Apple's Q4: Mac, iPad, Apple Watch sales, services shine ahead of iPhone 12 sales

Apple's iPhone sales paused ahead of the iPhone 12 launch. Fourth quarter sales were in line and earnings were ahead of estimates.

Apple's fourth quarter sales were in line with expectations, but earnings came out ahead as Mac, iPads and Apple Watch delivered strong revenue growth.

The company reported fourth quarter earnings of 73 cents a share, on revenue of $64.7 billion.

Wall Street was expecting Apple to report fiscal fourth quarter revenue of $64.7 billion with non-GAAP earnings of 70 cents a share. Apple declined to provide an outlook for the first quarter due to uncertainty about the COVID-19 pandemic

CEO Tim Cook said Apple is in the middle of its "most prolific product introduction period ever" with its 5G iPhone 12 lineup as well as products that align well with remote work and education. Apple said that international sales were 59% of the total revenue pie. Europe fared well in the quarter. 

While fourth quarter product sales were down a bit from a year ago, services revenue surged to $14.55 billion, up from $12.51 billion a year ago.

For the year, Apple delivered sales of $274.5 billion with net income of $57.41 billion.

By product line, iPhone sales for the fourth quarter were $26.44 billion, down from $33.36 billion a year ago. Some of that decline was due to the wait for the iPhone 12 launch.

Mac sales in the fourth quarter were $9.03 billion, up from $6.99 billion a year ago. iPad sales also surged with sales of $6.8 billion, up from $4.66 billion a year ago. Wearable sales also fared well with sales of $7.88 billion, up from $6.52 billion.

On a conference call with analysts, Cook added that the company has shown resilience during the COVID-19 pandemic.

Financial performance aside, I don't think this year will be a time that any of us look back on with great fondness or nostalgia. Those of us who wake up every day hoping for a return to normal can count ourselves fortunate. Others don't have that luxury. There is the great pain of a lost loved one, the uncertainty and fear of a lost job, a deep well of concern for people we care about who we are not able to see. A sense of opportunities missed, of plans delayed, of time lost. Even though we're apart, it's been obvious this year that around the company, teams and colleagues have been leaning on and counting on each other more than in normal times. I think that instinct, that resilience has been an essential part of how we have navigated this year.

Apple CFO Luca Maestri touted the company's ability to grow beyond the iPhone and cited strong growth across the portfolio. He said:

This is a very impressive level of performance when we consider that this year, we did not launch and ship any new iPhone models during the quarter. Outside of iPhone, we grew 25% in aggregate and had strong double-digit year-over-year revenue growth in each of our product categories.

As for the outlook, Maestri didn't give direct revenue guidance but did give some insight to a few items in the first quarter. Maestri said:

These directional comments assume that COVID-related impacts to our business in November and December are similar to what we've seen in October. We just started shipping iPhone 12 and 12 Pro and we're off to a great start. We are also excited to start preorders on iPhone 12 mini and 12 Pro Max next Friday. Given the tremendously positive response, we expect iPhone revenue to grow during the December quarter despite shipping iPhone 12 and 12 Pro 4 weeks into the quarter and iPhone 12 mini and 12 Pro Max 7 weeks into the quarter. We expect all other products in aggregate to grow double digits, and we also expect Services to continue to grow double digits. For gross margin, we expect it to be similar to our most recent quarters despite the costs associated with the launch of several new products. For OpEx, we expect to be between $10.7 billion and $10.8 billion.

Other key points:

  • Cook said that Apple has completed 5G iPhone 12 testing with more than 100 carriers in more than 30 regions.
  • The spread of iPhone 12 launches will hit the first quarter results at different times and make forecasting challenging.
  • Maestri said the 5G iPhone launch is "a once-in-a-decade opportunity." Cook added that "we are very bullish on this cycle."
  • Cook was asked about hardware bundles and he said there was nothing to announce, but hardware subscriptions would be akin to installment plans.
  • A second wave of COVID-19 also came up in relation to Apple stores. Cook said:

We're doing everything we can do but we're prioritizing safety first, obviously. And so with our stores as an example, we've come up with a new concept that puts an -- essentially turns the store into an express storefront. And we've implemented that in a number of places where we believe it helps from the safety of our employee and the safety of the customer's point of view but still allows for an interaction to take place. And so we've also put a lot more people on the phones because a lot of more people are reaching out to us in that way. And of course, the online store has stayed up and running through the whole of this. I think if you take some of those, the channel is doing some similar things and then some different things as well. And so I think everybody, to the best of their ability, is putting in contingency plans and finding a way to adapt to the environment. But it is difficult to call and there's a level of uncertainty in it.

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