Apple delivers blowout earnings but new iPhones face delays amid COVID-19

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Apple Inc on Thursday delivered blowout quarterly results, reporting year-on-year revenue gains across every category and in every geography as consumers working and learning from home during the COVID-19 pandemic turned to its products and services.

The report topped Wall Street expectations, with even some long-overshadowed categories like iPads and Macs getting fresh boosts. Shares rose 5% in extended trading after the results.

On a conference call with investors, Chief Financial Officer Luca Maestri said Apple expects the iPhone to continue its strong performance into the next quarter but that new models will be delayed.

“Last year, we started selling new iPhones in late September. This year, we project supply to be available a few weeks later. We expect the rest of our products categories to have strong year-over-year performance,” Maestri said.

The results, which included iPhone sales some $4 billion above of analyst expectations, came on the same day that U.S. gross domestic product collapsed at a 32.9% annualized rate last quarter, the nation’s worst economic performance since the Great Depression.

Other major tech companies Amazon.com Inc and Facebook Inc also posted results that topped Wall Street targets, sending their shares up.

With 60% of sales coming from international markets, the Cupertino, California-based company posted iPhone revenues of $26.42 billion, $4 billion above analyst expectations of $22.37 billion, according to IBES data from Refinitiv.

In an interview with Reuters, CEO Tim Cook said that after disruptions in April, sales began to pick back up in May and June, helped by what he called a “strong” launch for the $399 iPhone SE introduced in April.

“I think the economic stimulus that was in place – and I’m not just focused on the U.S., but more broadly – was a help,” Cook told Reuters.

The results underscore that Apple offers devices and services that customers flocked to despite stores re-closing in some U.S. markets. Apple posted rising sales for accessories such as AirPods and services such as the App Store.

The continued growth in services and accessories also showed the durability of the company’s brand, which has prompted investors to view it as a comparative safe haven and pushed up share prices since March.

The company also saw strong sales in its greater China region, where aggressive pricing during a June holiday shopping season and lower-priced iPhone SE model released in April helped boost sales 2% to $9.33 billion from $9.16 billion a year earlier.

Apple also announced a 4-for-1 stock split, saying it wanted to keep shares accessible to a broad range of investors. Shares soared past $400 for the first time Thursday, though they had been proportionally higher before a 7-for-1 split in 2014.

Apple’s fiscal third-quarter revenue and profits were $59.69 billion and $2.58 per share, compared with analyst expectations of $52.25 billion and $2.04 per share, according to IBES data from Refinitiv.

Sales in its services segment, which also includes offerings such as iCloud and Apple Music, rose 14.8% to $13.16 billion, compared with $11.46 billion a year ago and analyst expectations of $13.18 billion. Cook told Reuters that Apple has 550 million paying subscribers on its platform, up from 515 in the previous quarter.

Sales in the wearables segment that includes the Apple Watch rose 16.7% to $6.45 billion, compared with $5.53 billion a year ago and estimates of $6.0 billion, according to Refinitiv data.

Apple did not give a fiscal fourth-quarter forecast.

Apple benefited from remote work and learning trends, reporting sales in its iPad and Mac segments of $6.58 billion and $7.08 billion, which beat expectations of $4.88 billion and $6.06 billion, according to Refinitiv data.

“Both had some really significant product announcements at the end of March, beginning of April. I think we have the strongest product line in both areas that we’ve ever had,” Cook told Reuters. “You combine that with the work from home and remote learning, and it’s yielded really, really strong results.”

But the global smartphone market was already stagnating before the novel coronavirus caused it to contract, and Apple has leaned heavily into growing its services business, which is where the company’s fastest revenue growth occurred during the fiscal third quarter. The biggest component of that business is the App Store, where Apple generates commissions between 15% and 30% on some sales.

On Wednesday, Cook faced questions from U.S. lawmakers about Apple’s practices related to the store, which have come under fire from independent app developers who say its rules and unpredictable approval process put them at a disadvantage against the iPhone maker.

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