On Thursday, Apple released the results for its 2020 fiscal second quarter (which ran from December 29, 2019, to March 28, 2020) and held a call with analysts to discuss the results. Unlike Apple's Q1 which contains all of the holidays sales, Apple's Q2 is usually not a particularly interesting quarter. But this year, I was curious to see what impact COVID-19 might have. It wasn't until the end of March that COVID-19 started to have much of an impact in the United States, but China is also a large market for Apple. Three months ago, Apple predicted that its Q2 revenue would be between $63 billion and $67 billion, which was a larger range than normal because of COVID-19 uncertainty. A few weeks later in February, Apple announced that it no longer expected to see that much revenue because of COVID-19, and Apple did not release a revised number. The actual revenue announced by Apple last week was $58.3 billion. That's actually a little bit higher than Apple's $58 billion in revenue from 2019 Q2, so all things considered, it certainly wasn't a horrible quarter for Apple even if it wasn't as good as it had originally anticipated. 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 rough transcript of the call prepared by Seeking Alpha. Jason Snell of Six Colors also prepared a transcript. Apple's official press release is here. As always, I'm not as interested in the financial details as I am the statements of Apple executives during the call that are of interest to iPhone and iPad users. Here are the items that stood out to me.
iPhone
- iPhone revenue was $28.96 billion, compared to $31 billion this time last year.
- Apple had temporary iPhone supply shortages in February, but by the end of March seems to be back on track.
- Apple CEO Tim Cook pointed out that while the iPhone SE is the least expensive iPhone being sold by Apple, it is faster than even the fastest, most expensive, Android phones. That is because the new iPhone SE contains the same Apple-designed A13 chip that Apple also includes in its most expensive models of the iPhone. (The iPhone SE really is a fantastic value for folks who prefer the version of the iPhone with a button and Touch ID instead of a larger screen and Face ID.)
iPad
- iPad revenue was $4.4 billion, compared to $4.9 billion this time last year.
- Apple said that the new 2020 version of the iPad Pro, and the new iPhone SE, have "received outstanding customer response, even during these extreme circumstances."
Other
- This was a record-setting quarter for Apple — in a good way — in two areas. First, Apple reported its highest-ever revenue in Services. This includes just about everything folks pay to Apple other than hardware, things like the App Store, Apple Music, Apple TV+, iCloud storage, AppleCare, etc. Apple considers this a critical area of revenue because it can be a steady source of income. People may wait two to three years before buying a new iPhone, but they often pay Apple in the area of Services every month.
- For example, Apple now has over 515 million paid subscriptions across all of its services, and it expects to have over 600 million by December 31, 2020.
- Second, Apple reported that this was its best Q2 ever in the area of Wearables, Home and Accessories. This segment includes the Apple Watch and AirPods, two items that are incredibly popular for Apple.
- For example, Apple said that its wearables business is now the size of a Fortune 140 company.
- Apple has sourced more than 30 million masks for frontline medical workers battling COVID-19. It has also designed, tested, manufactured, and distributed more than 7.5 billion face shields and continues to ship more than one million face shields every week to medical workers.
- Cook said that Apple employees continue to work hard notwithstanding the pandemic. "In some areas of the company, people may be even more productive, in some other areas they’re not as productive. And so it’s mixed, depending upon what the roles are. But as you can tell, from what we did this quarter, despite the environment, we have our head down and are working because we know that our customers want the products that we’ve got. They’re even more important in these times."
- Cook said that, in light of COVID-19, Apple cannot predict what kind of sales it will have in April, May, and June, and thus Apple is taking the unusual step of not issuing guidance for its 2020 Q3. But Cook did say: "We’ve always managed through difficult moments by doubling down and investing in the next generation of innovation. And that’s our strategy today. And so while we can’t say for sure how many chapters are in this book, we can have confidence that the ending will be a good one."