The COVID-19 pandemic has disrupted everyone's plans, and Apple Inc. (AAPL) is no exception. The iPhone, Apple's signature product that revolutionized the smartphone market, saw continued sale declines as services and other products gained more traction. The sales of iPhones declined 21% to $26.4 billion from $33.4 billion during the same time period a year ago.
Apple reported quarterly revenue of $64.7 billion with quarterly earnings per diluted share of $0.73, which was above $0.69 that analysts anticipated. Apple's board of directors approved a cash dividend of $0.205 per share of the company's common stock. This quarter's results showed how the Silicon Valley giant has been navigating the geopolitical and economic uncertainties of the pandemic and how it's imagining the path forward.
"Working from kitchen tables and bedrooms, in distanced office settings and rework labs and manufacturing facilities, the team rebuilt every part of the plane while it was mid-air, and the results speak for themselves," said CEO Tim Cook describing the pressure on Apple to continue to innovate and deliver results in a remote environment. "If I had to describe our performance this quarter in a single word, it's resilient."
The delay to its iPhone 12 announcement meant that its sales were not included in the latest quarter's results. It was the first time since 2013 that Apple did not have a splashy iPhone release in September. In the last quarter, Apple continued to face supply disruptions that affected "iPad, Mac, and Apple Watch," according to Apple CFO Luca Maestri, who called it "an unprecedented period of uncertainty" and an "extremely volatile and challenging macro environment." Still, international sales made up 59% of the quarter’s revenue.
With iPhone sales in decline, the spotlight was more on the services offerings through the App Store, AppleCare, Cloud Services, Music, and Apple's Payment Services. The "contactless payment has taken on a different level of adoption that I think will never go back," Cook said on the earning call, noting the United States has been "lagging" in the contactless payment segment. "I think that the pandemic may well put the U.S. on a different trajectory there. And so we are very bullish about this area and view that there are more things that Apple can do in this space."
While some of the challenges are universal to all technology and global retail companies, others are more specific to Apple's product lineup. Some analysts remain optimistic that, pandemic or not, iPhone 12 can deliver a "supercycle" for Apple investors. "It really comes down to if Apple can exceed the 231 million peak units from 2015. If they can, then this goes into the Cupertino hall of fame as a super cycle," Wedbush analyst Dan Ives told CNBC.
Apple unveiled its latest iPhone 12 and iPhone 12 Mini in a remote launch event earlier this month. Apple is hoping the 5G technology and additional innovations will stop the slump in iPhone sales. Greg Joswiak, Apple’s senior vice president of worldwide marketing, called the 5G technology the "beginning of a new era for iPhone," noting other features like computational photography advancements, Super Retina XDR displays, and a new Ceramic Shield front cover.
While the company did not provide guidance for the holiday quarter, Apple remains optimistic about new iPhone sales in China, where 5G adoption is ahead, as well as the United States. "5G is a once-in-a-decade kind of opportunity. And we could not be more excited to hit the market exactly when we did," Cook told Reuters. "At least in the U.S., the carriers are being very aggressive."