Apple sales beat expectations but Tim Cook sees uncertainty ahead

  01 May 2020    Read: 896
Apple sales beat expectations but Tim Cook sees uncertainty ahead

Apple reported sales and profits that beat Wall Street expectations on Thursday despite fallout from the coronavirus pandemic, with Tim Cook saying China sales were “headed in the right direction” as that country reopens.

But the CEO said it was impossible to forecast overall results for the current quarter because of uncertainty created by the virus.

Apple reported sales of $58.3bn and earnings of $2.55 per share for its fiscal second quarter ended in March, above year-ago results of $58bn and $2.46, and above analyst estimates of $54.5bn and $2.27, according to IBES data from Refinitiv.

Sales of services such as streaming television content rose with billions of people locked in their homes, the company said. The segment, which includes iCloud storage as well as its streaming services for music and television shows, saw sales of $13.4bn, compared with analyst estimates of $12.9n, according to FactSet data. Cook said Apple had 515 million subscribers to apps and services, up by 125 million from one year earlier.

In a call with investors following the report’s release, Cook praised the company’s response to the pandemic. “Our global supply chain is profoundly durable and resilient, and we have shown the consistent ability to meet and manage temporary supply challenges like those caused by Covid-19,” he said.

With its global brand, few American companies have been exposed to the spread of the coronavirus like Apple, whose iPhone sales declined in the March quarter as device sales were forced to online-only in many places.

China, where the virus was first detected, is a major market for Apple, supplying about a sixth of its overall sales, and home to most of Apple’s contract factories.

Apple saw China sales of $9.46bn, down less than a $1bn from a year ago, a potential sign of how the company will fare as other markets emerge from lockdowns.

“While we felt some temporary supply constraints in February, our operations team, suppliers and manufacturing partners have been safely returning to work and production is back at typical levels,” Cook said.

Cook said that during the first five weeks of the fiscal second quarter, “we anticipated that that it was going to be a prolific and energetic period for Apple”. He previously expected Apple to hit its guidance of between $63bn and $67bn in sales.

The quarter quickly changed when the virus spread in China, hitting Apple’s supply chain and sales there, and then hit the rest of the world as Apple’s stores and contract factories came back online. Apple broke with its usual practice of providing an estimated range of sales for the current quarter.

“Given the lack of visibility, we will not be issuing guidance for the coming quarter, though we have a high degree of confidence in the enduring strength of our business,” Cook said.

In February, China kept factories closed and forced Apple to shut its stores there. Apple reopened its stores in China in mid-March and factories resumed production – but by that time, the pandemic had spread to Europe and the rest of the world, which has left Apple stores outside mainland China, Hong Kong, Taiwan and South Korea shuttered.

The closures, along with lockdown orders in many major Apple markets such as the United States and Europe, have forced Apple and its biggest sales partners in the retail and mobile carrier industries to conduct most sales online or via curbside pickup, including of the newly launched iPhone SE.

Apple said iPhone sales were $29bn, down from $30.9bn the year before, compared with analyst estimates of $28.4bn, according to data from FactSet.


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