Apple
Despite the better-than-expected results, Apple's stock ended the day down 2%. Some reasons for the stock's weakness was the company's additional share buyback of $50 billion being less than expected and pulling guidance due to uncertainty over the outlook due to the coronavirus. CEO Tim Cook did add that demand was beginning to pick up at the end of April and that it was his toughest quarter since taking over as CEO.
Inside the Numbers
Apple's cash holdings declined to $192 billion from $207 billion in the previous quarter. iPhone revenue declined 7% to $28.96 billion compared to the second quarter of 2019, while services revenue grew 16% which comprises iCloud, Apple Music, Apple TV, and other subscription products. Overall, revenue grew 0.5% compared to 9% the previous year.
Currently, most analysts are expecting a drop in revenues for the next quarter given that a new iPhone model will be available in the fall and, obviously, depressed demand due to the coronavirus hurting consumer wallets and confidence. However, some of the declines in iPhone sales will be offset by stronger sales for Macs and iPads due to higher demand stemming from work from home and kids taking classes online.
In terms of retail, most of Apple's stores are shuttered other than areas like Korea and China which have seen case counts significantly decline and have instituted tough quarantine and test-and-trace measures. Therefore, it's impressive that Apple was able to maintain revenue growth as customers simply went online to buy their products.
Coronavirus Impact
Apple's earnings were also closely watched last as it has experienced China shutting down and reopening. CEO Tim Cook said that sales in China were normal until late January when the country was shutdown. It saw a huge drop in demand during the shutdown, then a rebound effect when it reopened stores in late February. However, store traffic and sales have stabilized at a lower level than in January.
Similarly, Apple saw a big drop in sales during March and the first two weeks of April, when lockdowns were instituted across the rest of the world. However, Cook said that sales did strongly rebound in the last two weeks of April, and he attributed this to increased demand due to work from home and schools moving online and stimulus checks being sent in many parts of the world.
Another bright spot is that supply chains returned to normal despite short-term disruptions in the supply chain. This also means there won't be any disruptions to the launch of the new iPhone this fall which is expected to drive the next cycle of upgrades.
