Apple reported a historically strong quarter on Thursday, including $59.7 billion in revenue and double-digit growth in its products and services segments, blowing away analyst estimates in a period deeply impacted by the coronavirus pandemic. The company also announced it plans to give investors three additional shares of Apple per share already owned at the end of August as part of a 4-1 stock split.
Apple saw widespread retail closures during the quarter, especially in the United States, but touted both work-from-home trends and strong online sales as delivering a boost to overall operations.
The company declined to issue guidance for the second quarter in a row, due to uncertainty from the pandemic, but Apple CFO Luca Maestri said on a call with analysts that the company expects iPhone supply in the fall to be delayed for a few weeks. Apple usually releases new iPhones in late September, but the coronavirus pandemic has disrupted schedules and nearly halted business travel.
Apple shares gained more than 6% in extended trading following the report.
Here’s how the company did for the quarter ended June 27 compared with analysts’ expectations based on Refinitiv consensus estimates:
- EPS: $2.58 vs. $2.04 est.
- Revenue: $59.69 billion vs. $52.25 billion est.
- iPhone revenue: $26.42 billion vs. $22.37 billion est.
- Services revenue: $13.16 billion vs. $13.18 billion est.
“We’re conscious of the fact that these results stand in stark relief during a time of real economic adversity for businesses large and small, and certainly for families,” CEO Tim Cook said on a call with analysts.
Apple’s business is highly seasonal, and its revenue was the highest the company has ever reported in its third quarter, typically the slowest of the year for Apple. Revenue was up nearly 11% year over year, and every major product line saw year-over-year growth. Services were up 14.85% from the year prior, nudging the company past its internal goal of $50 billion in annual services sales.
“We are proud to announce that we have achieved our goal of doubling our fiscal 2016 services revenue six months ahead of schedule,” Cook said based on a preliminary transcript of the company’s earnings call provided by FactSet.
Here’s how the company fared by product line, compared with expectations based on Refinitiv consensus estimates:
- iPad revenue: $6.58 billion vs. $4.88 billion est.
- Mac revenue: $7.08 billion vs. $6.06 billion est.
- Other Products revenue: $6.45 billion vs. $6 billion est.
- Gross margin: 38.0% vs. 38.0% est.
Many of Apple’s products can be useful during at-home quarantines amid the ongoing pandemic. While iPhone sales only rose 1.66% year over year, other product categories saw huge growth. iPad sales were up over 31% and the company’s other products category, which includes AirPods and the Apple Watch, grew 16.74% from the same quarter in 2019.
Cook said on the call with analysts that the quarter’s strong Mac and iPad results came in spite of inventory shortages, and told CNBC’s Josh Lipton in an interview that sales were boosted by the work-from-home trend.
“It definitely has boosted Mac and iPad. We see both of those likely picking up share and, in addition, being a tool of choice for their productivity,” Cook told Lipton.
Cook added that about 75% of Apple’s retail stores are open around the world, after closures earlier this year, and highlighted a “very nice uptick” in users switching to iPhone from Android, partially driven by the iPhone SE, a cheaper $399 model released earlier this year.
“Overall these were ‘blow out’ results which in our opinion will add another leg to the Apple long term growth story,” Wedbush analyst Dan Ives wrote in an email.
Apple’s stock split is the company’s fifth in its history. It previously split on a 7-1 basis in 2014, and a 2-1 basis in 2005, 2000, and 1987. Apple also declared a $0.82 cash dividend payable on August 13.
Apple reported $193.82 billion in cash on hand, which is up from the company’s fiscal second quarter.
Correction: This story has been updated to correct that Apple’s Wearables, Home and Accessories category revenue rose 16.74% during the company’s third quarter.