Apple Services Revenue Jumps, Subscription Bundles Debut

Apple outsold analyst expectations on services, iPads and Macs. But the iPhone missed analysts’ expectations as sales were down over 20 percent year over year because of the iPhone 12 release delay.

And investors weren’t pleased, sending the stock down 5 percent — Apple lost $100 billion off its market cap in moments as a result, according to Yahoo Finance.

Normally, fiscal Q4 for Apple can count on a big iPhone sales bump — care of whatever the latest flagship model has gone out during the last few weeks of the quarter. But the pandemic caused production delays that meant those highly-anticipated new 5G phones aren’t officially on sale until today (Oct. 30) and the iPhone figures in Q4 suffered as a result — sales of the iPhone fell 21 percent on anticipation of the new models, hitting $26.44 billion — missing the $27.93 billion estimated by Wall Street pre-release.

Also showing soft numbers in the quarter was Apple’s performance in China, where sales dropped to $7.95 billion from $11.13 billion a year before, over a 28 percent decrease. Weakness, Apple CEO Tim Cook noted, that was largely a symptom of the delayed iPhone 12 models, making up a large percentage of China revenue.

Nonetheless, Cook told investors, early response to the iPhone 12 has been positive — and the firm’s expectation is for a powerful performance in iPhone sales in Q1.

“Given what we see in the early going with the new iPhones, we’re confident we’ll grow in Q1,” Cook noted.

Apple Chief Financial Officer Luca Maestri echoed that message, noting the new line will be pushed by the tailwind of the emerging 5G technology worldwide, which he referred to as a “once-in-a-decade opportunity.”

Other than the iPhone miss, notably, much of the rest of Apple’s hardware came in ahead of expectations. Mac sales set a new record with a 28 percent year-on-year increase in sales to $9 billion, according to CNBC. That came in above analyst estimates of $7.93 billion. iPad sales grew a 46 percent year over year to $6.8 billion, ahead of analyst estimates of $6.12 billion. Apple does not break out specific figures for the Apple Watch, but its category of Wearable, Home and Accessories saw sales tick up 20 percent year over year.

Notably, record-setting once again in Q4 was Apple’s ever-growing services segment, home of Apple Care, Apple Pay, Apple Cards, iCloud and Apple Subscriptions. That segment generated $14.5 billion sales, up from $12.5 billion at this time in 2019, and above Wall Street expectations of $13.9 billion. Additionally, services could be due for yet another bump in its revenue-generating potential when Apple next reports earrings in January. The company plans to launch Apple One subscription bundles with new Fitness+ services, set to debut this quarter.

As for what comes next, citing the growing case count and ongoing uncertainty about the COVID-19 pandemic, Apple waved off offering official earnings guidance for the holiday quarter yet to come.

Apple did manage to beat out analyst expectations for earnings and revenue in Q3, putting up earnings per share (EPS) of 73 cents ahead of the 70 cents estimated and logging revenue of $64.7 billion, which was ahead of the $63.70 billion estimated and a new quarterly revenue record for Apple. However, none of that was quite enough for investors in terms of what they wanted to see, and Apple stock, which was floating above $116 most of the day, dipped to close at $115.32.