The continuing Covid pandemic has forced people to study and work remotely. Even entertainment options have become home-bound. For Apple, this has translated into higher demand for Macs and iPads.
The last two quarters have been truly unprecedented for companies. Tech companies in general have done well in weathering this crisis. People being confined to their homes for work and fun has resulted in more sales of devices such as computers. Apple has benefited from this. Apple’s 4th quarter revenue was almost unchanged from last year. However, the Q42020 results show growth across several products and services offered by Apple.
Apple’s Fourth Quarter – The Big Picture
Despite a huge dip of 20 per cent in iPhone sales year-on-year, Apple’s overall revenue in Q42020 grew 1 per cent to $64.7 billion.
Sales of Apple iPads grew 46 per cent compared to last year while Mac sales rose 29 per cent.
Apple Watch sales grew 21 per cent and services revenue rose 16 per cent to $14.5 billion. The Wearables, Home, and Accessories category had revenue of $7.9 billion in Q4 – up from $6.52 billion in Q42019. The services segment includes AppleCare, App Store, Apple Music, Apple TV and others.
Remote Learning And Work From Home Here to Stay – Tim Cook
Apple saw a significant rise in sales of iPads and Macs. Apple CEO Tim Cook says this was caused by increased demand for these devices by remote learners and remote workers.
“The growth last quarter was phenomenal,” said Cook. “I think the moves that have taken place to remote learning and remote work are not going to go back to normal.”
Apple’s Mac sales rose to $9 billion in the Q42020 compared to $6.99 billion in Q42019. Apple CFO Luca Maestri informed that supplies of both Macs and iPads had been constrained during the last quarter.
“These are tremendous numbers,” Cook said. “As Luca said, the September quarter was the all-time high for Mac in the history of the company. And not just by a little bit, by $1.6 billion, so it was a substantial difference.”
Apple iPad sales rose by an even more phenomenal percentage of 46 per cent – from $4.66 billion in Q42019 to $6.8 billion in Q42020. And this excludes the iPad Air 4 which was announced during the quarter but bookings began only on October 16.
The iPad sales increases also appear to be Covid pandemic-related as more students take up remote learning and more workers take up remote work.
“Normal will become something different,” Cook said, “because I think people are learning that there are aspects of this that work well. So I don’t believe that we’re going to go back to where we were.”
Apple iPhone, Mac, iPad and Apple Watch Facing Supply Constraints
Apple admitted to facing supply constraints across its entire product lineup. This could indicate higher demand or could be linked to lingering effects of the Covid pandemic in China/Asia.
The recently available iPhone 12 models are seeing slippages in delivery dates. “Not a surprise at front end of the ramp, and how long we’ll be constrained it’s hard to predict. We haven’t taken orders yet for iPhone 12 Mini or Pro Max, so those are coming and we shall see,” per Cook.
The supply chain issues will only become more urgent to solve as the company enters the busy holiday shopping season.
“A fair number of areas of focus right now, and we’re working really, really hard to remedy those as quickly as we can. But at this point, I can’t estimate when we’ll be out of that,” Cook said.
Paid Subscriptions – At New High of 585 Million Now, Expected to Cross 600 Million by Year End
Apple offers a variety of paid subscriptions including Apple TV+, Apple Music, App Store, iCloud, Apple Arcade, and Apple Card. Total paid subscriptions across all of Apple’s subscription service offerings stand at 585 million now. Apple expects the number to cross 600 million sometime before the end of 2020.
Apple’s paid subscriptions grew by 135 million in the past year, or about 23 per cent.
China Earnings Did Badly
The Covid pandemic hit Apple’s China sales figures badly. Apple’s earnings from China plummeted to $7.9 billion in the Q42020 compared to $11.1 billion in Q42019. This represents a drop of 28.9 per cent. Last quarter’s earnings from China were $9.33 billion.
“Back in April, I said we were in the most challenging environment in which Apple, as a company has ever operated,” said Tim Cook.
“That atmosphere of uncertainty of resolve of making difficult calls with limited information has not only come to define Apple’s year… it has been a chapter that none of us will forget.”
“China is the region that was most heavily impacted by the absence of the new iPhones during the September quarter,” he continued.
“Still, we beat our internal expectations in the region, growing non-iPhone revenue by strong double digits and iPhone customer demand grew through mid-September.”
(Edit: November 05, 2020)