FQ2 2020 Chart

Even with a pandemic, Apple’s 2nd fiscal quarter of 2020 came packed with records

As expected, Apple yesterday released the financial results for its second fiscal quarter 2020.

This was not an ordinary quarter. As we reported, in mid-February Apple reported that it would no longer be able to beat the target set for the period due to the outbreak of the new Coronavirus (COVID-19) – at the time, an epidemic still concentrated mainly in China; today, a pandemic. Still, taking all the consequences into account (such as the closure of practically all the company’s stores around the world), the quarter was positive.

The revenue in the period was incredible $ 58.3 billion (1% more compared to the same period in 2019) – Wall Street forecast was US $ 54 billion -, with net profit of $ 11.2 billion (-3.5%) and diluted earnings per share of $ 2.55 (+ 4%). International sales comprised 62% of all quarterly sales.

I don’t think I can remember a quarter in which I was more proud of what we do / how we do it.

Tim Cook, Apple CEO

As usual, the CEO Tim Cook and the CFO Luca Maestri held an audio conference to announce the results and comment a little on Apple’s performance in the last period. Due to the pandemic, however, the company chose not to make a projection for the next quarter, given the market’s uncertainty.

In this event, whether during the speeches of the executives or in the question and answer session with analysts / journalists, they always paint interesting information. And we, of course, follow everything closely to bring you the highlights of the last quarter of the Apple.

General comments

  • Apple launched new products while providing protective masks for healthcare professionals – something that shouldn’t be easy, given the complexity of the company’s production lines.
  • Apple’s logistics and assembly network produced 30 million face masks and 7.5 million face shields, with a weekly production of around 1 million.
  • Cook confirmed that the company suffered from the supply of components in February due to the pandemic, but that by the end of March production was already properly normalized.
  • The installed base of active devices reached the highest increase ever, in all geographic segments where Apple operates.
  • The company’s gross margin was 38.4%, a stable sequential level; the gross margin of products was 30.3% (a sequential drop of 380 basis points due to loss of leverage and an unfavorable mix, according to Maestri); the service margin was 65.4%.
  • Apple ended the quarter with $ 193 billion in cash (net cash of $ 83 billion), in addition to marketable securities.
  • The company repurchased 64.7 million shares during the quarter.
  • Speaking of the pandemic itself, Cook said, “We can’t say for sure how many chapters there are in this book, but we can say that the ending will be a good one.”

Apple’s cash stack (every 10 years): 2020: $ 192.8 billion2010: $ 51 billion2000: $ 4 billion1990: $ 997 million

iPhones

  • The supply and demand for handsets were greatly affected by COVID-19 during the quarter.
  • Although the cycle of handset upgrades has lengthened, the instaladaiPhone‌ active installed base has reached its highest historical level.
  • Cook said the new iPhone SE is in strong demand, and that customers were apparently expecting a smaller size iPhone with cutting edge technology, or coming from Android – according to Cook, the SE is faster than most devices that run the Google’s operating system.
  • Bank of America is buying tens of thousands of iOS devices for its employees.

iPads

  • As a reflection of the closure of schools, teachers are turning to Apple products because of social isolation. According to Cook, Apple delivered tens of thousands of iPads in Ontario (Canada), about 100,000 in Los Angeles (in the United States), about 50,000 in New York (USA) and more.
  • The demand for the new iPad Pro with LiDAR scanner is high, according to Cook.
  • Half of iPad buyers bought the tablet for the first time.
  • The installed base of iPad users is the largest ever.

Macs

  • Half of Mac buyers are new, meaning they compare the computer for the first time.
  • The installed base of Mac users is the largest ever.

Wearables, Home and Accessories

  • Doctors are turning to Apple Watch to treat patients safely, remotely – using features like ECG, for example, to monitor health.
  • ‌More than 75% of users who have purchased a new Apple Watch around the world are new customers.
  • The segment set a new quarterly revenue record.
  • The division is now the size of a company listed on the Fortune 140.
  • Regarding the future of the Apple Watch, Cook said that “the company is always looking at other areas” (referring to healthcare resources); he commented that, regardless of the pandemic, they were already doing this: “I would not say that the health door has opened more; it was already quite open. ”

services

  • Apple News has reached the milestone of 125 million monthly active users, and is doing special coverage on COVID-19.
  • Services such as App Store, Apple Music, iCloud and ads on the App Store reached a record in the quarter; but, according to Maestri, the revenues from AppleCare and App Store ads will be impacted (the first due to the closing of stores and the second due to the crisis).
  • FaceTime and Messages had traffic records in the quarter.
  • The use of Final Cut Pro and Logic Pro also reached “record levels” after the trial period was increased to 90 days.
  • Third-party subscriptions grew by more than 40% year on year, the highest historical level ever.
  • Because of the pandemic, Apple Card users were able to skip credit card payments from March to April.
  • Currently, card users can buy iPhones at 24x interest-free; Cook said Apple is working to bring this benefit to other products.
  • According to Apple, the app and the website launched specifically with information about the pandemic had good numbers (about 2 million installs of the app and about 3 million unique visitors to the site).
  • Payments and transactions reached a new historic high in the quarter. Paying accounts increased by double digits across all geographic segments of Apple, reaching a total of 515 million subscriptions (125 million more year-on-year); by the end of fiscal 2020, Maestri believes Apple will reach 600 million paying accounts.
  • Apple is confident that it will be able to achieve the goal of doubling revenues from the “Services” category (a target set in fiscal year 2016) in fiscal 2020.

Apple Stores

  • Apple is normally paying all retail employees, regardless of how stores operate.
  • In China, where stores have reopened, traffic has returned to the level it was in February – but, of course, it has not yet returned to the pre-pandemic level.

Forecasts for the next quarter

Unusually in view of the current pandemic scenario, Apple is not making a new projection of numbers for the third fiscal quarter of 2020. Still, Maestri commented that the dollar has recently appreciated against most currencies in the world, and that is why they expect a revenue impact of more than $ 1.5 billion.

Speaking of iPhones‌ and wearables, Apple expects annual revenue performance to worsen in the June quarter compared to the March quarter; for iPads and Macs, the trend is for an improvement in revenue in a year-over-year comparison.

We are in the midst of developing our most exciting product and service line ever, while contributing more than $ 350 billion to the US economy in five years.

Luca Maestri, Apple CFO

Apple’s board of directors declared a cash dividend of $ 0.82 (+ 6%) per common share of the company, payable on May 14, 2020 to all shareholders registered at the end of business on May 11, next. The board also authorized a $ 50 billion increase to your current share buyback program.

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via MacRumors, AppleInsider, Six Colors, MacStories