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Apple demonstrated resilience in its most recent quarter, surpassing 1 billion paying subscribers for its digital services worldwide. This milestone resulted in increased profits from the previous year, despite a decline in total revenue.
The world’s leading company in terms of market value reported a 1% decrease in total revenue to $81.8 billion for the quarter ending in June. While this represents the third consecutive year-on-year fall, it slightly exceeded Refinitiv’s forecasts of $81.7 billion.
However, net profit rose by 2.3% to $19.9 billion, surpassing Wall Street estimates of a 3.6% decrease to $18.7 billion. Earnings per share also experienced a 5% increase to $1.26, surpassing the expected $1.20.
Apple’s services division, which includes revenue from App Store sales, iCloud, and Apple Music, saw an 8% increase in revenue from the previous year, reaching a record high of $21.2 billion. The number of subscribers also increased by 150 million, surpassing investor expectations of a 5% rise to $20.8 billion.
Services exhibit substantial profit margins of over 70%, double that of Apple’s hardware division. The division’s strong performance was the primary driver behind Apple’s higher quarterly profit.
According to the Financial Times, Apple’s total number of subscribers has doubled over the past three years, highlighting the significance of the services business for the company. It strengthens their ecosystem and reduces dependence on the performance of their products.
While sales of iPhones, Macs, and iPads declined compared to the previous year, wearable sales, including AirPods and Apple Watch, increased by 2.5%. Revenue in China grew by 7.9% to $15.8 billion, offsetting a 5.6% decline in the Americas, which remains Apple’s largest market with $35.4 billion in revenue.
Apple faced challenges in the previous two quarters due to significant supply chain disruptions in China and a tougher macro environment. However, in the latest quarter, the company’s CEO, Tim Cook, emphasized its resilience.
According to Luca Maestri, Apple’s finance chief, the worst is now behind them, although they did experience a 4 percentage point decrease in revenue due to foreign exchange headwinds. Maestri expressed gratitude that they did not encounter any silicon shortages or disruptions caused by Covid-19.
Apple has chosen not to provide quarterly guidance since the outbreak of Covid-19, and Maestri declined to comment on the outlook for the current quarter.
Following a year of significant growth that has seen Apple’s valuation surpass $3 trillion, the company’s shares fell 0.6% in after-market trading.
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