Since 2009, I have been reporting on Apple's quarterly earning calls, not because I have any interest in Apple's stock price, but instead because it is one of the few times a year when Apple makes public statements about the iPhone and iPad and answers some questions. Thus, every quarter I pay attention to the parts that concern the iPhone and iPad and related products. Click here to see my prior reports.
Last week, Apple released the results for its 2020 fiscal first quarter (which ran from September 29, 2019 to December 28, 2019, and did not actually include any days from calendar year 2020) and held a call with analysts to discuss the results. This is typically Apple's best quarter of the year because it includes holiday sales, and this year it was Apple's best quarter ever with revenue of $91.8 billion, an increase of 9% from this time last year. If you want to get all of the nitty gritty details, you can download the audio from the announcement conference call from iTunes, or you can read a transcript of the call prepared by Seeking Alpha, or a transcript prepared by Jason Snell of Six Colors. Apple's official press release is here. Here are the items that stood out to me:
iPhone
- Apple CEO Tim Cook said that Apple's record financial performance "was fueled by iPhone where December quarter revenue was up 8% year-over-year" along with double-digit growth outside of iPhone. iPhone revenue was $56 billion, compared to $52 billion this time last year. Every week during the quarter, the iPhone 11 was the top-selling model, and the three most popular models in the quarter were the newest models: the iPhone 11, the iPhone 11 Pro, and the iPhone 11 Pro Max. Cook said: "We had double-digit growth in many developed markets, including the U.S., the UK, France and Singapore, and also grew double digits in emerging markets led by strong performances in Brazil, Mainland China, India, Thailand, and Turkey."
- Twice as many people turned in an old iPhone to get credit towards a new iPhone during the quarter as compared to a year ago.
- Apple does not report the specific number of iPhones that are in active use, but said that this quarter that number was at an all-time high.
- Two analysts tried to get Cook to talk about an upcoming 5G iPhone. Cook declined to do so, noting that Apple does not comment on future products. All he would say is that "we're in the early innings of its deployment on a global basis" and he is "very excited about our pipeline as well and wouldn’t trade our position for anybody."
iPad
- iPad revenue in the quarter was almost $6 billion. It was $6.7 billion this time last year, but that is because at that point the 2018 version of the iPad Pro was still new.
- Cook noted that the iPad "saw growth in key emerging markets like Mexico, India, Turkey, Poland, Thailand, Malaysia, the Philippines and."
- About half of the people around the world who bought an iPad were buying their first iPad.
Other
- Without providing any specific number, Cook said that it was a "blowout quarter for wearables" such as the Apple Watch and AirPods. For the category of "wearables, home and accessories," Apple reported over $10 billion in revenue, compared to $7.3 billion a year ago.
- For wearable devices, Cook said that Apple set "an all-time record in virtually every market we track around the world, and this product category is now the size of a Fortune 150 company."
- Apple couldn't make enough of the AirPods Pro to keep up with demand, and even now, Cook cannot predict when Apple will be able to catch up.
- Over 75% of the people who bought an Apple Watch during the quarter had never before owned an Apple Watch. Although Cook did not reveal a specific number for Apple Watch revenue, he did say that it was an all-time revenue record. He also said that Apple had trouble making enough of the Series 3 Apple Watch to keep up with demand; the Series 3 starts at $199, whereas the Series 5 starts at $399.
- Apple had all-time record revenue in the services category of $12.7 billion. Services include Apple Music, Apple Pay, Apple TV+, Apple Arcade, iCloud, the App Store, Apple News+, Apple Card, and AppleCare.
- Across all of its services, Apple has over 480 million paid subscriptions. Apple expects to have over 500 million by March 2020 and is trying to reach 600 million by the end of 2020.
- As Jason Snell points out in an article on Macworld, services is a very important segment for Apple because it can be so profitable: "Apple’s gross margin on products was 34.2 percent. Its gross margin on services was 64.4 percent. ... In other words, every dollar of Services revenue generates nearly twice the profit of product revenue. Apple’s product margins are really good, but its Services margins are spectacular." As both product and services revenue grow, I wonder how long it will be before Apple reports revenue of over $100 billion in a single quarter?
- Cook said that Apple feels strongly that Apple TV+ should be an ad-free product without commercials.
- Apple CFO Luca Maestri said that every Fortune 500 company in the healthcare sector now uses Apple technology.
- When it predicted revenue for Apple's fiscal second quarter ($63 billion to $67 billion), Maestri said that this is a wider than normal range because of "uncertainty related to the recently unfolding public health situation in China."