going to get better.”

Once again, Apple’s timing proves impeccable.

Remote work is the new normal

Once the pandemic subsides, the world might not rush back to doing things the old way, Cook said. And that could continue to fuel strong Mac and iPad sales in the future.

“I think the moves that have taken place to remote learning and remote work are not going to go back to normal,” he said. “Normal will be, will become something different.”

Some aspects of remote work and schooling — and companies and educational organizations will naturally keep the good parts as we eventually emerge from COVID-19 lockdowns, he said.

“I don’t believe that we’re going to go back to where we were,” Cook said. “And I think that means that iPads and Macs are even more important.”

Talk about spinning a silk purse out of a sow’s ear …

Services are on the upswing

iPhone, Mac and other hardware gets much of the attention, but subscription services remain critical to Apple’s future. They offer the company its best opportunity for growth. People only occasionally buy a new computer, but will pay a subscription fee for Apple Music and/or Apple TV+ every month.

To take better advantage of this, Cupertino rolled out a bunch of new services in recent years, and keeps pumping a bunch of money into them. The bet is — apparently — paying off.

Last quarter’s services revenue provides a good example. “We grew strong double digits and set all-time records in App Store, cloud services, Music, advertising and payment services,” said Maestri. “We also set an all-time record in AppleCare,” the company’s extended warranty program.

But those are all established offerings. Company execs also painted a rosy picture of new services. “Apple TV, TV+, Apple Arcade, Apple News+ and Apple Arcade are also contributing to overall services growth, and continue to add users content and features,” said Maestri.

But the company continues to steadfastly refuse to get specific about subscriber numbers for any of these services.

Source: Apple

Lewis Wallace contributed to this report.