20201019 ML Brief
Apple posts revenue miss of $50.6 billion but sells more iPhones than expected
Apple’s fiscal second quarter earnings are out. As expected, Apple posted its first year-over-year revenue decline in 13 years. Apple stock is down in after-hours trading.
Revenues were $50.6 billion; net income came in at $10.5 billion. Revenues were off 13 percent year-over-year and 33 percent sequentially. Revenues a year ago were $58 billion and net income was $13.6 billion.
Apple reported that international sales generated 67 percent of revenue. However sales in China and Asia Pacific were off 26 percent and 25 percent vs. a year ago. However sales grew 24 percent in Japan.
Sales of iPhones and iPads, though down sequentially and vs last year, beat Wall Street expectations. Here are the product-line numbers:
- iPhone: 51.2 million units, $32.8 billion in revenue (beat expectations).
- iPad: 10.2 million units, $4.4 billion in revenue (beat expectations).
- Macs: 4 million units, $5.1 billion in revenue (below expectations).
- Services (including Apple Pay, Apple Care): $5.99 billion.
- Other (including Apple TV, Apple Watch, Beats products): $2.2 billion.
Apple is providing fiscal Q3 guidance of between $41 billion and $43 billion. This is well below Wall Street expectations of just over $47 billion. According to CNBC, Apple has a massive $233 billion cash and cash equivalents on hand.
Notes from the earnings call:
CEO Tim Cook:
- Says it was a “busy and challenging quarter.” Says execution was excellent despite “macroeconomic headwinds” internationally.
- Installed base of over 1 billion active devices continued to grow, including “Android switchers.” iPhone business is “healthy and strong.”
- 95 percent iPhone loyalty rate. We added more switchers in the first half of this year than during any other period.
- In India, iPhone sales up 56 percent from a year ago.
- Services revenue was “highest ever,” jumping 20 percent to $6 billion.
- Music revenue has hit an inflection point and growing after many quarters of decline
- Apple Pay continues to grow — more than 5X the transaction volume of a year ago. More than 1 million new users per week
- Apple Watch: unit sales met expectations in the quarter. We expect Watch sales to mirror iPod sales, which generated 40 percent of revenues in the December quarter.
- iPhone SE: terrific customer response so far. Demand has been very strong and exceeds supply at this point. SE places us in a better strategic position to attract more customers to our ecosystem.
- iPad Pro 9.7 selling well. We expect best revenue from iPad in two years in the June quarter. More than 1M iPad apps in the App Store.
- Future is very bright. Product pipeline has exciting things in store. We’ve made 15 acquisitions in past several quarters.
CFO Luca Maestri:
- June iPhone purchase intent is high.
- Revenue from the App Store grew 35 percent. Average amount of money spent per customer grew.
- We believe that we grew market share for Macs, despite a challenging quarter for the industry.
- iPad: 78 percent share of US market for tablets priced above $200.
- 97 percent consumer satisfaction for iPad Air 2.
- Revenue from “other” grew 30 percent due to Apple Watch. 94 percent customer satisfaction for Apple Watch.
- 90 percent of Apple’s cash is outside the US.
- $12 billion in annual dividend payments.
Financial analyst questions/answers:
Apple Pay not a meaningful contribution to revenues/profits now but may over time.
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