Apple records flat revenue in FQ2 because of COVID-19

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Apple records 1 percent revenue growth in FQ2 despite COVID-19 impact.
Image: YouTube | Apple

May 1—Despite COVID-19’s devastating impact on its operations, Apple posted very slight year-over-year revenue growth in the fiscal second quarter. The iPhone maker generated $58.3 billion in sales during the three months ending March 28, up from the $58 billion it made in FQ2 2019. However, CEO Tim Cook declined to offer guidance for the June quarter because of a “lack of visibility and uncertainty.”

Apple’s Rocky FQ2 Results

Although Apple’s annual revenue growth was effectively flat last quarter, the conglomerate recorded gains in two segments. The corporation made $6.284 billion in Wearables, Home, and Accessories sales, up 22.51 percent from 2019, and its Services revenue, $13.348 billion, grew by 16.5 percent annually.

On the other hand, Apple’s Mac, iPad, and iPhone FQ2 sales fell by 2.93, 6.72, and 10.34 percent, respectively.

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The COVID-19 related downturn in the company’s core business led to a $312 million year-over-year dip in net income. The Big Tech firm’s biggest regional revenue loss came from Greater China, which declined by $763 million from FQ2 2019. That said, the corporation saw its sales in the Americas, Europe, and the Asia-Pacific region (excluding Japan) rise year-over-year.

Apple first signaled its fiscal second-quarter earnings would take a significant hit from the coronavirus pandemic in February when Cook withdrew the firm’s guidance. At the beginning of the year, the executive pegged the corporation’s revenue at between $63 billion and $67 billion. However, the temporary closure of its main production facilities and physical retail infrastructure rendered its forecast moot.

An Uncertain Future

In a rare occurrence, Apple is moving into a fiscal third quarter with a great deal of uncertainty. While understandable, Cook’s decision not to offer an earnings estimate for the June period caused the corporation’s stock to fall by 2 percent in extended trading. CFO Luca Maestri’s statement that the company’s iPhone and Wearables revenue will “worsen” in FQ3 is similarly uninspiring.

Nevertheless, there is data suggesting Apple’s spring quarter sales might actually show improvement year-over-year.

For one thing, Apple released the iPhone SE, a new iteration of its low-budget handset, to widespread critical acclaim last week. The mobile device’s $399 starting price point and impressive technical specifications prompted an estimated 340,000 preorders through Chinese e-commerce platform JD.com. Moreover, TF International Securities analyst Ming-Chi Kuo predicts the firm will sell between 12 million and 14 million in the June quarter.

In an interview with Bloomberg, Cook mentioned Apple’s sales began to recover this month after plummeting in March. The executive attributed the mid-April uptick in revenue to the introduction of new hardware, including the iPhone SE. Because the COVID-19 outbreak caused a contraction in the global economy, smartphone buyers may gravitate toward the budget handset in the near-term.

Since the SE does not cost as much as the corporation’s premium offerings, the firm’s FQ3 iPhone revenue may indeed be down year-over-year. But if the mobile device brings new and lapsed customers into the Apple ecosystem, the company could experience an attendant surge in services revenue.

With its production issues largely addressed and its stores reopening next month, Apple might resolve its uncertainty with surprising success next quarter.

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