Apple reports Q2 revenue of $58.3B, up 1% YoY, of which $44.9B came from products, $13.35B from services, and net income of $11.25B

Total Revenue Grows, Services Revenue Reaches New All-Time High of $13.3 Billion — Apple today announced financial results for its fiscal 2020 second quarter ended March 28, 2020.

Apple 2020-05-01

Context & Ripple Effects

A year ago, Apple's March quarter had been its weakest in the arc of this coverage — revenue down 5% YoY with services at a then-record $11.5B. Since then the pattern has been consistent: services set a new high every quarter, reaching $12.5B by the December quarter (fiscal Q4) before today's print.

This Q2 report extends that streak into the quarter ended March 28, 2020: total revenue of $58.3B is up just 1% YoY, but the entire gain comes from services hitting an all-time high of $13.35B — meaning product revenue, at $44.9B, actually shrank versus the year-ago quarter's implied ~$46.5B. The mix shift, not the headline growth number, is the story.

First-order effects

Services revenue reached a new all-time high of $13.35B, up roughly 16% from the $11.5B recorded in the same quarter last year, making it the only growing segment in the report.
Product revenue fell to $44.9B from about $46.5B a year earlier, so Apple's 1% total growth masks a declining hardware base offset entirely by services.

Second-order effects

With hardware shrinking and services compounding, Apple's earnings quality increasingly depends on monetizing its installed base — pushing metrics like revenue per active device to the center of how investors read these reports.
A larger services line raises the stakes for the App Store ecosystem that feeds it, giving Apple stronger incentive to expand monetization across the hundreds of millions of users who touch its storefronts weekly.

Third-order effects

If the four-quarter pattern holds — services records every quarter against flat-to-down products — Apple's valuation narrative structurally shifts from a device-cycle company to a recurring-revenue company, changing which numbers move the stock each quarter.
Sustained services dependence also concentrates regulatory and developer scrutiny on the App Store economics, since that single channel now underwrites the growth the hardware business no longer provides.

The trend: Apple's quarterly results are being carried by a steadily compounding services business while product revenue stagnates, marking a structural transition toward installed-base monetization.

Discussion

@etnowlive @etnowlive on x
Apple saw a pickup during the second half of April. The pickup was caused by the economic stimulus and the new products, says CEO @tim_cook, @Apple https://twitter.com/...
@patrickmcgee_ Patrick McGee on x
Tim Cook sees no need to diversify supply chain from China: “I conclude that if you look at the shock to the supply chain that took place this quarter - for it to come back up so quickly really demonstrates that it's durable and resilient. And so I feel good about where we are.”
@benwood Ben Wood on x
Wow. Quite surprised to see this. Hard to believe Apple is not even considering adding some diversity to its approach to supply chain. https://twitter.com/...
@neilcybart Neil Cybart on x
Apple's active installed base hit record highs in all products and geographies. Said another way: Not many people left Apple's ecosystem in 2Q20.
@caro_milanesi Carolina Milanesi on x
The uptick in April numbers came from a combination of things: new products availability, the stimulus grogram and the realization that the situation would take longer to resolve which drove some people to buy new devices Mac iPad in particular - makes a lot of sense #AAPL
@neilcybart Neil Cybart on x
Summing up Tim Cook's prepared remarks: Even though Apple is continuing to run forward on all fronts, I am more proud at how Apple has responded to help combat the coronavirus pandemic.
@lanceulanoff Lance Ulanoff on x
Apple: “Liquidity has not been an issue for us during these highly unusual market conditions.” They have $193B in cash. #AppleEarnings
@alexeheath Alex Heath on x
have lost count of this line being used over the years https://twitter.com/...
@asymco Horace Dediu on x
Apple retail increasing revenues to highest quarterly ever while stores are shut down.
@alex @alex on x
kinda wild how services is driving AAPL rev growth - long time coming https://twitter.com/...
@khabirm Khabir on x
Holy shit. Even during a pandemic https://venturebeat.com/...
@teroterotero Tero Kuittinen on x
Cook really hyping up April perf. Interesting he is not opting for a more cautious line. And dividend raise and all.
@reneritchie Rene Ritchie on x
“Apple Reports Second Quarter Results” The first COVID-19 quarter. All-time record on services, quarterly record on wearables (Watch, AirPods) https://www.apple.com/...
@2shar Tushar Kanwar on x
Services help Apple Q2 revenue hit $58.3 billion, despite Covid-19 pandemic - Apple's services and wearables “gamble” pays off in a difficult quarter. https://appleinsider.com/...
@billboardbiz @billboardbiz on x
Apple Music Subscriber Growth Sets Quarterly Record https://www.billboard.com/...
@aloomba Aman Loomba on x
Me every time this chart gets updated: 🤯 https://twitter.com/...
@asymco Horace Dediu on x
@paulcanetti “Google will get better at design (hardware) faster than Apple will get better at (internet) services.”
@paulcanetti Paul Canetti on x
“Apple will never be a services company” https://twitter.com/...
@2shar Tushar Kanwar on x
Coming out of this lockdown, I fully expect the iPhone SE 2020 to be a blockbuster for Apple in India, making a strong case for itself against the likes of OnePlus and the Lite Samsungs, even with its undeniably premium India pricing. https://twitter.com/...
@munster_gene Gene Munster on x
75% of Apple Watch buyers this quarter were new to the product. Watch is still massively underpenetrated with respect to the iPhone installed base.
@jonerlichman Jon Erlichman on x
Apple's cash pile (every 10 years): 2020: $192.8 billion 2010: $51 billion 2000: $4 billion 1990: $997 million
@benbajarin Ben Bajarin on x
Depending on what one believes Apple's quarterly iPhone ASP is, iPhone unit sales were somewhere between 38-42m units.
@reneritchie Rene Ritchie on x
@SnazzyQ Apple is usually good at demand forecasting more price-sensitive purchasers. Historically it's been size-sensitive ones that have blind sides them. LOL.
@asymco Horace Dediu on x
I'm almost certain that there are more than 1 billion iPhones in use. Surprised Apple did not mention this yet.
@asymco Horace Dediu on x
Apple's installed base and the 515 million subscriptions in context. (Note target is 600 million by end of year 2020). https://twitter.com/...
@adamnash Adam Nash on x
Wow. Apple just announced $58.3B in revenue, earnings beat ($2.55 vs. $2.26 est), $50B in additional stock buyback, raised dividend by 6%. $192.8B in cash. In Q&A, @tim_cook said sales were weak in the beginning of April, but there has been recent strength. https://twitter.com/..…
@wlwatts Bill Watts on x
Apple promises additional $50 billion in buybacks, 6% dividend increase while beating fiscal second-quarter estimates https://www.marketwatch.com/ ...
@thedomino Dominic Chu on x
Apple adds $50 billion more to its existing stock buyback program... Entering this report, 15 of the 20 biggest quarterly stock buybacks in history came via $AAPL. Per @hsilverb, in 10 yrs ended 2019, it bought back $342 Billion of stock. https://www.apple.com/... @CNBC
@stevekovach Steve Kovach on x
At a time when many companies are suspending buybacks. (But Apple has plenty of $$$ to do this. It's not laying off employees either.) https://twitter.com/...

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