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Strength in Apple’s services business and sales of accessories like Airpods and watches helped the iPhone maker slightly increase revenue in the last quarter, despite closing retail stores worldwide due to the coronavirus.
The California tech group has also seen a “rebound” in its business in recent weeks thanks to a new iPhone model, after going down last month, according to its chief financial officer.
Apple reported $ 58.3 billion in revenue for the three months through March, its fiscal second quarter, up 1% from a year ago and well above the $ 54.5 billion expected by analysts. Net profit fell 2.7 percent to $ 11.25 billion.
Tim Cook, chief executive, said he was confident in January that the group was headed to a record start to the year, but then the pandemic caused its factories in China to topple and caused a “sharp decline” in world demand in March.
The company declined to offer guidance for the current quarter, which many analysts expect to be the most difficult period related to the virus.
“We really didn’t feel like there was enough visibility and certainty to provide guidance and, frankly, we didn’t want to do something that wasn’t of much value to investors,” Luca Maestri, chief financial officer, told the Financial Times.
$ 58.3bn
Apple revenue for the three months through March
Earnings in March were hampered by “downward pressure” that lasted until the first half of April, but in the past two weeks “we have really seen a rebound,” Maestri added, attributing growth to the new iPhone SE and updates for iPad tablet and MacBook Air computer.
“I think people are starting to adjust more to the new reality that Covid-19 is not going to go away anytime soon, and therefore they are also trying to adjust their spending patterns,” he said.
In particular, iPad and Mac sales are expected to improve in the current quarter a year ago thanks to online learning and people working from home. “So we are going to see some advantages there,” Maestri said.
Apple shares fell about 2.5 percent in trading after hours after quarterly results.
Apple originally had expected a 9-15 percent rise in total revenue, to $ 67 billion, but withdrew that guidance in mid-February, as the coronavirus caused factories to close in China. Conditions deteriorated further when Apple closed all of its retail operations outside of China.
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Sales of the iPhone smartphone fell 6.7 percent to $ 29 billion, accounting for just under half of revenue in its fiscal second quarter. That drop compares to a bigger 16.8% drop in global smartphone shipments, according to the Omdia Smartphone Intelligence Service.
That slowdown was offset by sharp increases in the services and wearables divisions, where revenue increased 17 percent and 22.5 percent to $ 13.3 billion and $ 6.3 billion, respectively. Services, the unit that encompasses the app store, warranties, and license agreements, accounted for 23 percent of all revenue.
“It is very clear that they now have a business that, while built on the iPhone, has the ability to resist obstacles due to service revenues,” said Geoff Blaber, analyst at CCS Insight.
Mac sales were relatively flat at $ 5.4 billion, as were iPad sales at $ 4.4 billion.
In a call with analysts, Cook rejected the idea that Apple should update its supply chain as a result of Covid-19. When the virus devastated China in February, Apple faced criticism for relying too heavily on the country for the final assembly of its key products, but Cook said there was little basis for major changes.
“If you look at the supply chain shock that took place this quarter, its reappearance so quickly really shows that it’s durable and resilient,” he said. “And so I feel good about where we are.”
Apple declared a dividend of $ 0.82, an increase of 6 percent, and the board authorized the purchase of an additional $ 50 billion of shares, less than the $ 75 billion and $ 100 billion authorized in the prior two years. .
Maestri told the FT that Apple still had “another $ 40 billion pending from last year, so when you think about the firepower we have.” . . we think it’s a good amount that we can allocate to buybacks. ”
