Apple Inc (NASDAQ:AAPL) has reported record revenues for its fourth quarter as home working during the coronavirus pandemic led to heightened demand for its Mac computers and iPad tablets.
In its results for the quarter ended September 26, 2020, reported after the close on Thursday, the tech giant reported revenues of US$64.7bn, up from US$64bn in 2019 and ahead of forecasts of US$64bn. However, earnings per share dipped slightly to US$0.74 from US$0.76 a year ago and net income fell to US$12.7bn from US$13.7bn.
The higher revenue figures came despite a sharp fall in iPhone sales in the quarter to US$26.4bn from US$33.4bn, however, this was offset by increases in Mac and iPad sales as well as higher sales in the wearables, home and accessories category and in services, which includes Apple’s app store and licensing deals. Apple also declared a dividend of US$0.02 per share.
The drop-off in iPhone revenues was partially caused by a delay to the launch of the company’s iPhone 12 range of smartphones.
The figures also emphasised the importance of Apple’s global markets, with international sales accounting for 59% of the quarter’s revenue. The finances also showed a sharp decline from the company’s critical greater China market, where net sales fell to US$7.9bn from US$11.1bn.
However, the tech firm did not provide an outlook statement for its current quarter, usually its most critical due to spending over the holiday period.
“Our outstanding September quarter performance concludes a remarkable fiscal year, where we established new all-time records for revenue, earnings per share, and free cash flow, in spite of an extremely volatile and challenging macro environment”, Apple’s chief financial officer Luca Maestri said in a statement.
“Our sales results and the unmatched loyalty of our customers drove our active installed base of devices to an all-time high in all of our major product categories. We also returned nearly $22 billion to shareholders during the quarter, as we maintain our target of reaching a net cash neutral position over time”, the CFO added.
“Apple capped off a fiscal year defined by innovation in the face of adversity with a September quarter record, led by all-time records for Mac and Services. Despite the ongoing impacts of [coronavirus], Apple is in the midst of our most prolific product introduction period ever, and the early response to all our new products, led by our first 5G-enabled iPhone lineup, has been tremendously positive”, said chief executive Tim Cook.
In a note on Thursday, analysts at Wedbush reiterated their ‘outperform’ rating and US$150 target price on Apple, saying they viewed the quarter as “the drumroll to the main event and the iPhone 12 5G supercycle”, highlighting that preorder activity is more than two times its predecessor, the iPhone 11, which served as a “green light” into the 2021 financial year.
Meanwhile, Hargreaves Lansdown’s Sophie Lund-Yates commented: “Apple needs to be able to keep the upgrade cycle going or the share price will wobble because there’s no real room for forgiveness in the current valuation. The initial reception to the new 5G enabled models is apparently very positive, but we’ll have to wait and see exactly what that means next quarter. We’d been expecting the new working and learning from home cultures to spur on sales of larger hardware, like Macs and iPads. It’s great to see these items support the top-line, but they aren’t Apple’s traditional bread and butter and it’s very possible these purchases have simply been pulled forward.”
“Despite what Apple would have us believe, the company is still very much a hardware business. Services have come a long way, and this higher margin division is an attractive addition to Apple’s story. But leveraging things like the App Store and Apple Music relies on punters continuing to buy Apple devices. As the differences between smartphones get smaller, and competitors get bigger, Apple is going to have to keep peddling hard to keep its lead”, she added.
The iPhone sales drop and lack of official guidance for the Christmas quarter appeared to have left investors unimpressed, with Apple’s shares falling 4.8% to US$109 in pre-market trading in New York on Friday.