Apple skips forecast for the first time in years

Apple's suppliers and manufacturers in Asia ground to a halt as part of efforts to curb the spread of Covid-19

The Cupertino, California-based technology giant did not provide guidance for its June quarter due to the ongoing complications from Covid-19.. REUTERS

Apple reported quarterly revenue that grew 1 per cent but didn’t provide a forecast for the first time in more than a decade, sparking concern that performance will suffer later this year. The shares fell 2.6 per cent in extended trading.

Chief executive Tim Cook said Apple experienced a “very depressed” period in late March and early April, in the depths of the Covid-19 pandemic, but saw a “pickup” in the second half of this month. The company raised its dividend and expanded a share buyback plan by $50 billion.

Fiscal second-quarter sales came in at $58.3bn, compared with $58bn a year earlier. That beat Wall Street estimates, according to data compiled by Bloomberg. iPhone revenue was $28.96bn, down 7 per cent, but also topping analysts’ expectations. Services sales jumped 17 per cent to $13.35bn, while the wearables and accessories business climbed 23 per cent to $6.28bn.

“The last part of March and the first part of April were very depressed and then we’ve seen a pickup relative to that period of time in the second half of April,” Mr Cook said. “I would attribute that partially to the new products that we were able to launch at end of March and early April, the economic stimulus and probably some level of people getting a bit more used to that this is going to last a little while.”

The California technology giant did not provide guidance for its June quarter due to the ongoing complications from Covid-19.

“It just spooks people about just how bad the second quarter is going to be,” said Mike Walkley, an analyst at Canaccord Genuity.

During a conference call, chief financial officer Luca Maestri suggested that challenges continue in the current quarter.

“On iPhone and wearables, we expect the year-over-year revenue performance to worsen in the June quarter relative to the March quarter,” he said. “On iPad and Mac, we expect the year-over-year revenue performance to improve.”

Apple has been uniquely impacted by the pandemic. In late January, many of its suppliers and manufacturers in Asia ground to a halt as part of efforts to curb the spread of Covid-19. That resulted in shipping delays for devices and supply constraints. Around that time, it closed all 42 retail stores in China, a key source of revenue for the company, then shut its other retail locations. It’s still waiting to reopen most of them.

In January, the company had projected fiscal second-quarter sales of between $63 and $67bn, but it pulled the guidance in February as the pandemic starting spreading outside of China.

On Thursday, Mr Maestri said digital content services, such as Apple TV+ and Apple Music, will remain strong, but that the AppleCare warranty business and revenue from advertising deals would again dip. App Store revenue grew double digits in the fiscal second quarter, with paid subscriptions topping 550 million, he noted.

“Our active installed base of devices reached an all-time high in all of our geographic segments and all major product categories,” the chief financial officer said. “We are confident in our future and continue to make significant investments in all areas of our business.”

Apple is also sticking to its M&A strategy, Mr Maestri said, while reiterating a pledge to invest $350bn in the US economy in the coming years.

Apple’s sales in China during the quarter dipped by about $760 million, with increases reported in Europe and Asia Pacific outside of China. The company reported slight annual sales declines in the US and Japan. It launched some new products in the quarter, including the new iPad Pro and a pair of Macs, but the iPhone SE’s debut was delayed about a month into the current quarter.

Mr Cook said foot traffic to its retail stores in China hasn’t returned to pre-pandemic levels. But retail sales hit a quarterly record because of strong online performance.

The chief executive also praised the new iPhone SE’s $399 starting price, saying it will attract switchers from Google’s Android and appeal to fans of smaller smartphones.

Cook said Apple’s China-centric supply chain showed strength, but that the company would still investigate tweaks to its processes after the pandemic.

Net income was $11.25bn, or $2.55 a share, compared with $11.56, or $2.46 a share, a year earlier.

The virus is also impacting efforts to build future products. The company's four upcoming redesigned iPhones with 5G will launch multiple weeks later than usual, but still by November, Bloomberg News has reported.

Mr Cook said some parts of Apple are more productive when employees work from home, while some are less productive.