It's only been three months since Apple held its last earnings call in July, but even though the ongoing global pandemic is holding much of the world back, it's become clear that hasn't slowed Apple down in any meaningful way.
In fact, while Apple's usual enthusiasm was a bit more muted last time around — understandable, since it was the first time Apple has had to publicly announce an iPhone delay — this week's earnings call just exuded much more of the company's usual optimism, since of course it comes on the heels of a series of major product launches that have already blown away expectations, and according to Apple CEO Tim Cook, there's still more exciting stuff coming before the year is over.
Considering Apple continued to show strong numbers across the board during the past two quarters, during a time when much of the world — and Apple Stores — were locked down, it probably shouldn't be a big surprise that these latest results show it bouncing back even stronger. Read on for 8 key takeaways from yesterday's Apple earnings call.
Not surprisingly, Apple once again shattered several of its quarterly records with its latest numbers, reporting $64.7 billion in revenue, and what's particularly significant about this is that it's coming from a quarter that missed the actual iPhone 12 launch — Apple's Q4 2020 fiscal quarter ends on September 30th.
So in other words, Apple managed to pull off $64.7 billion in revenue before it even sold a single new iPhone. While the company tried to set expectations for lower revenue last time around by announcing that the new iPhone launch would be delayed into the next quarter, that seemed almost unnecessary considering that it still set a year-over-year September quarter record.
Of course, that didn't necessarily come from iPhone sales, but every other category more than made up for that. Here's how the numbers actually broke down last quarter:
- iPhone: $26.4 billion
- Mac: $9 billion
- iPad: $6.8 billion
- Wearables, Home, and Accessories: $7.9 billion
- Services: $14.5 billion
In fact, with the obvious exception of the iPhone, which of course dropped by around $2 billion due to the lack of new iPhone releases, every other category saw staggering growth compared to this quarter last year, with Mac, iPad, and Services each growing by around $2 billion overall.
Apple Services: 585 Million Subscribers
As usual, it's Apple's Services category that continues to shatter records, and this year it jumped to a staggering $14.5 billion, even despite the fact that Apple is still giving away Apple TV+ for free to most of its customers.
Of course, there's a lot more tucked into Apple's "Services" category, and there's still little doubt that the bulk of this revenue is made up by its $8-$12 billion Google search deal and the 30% commission is takes from App Store sales. In fact, while Apple never breaks down its numbers, most analysts have estimated that these two make up about 50% of Apple's Services revenue by themselves.
However, these two areas aren't huge growth markets. The Google deal is mostly a fixed annual rate, and the App Store has been around for long enough that it's become a pretty stable revenue stream, so it's the upswing in Apple's other services that accounts for most of the $2 billion increase over last year's quarter, which of course came at a time when Apple hadn't even yet launched Apple TV+ or Apple Arcade.
At this point, Apple now boasts 585 million paid subscribers to its services — an increase from 135 million at this time last year, although it's unclear what it means by "paid" subscribers in this case.
To be clear, Apple does move numbers around on its balance sheets to account for "free" subscriptions to Apple TV+. Since it's been giving away Apple TV+ with new device purchases, securities regulations and "generally accepted accounting principles" (GAAP) require them to take a portion of revenue from their hardware categories and apply them to the Apple TV+ category every time somebody takes advantage of the free one-year offer. In other words, Apple's Services revenue does actually reflect income from all of the users who are currently getting Apple TV+ for free; those users are just considering as having paid $60 less for their iPhones instead.
Macs: Through the Roof
Services wasn't the only area in which Apple set a new all-time record for revenue this time around, however; Mac revenue blew everyone's expectations right out of the water.
Perhaps as a direct result of many users still needing to work from home, Mac sales surged to $9 billion in the previous quarter — a growth of almost 30% over the year-ago quarter — and this came on the eve of Apple's expected launch of new Apple Silicon MacBooks.
While Apple doesn't break down its numbers by specific Mac models, of course, the fact that it didn't have many major new product releases last quarter is somewhat significant, since not only was this growth not fuelled by new product announcements, but customers don't seem to have been putting off purchasing new Macs either.
iPhone Sales Lagging
The only category in which Apple saw a drop in sales was the very one where everybody was expecting it to happen. With Apple's iPhone 12 missing the Q4 2020 launch, it also missed the normal surge in revenue that's happened in every other Q4 in the past decade.
This was also undoubtedly hampered by the fact that pretty much everybody knows that new iPhones come out in the fall, which also always results in a price decrease for older models, so many more users would be taking a "wait and see" approach.
However, at the end of the day, Apple has almost certainly only shifted these numbers to Q1 2021, which will likely shatter previous Q1 records for iPhone sales. Previously, when iPhones were launched in September, those numbers were split across Q4 and Q1, but this time around they're all going to land in Q1, which likely means that when we hear about the numbers in January, Q1 2021 will turn out to be Apple's best first quarter ever for iPhone sales. Cook added that there's a lot of excitement over 5G right now, adding that "we're off to a great start" when it comes to the iPhone 12.
A Wearables Record
Apple's Wearables category also continues to break records, and while the growth in dollars wasn't as high as the other categories — it only gained $1.3 billion — that still represents a 20% increase over last year's quarter.
The category, which is actually "Wearables, Home, and Accessories," contains pretty much everything else Apple sells that's not an iPhone, iPad, Mac, or service, so while even things like cases are in there, it's undoubtedly the release of the Apple Watch Series 6 and Apple Watch SE that drove the growth here, since those actually were released in September, combined with the ongoing popularity of Apple's AirPods and AirPods Pro.
Apple also noted that 75 percent of Apple Watch purchases in September came to those who were new to the Apple Watch, so unlike the iPhone, Apple's wearables have a lot of room for net new growth.
Apple's new HomePod mini will also fit into this category, but that doesn't go on sale until next month, so any sales from that will show up in the Q1 2021 numbers.
Sales Down in China
While Apple's numbers were generally great overall, it did share that its sales in China were down this past quarter, however it attributed that to the fact that most of the Chinese market is driven by iPhone sales, rather than things like iPads and Macs, and of course most of Apple's Services aren't even available in China.
Based on this, Apple remains confident that China will bounce back in Q1 2021, now that the iPhone 12 is available to drive sales in that country.
No Q1 2021 Guidance
Citing the uncertainties of the pandemic, Apple is continuing to decline offering up any guidance for what it expects the next quarter to actually be like, which means it's not providing any clues on how big it really expects the iPhone 12 cycle to be, but it doesn't take a crackerjack financial analyst to realize that it's going to be huge.
Of course, Apple still has good reason to be cagey, since offering guidance in the actual financial markets is far more complicated than simply spinning things for marketing purposes. It's one thing to claim that the iPhone 12 is selling like crazy, but it's quite another to try and give actual numerical predictions to investors who will actually hold Apple to those numbers.
So in other words, we shouldn't read too much into Apple's reticence here. The company stopped providing quarterly guidance back in February due to the uncertainties of the novel coronavirus pandemic, and the world is no more certain of a place today than it was back then.
More Big Things Coming
As usual, Tim Cook was sunnily optimistic about everything Apple is working on, however his enthusiasm this year is more near-term, as he shared during the earnings call that "this year has a few more exciting things in store."
Of course, he's almost certainly talking about Apple's Silicon MacBooks, which are expected to land at an event next month, but "a few more" provides a strong hint that there's more coming than just a single product lineup, which means that we could very well see AirTags and/or AirPods Studio launch this year, despite a lot of speculation that they may not have been coming until next spring.