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By Jason Snell

A few notes on Apple’s latest record quarter

Note: This story has not been updated since 2020.

So, another record fiscal quarter for Apple. Are we surprised? Not really, I suppose, though it’s interesting to remember that last year’s holiday quarter was actually smaller than the previous year’s, which set the record. 2019 is now the champ, with $91.8 billion in revenue. Yikes.

Anyway, here are a few quick observations about this quarter’s Best Quarter Ever.

The iPhone 11 is the core iPhone

If you were wondering about Apple’s strategy to make the successor to the iPhone XR the “real” iPhone 11, and rebranding the iPhone X successors as pro models, wonder no more. According to Apple, the iPhone 11 outsold the iPhone 11 Pro and 11 Pro Max every single week of the holiday quarter.

That said, I’d assume that the two pro models put together outsold the iPhone 11. But it’s clear that the iPhone 11 has been a success, and it’s only right.

Also, let’s give a clap to the iPhone, which returned to year-over-year revenue growth for the first time in a year. Apple says that its trade-in programs have worked wonders, including in China. and also suggests that the (U.S. only) Apple Card installment plan also has helped contribute to iPhone sales.

The iPhone is never going to be the growth engine it was during the middle of the last decade, but it’s still an enormous contributor of revenue and profit to Apple, and I suspect its sales will ebb and flow as new models come and go. There are worse things for a company to have than a boring product that just keeps dumping $146 billion a year into the coffers.

iPhone revenue chart

Wearables are big—and interesting

Apple’s wearables business is clearly successful and growing rapidly, as expressed in the Wearable/Home/Accessories category’s rapid growth. It was $10 billion in revenue for that category this quarter, up 37 percent from the year-ago quarter and marking 12 straight quarters of 20+% growth.

Apple provided a few fun tidbits in its description of what’s going on inside the Wearable/Home/Accessories bundle. Apple Watch set a new revenue record, though Apple won’t say what that record is. Perhaps more interesting even than that, the company claimed that 75 percent of Apple Watch purchases were from people who were new to the product.

Wearables revenue chart

On the phone call with analysts and executives Tuesday, Mike Olson of Piper Sandler1 asked Cook about how many of those watch buyers were really new to Apple overall. Cook’s response was that “it’s more likely that the iPhone comes first,” which is probably true—first you get an iPhone, then you branch out into the Watch. (Keep in mind, you can’t really use an Apple Watch without an iPhone.) And there are so many iPhone users out there that Apple could keep adding 75 percent new Watch owners every quarter for quite a while without running out of potential sales targets.

But Cook did say, “There’s no doubt in my mind that there’s some people that came into the ecosystem for the Watch,” and I can see that point too. With Apple having the pre-eminent smartwatch out there, Apple probably benefits from a surprising halo effect: Someone who might not care whether their phone is iPhone or Android might buy an iPhone just because they want to get an Apple Watch.

Apple Watch sales aren’t all about the Series 5, either. Cook said that Apple couldn’t make enough of the $199/$299 Apple Watch Series 3. That’s a fascinating tidbit, because it suggests that—like the iPhone SE before it—Apple underestimated the amount of demand that its customers might have for a lower-priced, entry-level product. At $199, the Apple Watch Series 3 is priced similarly to a bunch of other fitness trackers—and it seems to have found some traction there.

Then there’s the AirPods and AirPods Pro, which also achieved record revenues. According to Cook, Apple couldn’t make enough AirPods Pro to meet demand—and that’s still the case, and the company doesn’t know when it will be able to. That’s the sign of a hit product (or enormous production problems, but I’ll guess the former).

The arrow points up

If you’re not an investor or Wall Street analyst you might have missed perhaps the most important news Apple broke on Tuesday. It’s not about the 2019 calendar holiday quarter, it’s about the second fiscal quarter of 2020, the one we’re living in right now. Every quarter, Apple supplies guidance about how it thinks it will perform in the next quarter. On Tuesday it said it would generate between $63 and $67 billion, a wide spread that it said was due in part to some uncertainty about what will happen with the spread of the Coronavirus in Wuhan, China.

That’s great news for Wall Street. Not only did Apple beat its own guidance for this quarter, but it’s now projecting another quarter of year-over-year growth. The fiscal second quarter of 2019 was a $58 billion quarter, so Apple’s predicting growth of between 8 and 16 percent. Until this latest quarter, Apple’s year-over-year revenue growth had been pretty static for a year, measuring between a 5 percent drop and a 2 percent rise. This guidance suggests that Apple will follow up this quarter’s 9% growth with a figure that’s similar, with quite a bit of possible upside.

It’s a good sign that Apple is confident about the direction its business is going in.

What’s up with the Mac and the iPad?

Mac and iPad sales were down. The Mac was down 3% and the iPad was down 11%. A little scary, but Apple put a positive spin on it, mostly saying that this quarter was a “tough compare” to the year-ago quarter, because the product mix was very different.

“Both products had a difficult year-over-year comparison due to the launches of MacBook Air, Mac Mini, and iPad Pro during the December quarter a year ago,” Maestri said. And he’s got a point. There was no major iPad release this year during that period, and that definitely made this year’s holiday quarter pale in comparison to last year’s.

I do think it’s interesting that Apple pointed to the “tough compare” argument for the Mac, though. A new 16-inch MacBook Pro presumably had some impact on sales, though the Mac Pro wouldn’t have—not only did it ship at the very end of the quarter, but it’s not the kind of high-volume product that has a heavy impact on the bottom line. There was a lot of pent-up demand for the MacBook Pro, sure, but a lot of people are probably waiting and hoping for a revision to the smaller MacBook Pro model, and there was an enormous amount of pent-up demand for the MacBook Air last year.

We’ll see whether the Mac and the iPad can turn it around when we check back in on Apple’s financial results in three months. Set your calendar alarms for April 28.


  1. Oh no, did Adam Sandler kill Mr. Jaffray and steal his power? 

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