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iPhone, Apple Watch and Air Pod Spark Big Quarter
February 02, 2020
 
Apple announced its fiscal first quarter 2020 results, and blew away expectations: $91.8b in quarterly revenue, up 8.3% Y/Y at $84.4b and $88.3 billion in the first quarter of 2018. The main point to get across from Apple’s earnings release overnight is that the iPhone 11 sold bundles, and so did AirPods. Apple says it sold $55.957 billion in iPhones, $7.160 billion in Macs, and $5.977 billion in iPads. Its combined “wearables, home and accessories” sales were $10.01 billion, while services hit $12.715 billion. One year ago, iPhones were at $51.98 billion, Macs at $7.416 billion, iPads at $6.729 billion, wearables and accessories at $7.308 billion, and services at $10.785 billion. In other words, the company experienced dips in both Mac and iPad sales, but growth across all of the other categories.
 

• 61% of that revenue was from the iPhone alone, revenue increasing by 8%.
• Wearables beat Mac revenue, meaning AirPods + AirPods Pro + Apple Watch (buoyed by heavy discounts of the Series 3)beat MacBook sales, even with AirPods Pro supply issues.
• Mac sales declined 3%, Wearables up 44%.
• Also, iPad sales fell 11%, which may be a function of waiting for the next release, though.
• No public comment on 5G rollout for iPhones or potential benefits for sales.
• Not that Apple cares too much, with 1.5 Billion active devices worldwide.
• CEO Tim Cook provided App Store sales data for New Year's Day, a single day of the App Store’s existence, coming in at $386 million.
• Apple noted the new novel coronavirus as a potential issue for this financial quarter, with Cook noting the virus has already impacted Apple's operations in China. A store has been temporarily closed, retail store hours have been reduced, travel restrictions are impacting sales, and manufacturing and supply have been hit, with facilities closed.

It wasn’t all great news for Apple with the iPhone, as sales in Japan were down about 10% for the quarter, coming after the Japanese government introduced rules to stop carriers discounting handsets, and reduce penalties for canceling contracts, to try and promote cheaper phone bills. That’s the kind of thing where handsets can be had for ¥0 ($0!) upfront on 24-month contracts, if you switch carriers. Japan went ahead with the rules, and iPhone sales fell. 
Heading into earnings yesterday, momentum was already in Apple's favor: Shares were up 30% since its last report and over 100% from a year ago. 
 
CEO Tim Cook pointed to strong performances from iPhone 11s and the Wearables, Home, and Accessories division, which did $10+ billion in quarterly sales for the first time ever as Apple passed 1.5 billion active devices globally.  Wearables were up 44%, Cook said, and over 75% of Apple Watch buyers were first-timers. But the product du jour was AirPods, which Apple can’t make enough of to satisfy demand. The company didn't disclose numbers, but one analyst estimates AirPods did as much as $4 billion in Q1. 
 
Cook’s refocusing Apple on services, including subscription video, gaming, and payments. Last quarter, the division took in $12.7 billion—a 17% year-over-year increase. The highlights: 

• Apple has 418+ million paid subscriptions across its platforms and expects half a billion come March.
• Apple Pay revenue and transactions more than doubled annually.
• Executives said they're using subscriber totals to judge Apple TV+'s success…but stopped short of handing over those digits. 

Revenue from Greater China, Apple's second-most important market, rose 3% annually to $13.6 billion. 

• About a year ago, Apple cut its sales forecast over fears of lower iPhone demand among Chinese consumers. 
• But yesterday, Cook said iPhone revenue grew by double-digits on the mainland in Q1.

Apple is closely monitoring the coronavirus outbreak, which could hurt sales during the Lunar New Year and impact some of its production as plants remain closed around the country.