Apple’s Q4 2020 Marks Record Revenues but Lower Profits as Mac and iPad Boom
Reporting on its fourth-quarter 2020 financial results, the company’s second quarterly report since the start of the continuing global pandemic, Apple announced net profits of $12.67 billion ($0.73 per diluted share) on record-setting revenues of $64.7 billion. The company’s revenues beat the year-ago quarter by 1%, but profits were down by 7.4% (see Apple Q4 2019 Breaks Records Despite Slipping iPhone Sales, 30 October 2019).
The reason is the huge year-over-year drop in iPhone sales, which fell 20.7% due to the delay of the iPhone 12 models (see “Apple Q3 2020 Breaks Records While the World Burns, Next iPhone to Be Fashionably Late,” 30 July 2020). Losing those sales accounted for Apple’s year-over-year decline in profits, although they’ll undoubtedly boost the Q1 2021 results next quarter.
But the flip side is the astronomical growth in Apple’s other businesses to help offset the lower iPhone sales. Revenue for every category outside of the iPhone grew by double digits.
iPad revenue rose by a whopping 46% year over year, bringing in $6.8 billion. Mac sales broke a new record in Q4 2020, with an amazing 29.2% year-over-year increase that accounted for over $9 billion in revenue, the category’s largest increase ever “by far,” according to Apple CFO Luca Maestri.
“Both Mac and iPad are incredibly relevant products for our customers in the current living and working environments,” said Maestri. He also cited strong back-to-school sales for the massive increase.
“Normal will become something different,” CEO Tim Cook said, “because people are learning that there are aspects of this [remote work and teaching environment] that work well, and so I don’t believe we will go back to where we were. iPads and Macs are even more important in those environments.”
Put simply, despite the iPhone’s delay, the Mac and iPad both saw rapid sales growth due in part to a wave of kids suddenly thrust into remote schooling and employees working from home. “Demand exceeded our expectations around the world,” Maestri said.
Apple’s Services category enjoyed yet another record-breaking quarter, with 16.3% annual revenue growth, for a total of $14.5 billion in revenue. Apple cited strong growth from the Apple Store, Apple Music, and Apple TV+. The latter seems to be taking off, with Ted Lasso, Apple TV+’s first bonafide hit, emerging as both a critical and audience favorite. It’s worth noting that Services revenue also includes billions of dollars of payments from Google for the default placement of its search engine on Apple devices.
Cook let an additional little nugget drop: the Apple One service bundle is slated to launch on 30 October 2020. See “Apple Subscriptions Expand with Apple Fitness+, Apple One Bundles” (15 September 2020).
Payments by Apple Card and Apple Pay, part of the Services category, continue to accelerate, with the popularity of contactless payments rising notably because of customer resistance to handling physical cash and cards during the pandemic. Cook reiterated the theme of a “new normal,” saying that this shift in customer behavior will likely persist in years to come.
Wearables, Home, and Accessories had yet another strong quarter, with revenue up 20.8% year over year for a total of $7.9 billion. The Apple Watch Series 6 launched before Q4 ended on 26 September 2020, which may have helped that category’s revenue increase.
Another area where Apple saw some pain is in the Greater China region. While Apple posted steady numbers or slight growth in most regions, revenues fell by 28.6% in China. Other regions, however, seemed to take up the slack, with European sales, for example, totaling over twice the revenues from China.
During the quarterly investor call, Cook mentioned that Apple was supply constrained on the iPhone 12, Mac, iPad, and some Apple Watch models. It remains unclear whether Apple is overwhelmed with demand or suffering from the supply chain hiccups that have hit many industries this year; Apple’s sales results suggest both.
Pointing out that Apple’s watchwords are “resilience” and “hope” in the face of current conditions, Cook said, “We feel great optimism about the road in front of us.” Maestri continued that theme, predicting double-digit growth in equipment sales.
As it faces a future that’s more unpredictable than ever before, Apple will need both hope and resilience in the months ahead, but, judging by this last quarter’s performance, it may well continue beating expectations through the first fiscal quarter of 2021.
No grand insights from me but it is nice to see non-iPhone parts of the business doing well and helping Apple be more diversified. Hopefully the increased Mac sales will encourage Apple to continue paying more attention to the Mac.
This reminds me that years ago friends couldn’t understand why Apple was still in the Mac business. This was back in the day of the iPod, pre-iPhone. There were convinced that Apple should just go into the iPod business and dump the Mac.
That was a sneakily massive quarter. As noted, iPhone sales, which make up the majority of Apple’s revenues, shrank dramatically because the year ago quarter had a chunk of sales from the new iPhone model and this one didn’t. That drop concealed the fact that every other division had massive growth, which meant that despite the 21% iPhone drop, Apple still earned more than every other non-holiday quarter ever.
My favourite thing about this article are the colours, particularly the first chart. Put a smile on my face
I appreciate the idea, but I will note that for a colorblind person like myself the colors for wearables and services are almost indistinguishable.
Glad to hear it! We figured that Apple’s original six-color logo options were the most obvious choice.
Drat, sorry! It does look to me like that first chart is using the orange for Services, whereas the Services-specific chart later on is using the yellow. We should be consistent regardless; can you tell if the yellow would work better when next to the green for Wearables?
Yes, @ace, the bar chart color for services is definitely easier to distinguish from the wearables color than in the top plot. It’s lighter giving it more contrast to the wearables green. But of course that’s just me. There are lots of colorblind people who don’t have as much trouble with green and orange.
Well, we need to be consistent, and you’re the first person who’s said anything about this, so you win.
@jcenters, can you please change that orange in the first chart to the yellow?
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