To recap, Apple topped depressed March quarter estimates, with iPhone revenue (though down 7% annually) beating consensus by about $900 million and Services revenue (up 17%) beating by about $500 million. The company declined to provide June quarter sales guidance, but did mention on its earnings call that it has seen an "across the board" improvement in demand during the second half of April following a "sharp decline" during much of March and early April.
Tim Cook attributed the recent demand pickup to three factors:
- The launch of new products. That was a reference to the new iPad Pro and MacBook Air models that were announced on March 18, along with the new iPhone SE, which saw pre-orders start on April 17.
- The impact of stimulus programs, which (judging by third-party data) have provided a healthy boost to discretionary consumer tech and electronics spending at a time when COVID-19 lockdowns are having a major impact on spending in areas such as travel and dining/entertainment.
- Mac and iPad sales are benefiting from purchases made to support remote work and learning activities.
It's possible that remote work/learning purchases could remain strong for a while, given that many companies, schools and colleges appear set to reopen slowly in the coming months. Likewise, some of Apple's services businesses, such as App Store transactions and Apple Music and iCloud storage subscriptions, should continue getting a boost from consumers spending more time at home than usual. Yesterday, research firm SensorTower reported that iPad app downloads just saw their first quarter of positive annual growth in four years.
Also: Given that many consumers want to try out a phone in person before buying it, there's probably some pent-up iPhone demand right now that will be addressed once shuttered retail stores (both Apple's and those of wireless carriers and other electronics resellers) start reopening. Cook said yesterday that "a few" Apple Stores could reopen in the U.S. during the first half of May.
But at the same time, unless there are initial shortages or the holiday season is near, sales of new products tend to cool off after their first few weeks of availability. And one can't count on debt-financed stimulus programs perpetually boosting discretionary consumer spending.
Meanwhile, in the absence of ongoing stimulus boosts, a macro environment featuring high unemployment and major disruptions to industries such as travel, hospitality, auto and energy might not be a good one for discretionary tech and electronics spending -- even if lower spending on things such as travel and dining/entertainment provides an indirect boost.
This can't be ignored at a time when the iPhone, which is a few months away from seeing an anticipated fall refresh, still accounts for over half of Apple's annual revenue, and the company's Wearables, Home & Accessories segment, which also depends heavily on discretionary purchases, has grown to account for a double-digit percentage of revenue.
With research firms estimating that smartphone shipments fell by a double-digit percentage in Q1, and Qualcomm (QCOM) estimating that phone shipments fell 21%, iPhone sales do appear to be holding up better than smartphone sales at-large. And as is the case for other tech giants, Apple could emerge from this downturn in a stronger long-term position than where it started -- both due to consumers spending more time using Apple devices and the services that they support, and due to Apple potentially using its balance sheet strength to make strategic moves when they present themselves.
But with Apple's stock now nearly flat on the year and up 38% over the last 12 months, macro trends and their impact on discretionary spending are definitely worth paying close attention to right now.