Apple Hits 52-Week High on Holiday Quarter iPhone and Wearables Sales

Analysts had positive things to say. Canaccord Genuity's Mike Walkley, citing the company’s global 1.5-billion-device installed base, was encouraged by strong demand for the iPhone 11 series that “could be bolstered by a 5G upgrade cycle.” Cook wouldn’t discuss Apple’s 5G plans during Q&A. He said of fifth-generation wireless generally, “We're in the early innings of its deployment on a global basis.” Apple is proud of its lineup and excited by its “pipeline,” Cook said.

EMarketer analyst Yory Wurmser noted "caution” about Apple's services growth -- including Apple TV Plus -- which came in “slightly below expectations." The miss could be attributed to competition from Disney Plus, which launched at roughly the same time as Apple TV Plus, he noted. Overall services growth grew 17 percent to $12.7 billion; the category grew 18 percent in the September quarter.

In Q&A, Chief Financial Officer Luka Maestri said Apple set record highs in several services categories, including Apple Music, cloud, search ads and payment services; it set December records for the App Store and Apple Care. Apple News has more than 100 million monthly active users in the U.S., U.K., Australia and Canada, Maestri said.

Apple’s goal for services was to double FY 2016 revenue during 2020, which Maestri said the company met in December when it reached 480 million subscribers, blowing past its goal a year ahead of schedule. Now Apple expects to meet the 500 million subscriber goal by March 31 and upped its 2020 goal to 600 million subscribers by year's end.

On whether Apple is considering advertising on Apple TV Plus for an additional revenue stream, Cook said it’s possible to have advertising in a “straightforward manner that doesn't encroach on people's privacy.” He “wouldn't want to conjecture about us in that business.” Apple believes customers want an ad-free Apple TV Plus experience, he said.

Two categories had declines: Mac sales dipped from $7.4 billion to $7.2 billion, and iPad sales slipped from $6.7 billion to $6 billion. Both segments had difficult comparisons due to timing of MacBook Air, Mac mini and iPad Pro launches, Maestri said. Half of customers buying Macs and iPads were new to those products, he said.

Apple’s Wearables business, now “the size of a Fortune 150 company,” grew to $10 billion, from $7.3 billion, said Cook. He cited holiday quarter “supply constraints” for AirPods Pro earbuds and Series 3 Apple Watches and was hopeful watch shipments balance this quarter. He couldn’t give an estimate when supply constraints would ease for the AirPods Pros: “We seem to be fairly substantially off there, and we're working very hard to put in additional capacity.”

The March quarter outlook -- “wider than usual” -- accounts for potential impact from the coronavirus, Cook said in Q&A. Apple is working closely with its team and partners in the affected areas, he said. Apple reported double-digit iPhone growth and “extremely strong” double-digit growth in wearables in China. The company has alternate suppliers in the quarantined Wuhan area and is working on mitigation plans to make up any expected production loss.

Outside of Wuhan, "the impact is less clear,” Cook said, noting the Chinese government extended the New Year holiday through Feb. 9 to keep people from traveling and to reduce the risk of the coronavirus spreading. Q2 revenue guidance is $63 billion-$67 billion.