Apple delivers blowout quarter, announces 4-for-1 stock split

Consumers snapped up iPhones, iPads, Macs despite stores reclosing in some US markets.

Apple blowout quarter
Apple reported iPhone sales some $4bn above analysts' expectations [File: Jason Lee/Reuters]

Apple Inc on Thursday delivered blowout quarterly results, reporting year-on-year revenue gains across every category and in every geography as consumers working and learning from home during the COVID-19 pandemic turned to its products and services.

The report topped Wall Street expectations, with even some long-overshadowed categories like iPads and Macs getting fresh boosts. Shares rose five percent in extended trading after the results.

The results, which included iPhone sales some $4bn above analysts’ expectations, came on the same day that the United States Bureau of Economic Analysis reported that gross domestic product collapsed at a 32.9 percent annualised rate last quarter – marking the nation’s worst economic performance since the Great Depression of the 1920s.

Other major tech companies, Inc and Facebook Inc, also posted results that topped Wall Street targets, sending their shares up.

With 60 percent of sales coming from international markets, the Cupertino, California-based company posted iPhone revenues of $26.42bn, $4bn above analysts’ expectations of $22.37bn, according to IBES data from Refinitiv.

In an interview with Reuters news agency, CEO Tim Cook said that after disruptions in April, sales began to pick back up in May and June, helped by what he called a “strong” launch for the $399 iPhone SE introduced in April.

“I think the economic stimulus that was in place – and I’m not just focused on the US, but more broadly – was a help,” Cook told Reuters.

The results underscore that Apple offers devices and services that customers flocked to despite stores reclosing in some US markets. Apple posted rising sales for accessories such as AirPods and services such as the App Store.

The continued growth in services and accessories also showed the durability of the company’s brand, which has prompted investors to view it as a comparative safe haven and pushed up share prices since March.

The company also saw strong sales in its greater China region, where aggressive pricing during a June holiday shopping season and lower-priced iPhone SE model released in April helped boost sales two percent to $9.33bn from $9.16bn a year earlier.

Tim Cook testimonyOn Wednesday, Apple CEO Tim Cook  was grilled by United States lawmakers about the company’s growing market power [File:Reuters]

Stock split

Apple also announced a 4-for-1 stock split, saying it wanted to keep shares accessible to a broad range of investors. Shares soared past $400 for the first time Thursday, though they had been proportionally higher before a 7-for-1 split in 2014.

Apple’s fiscal third-quarter revenue and profits were $59.69bn and $2.58 per share, compared with analysts’ expectations of $52.25bn and $2.04 per share, according to IBES data from Refinitiv.

Sales in its services segment, which also includes offerings such as iCloud and Apple Music, rose 14.8 percent to $13.16bn, compared with $11.46bn a year ago and analysts’ expectations of $13.18bn.

Cook told Reuters that Apple has 550 million paying subscribers on its platform, up from 515 in the previous quarter.

Sales in the wearables segment that includes the Apple Watch rose 16.7 percent to $6.45bn, compared with $5.53bn a year ago and estimates of $6.0bn, according to Refinitiv data.

Apple did not give a fiscal fourth-quarter forecast.

Apple’s results come as most analysts expect the release of at least some of its new iPhone models this fall to be delayed after several major Apple suppliers such Broadcom Inc and Qualcomm Inc have given forecasts that included a delayed fall launch from a major customer.

Apple is likely to delay the release of some models until November due to supply chain disruptions from the coronavirus, according to a senior official at a major iPhone supplier with direct knowledge of the matter.

Apple benefited from remote work and learning trends, reporting sales in its iPad and Mac segments of $6.58bn and $7.08bn, which beat expectations of $4.88bn and $6.06bn, according to Refinitiv data.

“Both had some really significant product announcements at the end of March, beginning of April. I think we have the strongest product line in both areas that we’ve ever had,” Cook told Reuters. “You combine that with the work from home and remote learning, and it’s yielded really, really strong results.”

But the global smartphone market was already stagnating before the novel coronavirus caused it to contract, and Apple has leaned heavily into growing its services business, which is where the company’s fastest revenue growth occurred during the fiscal third quarter. The biggest component of that business is the App Store, where Apple generates commissions between 15 percent and 30 percent on some sales.

On Wednesday, Cook faced questions from US lawmakers about Apple’s practices related to the store, which have come under fire from independent app developers who say its rules and unpredictable approval process put them at a disadvantage against the iPhone maker. 

Source: Reuters

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