Apple beats revenue expectations for Q4 even without help from the iPhone 12

Apple beats revenue expectations for Q4 even without help from the iPhone 12
Karl Mondon/Digital First Media/The Mercury News via Getty Images
  • Apple beat revenue expectations for its fiscal fourth quarter even without the boost it typically gets from early sales of its new iPhones.
  • Analysts will be looking for any clues about how the iPhone 12 is performing during the company's earnings call.
  • First weekend iPhone sales usually give the company a boost in the September quarter earnings, but the iPhone 12 launched later than usual because of the COVID-19 pandemic, and will not be included in Apple's latest-quarter reporting.
  • iPhone sales fell slightly short of expectations, but divisions like wearables and services saw significant growth.

Apple beat revenue expectations for its fiscal fourth quarter, even without the boost it typically gets from initial sales of its new iPhones.

The company saw its wearables and services units grow, but Apple stock fell in after-hours trading as iPhone sales continued their decline.

Here's a look at the key numbers. Analyst estimates are based on Bloomberg Consensus data.
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  • Q4 2020 revenue: $64.7 billion. Analysts are looking for $63.48 billion. Apple posted $64 billion in the year-ago quarter.
  • Q4 2020 earnings per share: $0.73. Analysts were expecting $0.70. Apple posted $0.71 in fiscal Q4 2019 (adjusted after its 4-for-1 stock split).
  • iPhone revenue: $26.4 billion. Analysts were expecting $27.06 billion. iPhone revenue was $33.36 billion in Q4 2019.
  • Services revenue: $14.5 billion. Analysts wee looking for $13.87 billion. Services revenue reached $12.5 billion in the same period last year.
  • Wearables revenue: $7.8 billion. Analysts estimated $7.35 billion. The wearables, home, and accessories unit reached $6.5 billion in Q4 2019.
Smartphone revenue for Apple's fiscal fourth quarter usually gets an extra bump from first weekend sales of the latest iPhone, which typically launches in late September. But the iPhone 12 debuted later than usual this year, in October, because of the COVID-19 pandemic, meaning Apple's earnings for the September quarter don't serve as a bellwether for early iPhone 12 adoption.

Apple's iPhone revenue fell slightly below analyst expectations in its fiscal fourth quarter, but other business segments like services and wearables continued to show strong growth. The results underscore that Apple's strategy of leaning on these businesses to boost its revenue during periods of slow iPhone growth is continuing to work.

Mac sales also reached an all-time record as remote work arrangements continue because of the COVID-19 pandemic. Revenue for Apple's Mac division reached $9 billion compared to $6.9 billion during the same quarter one year ago.
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But Wall Street is still most concerned with how the iPhone 12 is performing so far. Apple provided some vague clues about this even though it did not offer revenue guidance for its fiscal first quarter of 2021.

Luca Maestri, Apple's chief financial officer, said the iPhone 12 and iPhone 12 Pro have been "off to a great start" following their October 23 release. The company expects iPhone revenue to grow in the December quarter assuming the impacts from COVID-19 remain the same. That's even though the iPhone 12 and 12 Pro launched four weeks into the quarter while the iPhone 12 Mini and iPhone 12 Pro Max will be launching seven weeks into the quarter.
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Apple CEO Tim Cook also hinted in the company's earnings press release that early reception has been positive so far.

"Despite the ongoing impacts of COVID-19, Apple is in the midst of our most prolific product introduction period ever, and the early response to all our new products, led by our first 5G-enabled iPhone lineup, has been tremendously positive," Cook said in the release.

Apple's iPhone launches are always closely watched, but this year is particularly important because expectations around the 5G iPhone 12 have been especially high.
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Analysts have estimated that the iPhone 12 could drive significant upgrades for Apple thanks to 5G support, a new design, and the notion that many iPhone owners are using older models, pulling it out of the sales slump it's experienced in recent quarters.

Other recent iPhone launches like the iPhone SE from April and last year's iPhone 11 lineup gave Apple's iPhone business a bump. But Apple has otherwise relied on its growing wearables and services categories to juice its quarterly revenue, as is yet again the case with its fiscal fourth quarter of 2020.

The iPhone 12, however, is expected to begin a long tail upgrade phase, or "super cycle," for the iPhone — one that could stretch on for years.
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"We expect this year's line-up to kick off a significant replacement cycle which we believe will be a multi-year process as new applications and spectrum become available over time," RBC Capital Markets analyst Robert Muller and senior associate Michael Murray wrote in a report ahead of the iPhone 12 unveil.
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