The Apple Inc (NASDAQ:AAPL) share price has undergone a fairly decent rebound since the March lows. It, however, has lagged behind a number of its FAANG peers, probably as a result of the fact it is still predominantly considered a hardware company, even though services continue to make up a progressively bigger proportion of its revenue.
Earlier this week Samsung (LON:0593xq) saw its profits rise in its most recent quarter to the tune of 3% to $5.2 billion, but a good chunk of this was driven by sales of its memory chips, and lower marketing spend. Its outlook for the upcoming quarter was quite bleak in terms of sales of mobile phones and TVs and, as a result, the company declined to provide forecasts for the rest of the year.
In its Q1 numbers, three months ago Apple posted a record net income and revenue of $91.8 billion and $22.2 billion, respectively, helped by a decent performance at the end of last year.
Yesterday’s Q2 performance came in some way short of its Q1 performance with $58.31 billion of revenue, but it still beat revised expectations of $54.25 billion, and also beat the same quarter last year, though it is important to remember that prior to the disruption in China, Apple had expected to see Q2 sales of $65 billion.
The standout performer was in services, which saw a 17% increase in revenues to $13.35 billion from Q1’s $12.72 billion, with wearables, home and accessories contributing $6.28 billion of that total.
It would appear that while wearables saw the company post a record quarter in that area, along with the wider services division, the launch of Apple TV+ appears to have been a little underwhelming.
It also appears that iPhone sales were hit by the coronavirus as revenues here slid by 7% to $28.96 billion.
This decline in sales, while expected due to coronavirus, still speaks to a trend that was already in place, and may also help explain Apple’s decision to launch the new iPhone SE this month, one of its cheapest ever iPhone models.
The deviation away from the higher end is probably not surprising given the intense competition in the market, but it could well alienate some of its more affluent users who have paid a lot more for some of the same features which are now available in this smaller budget model, including the latest A13 bionic chip.
The continued lack of a 5G model is probably less of an issue now, given the economic disruption taking place. However, it is still an area where they expect to launch an iPhone by the end of this year.
Given the upcoming economic disruption, it was perhaps not surprising to see the company decline to offer any guidance for the year. It can’t be too pessimistic about the future, however, if it feels it can boost the dividend and spend another $50 billion on buybacks, even though it is quite clear given the ongoing disruption globally, that this next quarter will probably come in short of the same period last year.
Nonetheless investors appeared a little unsettled by the reluctance to provide any sort of guidance with Apple’s share price slipping back in post market trading, despite CEO Tim Cook saying that sales were recovering in the second half of April, after a very poor start to the month, and that manufacturing output was slowly returning to normal in China.
In addition, Apple stores also remain closed in large parts of the world with little sign of when a lot of them might reopen.