An Apple store in Hong Kong earlier this week. The company reported an 11% rise in quarterly sales despite being forced to close stores amid the coronavirus pandemic.
Photo: Budrul Chukrut/Zuma PressApple Inc. AAPL 1.21% showed the technology industry’s resilience amid the pandemic, reporting a better-than-expected 11% increase in quarterly sales from a year earlier as it benefited from strong demand for apps and work-from-home devices and avoided a downturn in its iPhone business.
The tech giant posted revenue in its fiscal third quarter of $59.69 billion, even as a new wave of coronavirus outbreaks across the U.S. led the company to again close stores. Profit rose about 12% to $11.25 billion, or $2.58 a share.
The results exceeded analysts’ expectations of $52.24 billion in revenue for the three months ended June 27. Apple and its tech peers have outperformed other industries upended by the pandemic because of their roles providing the goods and services people have turned to as they work remotely and spent less time venturing outside the home.
Apple also said its board approved a four-for-one stock split, aiming to make the stock more accessible to a wider investor base. On Thursday, before the financial report, shares closed at $384.76.
Shares rose nearly 5% in after-hours trading. The company’s stock price has risen more than 31% since the start of the year, adding more than $350 billion in market value.
For the second time this year, Apple declined to project sales for the current quarter, as economic uncertainty continues to make the future hard to predict. The omission follows production challenges stemming from plant closures and travel restrictions to China that have combined to delay the iPhone production ramp-up by about a month. Analysts project sales in the current quarter of $61.59 billion, according to FactSet.
Tech giants Amazon, Apple, Facebook and Google reported earnings. Follow our coverage for results and analysis.
The iPhone business, which posted sales of $26.42 billion, rose slightly behind strong demand for the new, lower-priced iPhone SE, analysts say. The $399 device, introduced in April, encouraged customers with older devices to upgrade, helped lift sales even as many iPhone owners wait for the fall release of the first 5G models.
Apple’s growing services business helped the company set a new June quarter sales record, demonstrating the value of the company’s strategic shift in recent years from selling more devices to selling more software and services across those devices. Services revenue jumped 15% to $13.16 billion.
The services business has come under assault from regulators, lawmakers and developers over the past year because Apple takes a 30% cut of App Store sales. In June, European regulators opened probes into the App Store and Apple’s mobile-payments service. On Wednesday, Chief Executive Tim Cook faced questions from Congress about whether Apple offered favorable terms to larger companies or sought to boost its own services over offerings from rivals.
“We treat every developer the same,” Mr. Cook told the House Judiciary antitrust subcommittee. “It’s a rigorous [approval] process because we care about privacy and quality.”
The company’s Mac and iPad businesses benefited from the well-timed release of product upgrades. Sales of Macs rose 21% to $7.08 billion after Apple released a series of laptop updates in the period that featured a traditional keyboard instead of the flawed, butterfly keyboard adopted in 2015. In mid-March, the company released a new iPad Pro and complementary keyboard that helped lift quarterly sales of that business by 31% to $6.58 billion.
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“On almost every front of their business, they’re participating in things people need in this environment,” said Stephen Lee, a principal at Logan Capital Management, a Newtown Square, Pa., firm with $3 billion in assets under management. “Laptop demand in general is getting boosted as families consider the impact of staying home. Apple’s customer base, which is slightly more affluent, seems to be willing to spend.”
Sales in China rose slightly to $9.33 billion as the country’s economy rebounded in the quarter after being the world’s first to shut down earlier this year as Wuhan became the virus epicenter. Following the shutdown, Apple encouraged demand for iPhones by offering discounts on its iPhone 11 models, which combined with the release of the iPhone SE, helped boost unit sales by 32% during the quarter, according to Counterpoint Research.
Growth in the Chinese smartphone market has slowed in recent years, though smartphone makers are hoping that the transition to 5G technology will encourage customers to upgrade to new devices. Smartphones with 5G accounted for one in three devices sold in the country during the three months ended in June, according to Counterpoint, an uptick that underscores the importance of Apple’s delivery of its first 5G devices later this year.
Huawei Technologies Co., which eclipsed Samsung Electronics Co. as the world’s largest smartphone maker during the April-to-June period, captured 60% of the 5G smartphone market in China.
“China is the first big opportunity for a lift from 5G for Apple,” said Gene Munster, managing partner at Loup Ventures, a venture-capital firm specializing in tech research. “This is a feature Apple has to have to be relevant, but it won’t be easy because Huawei is already in the market with 5G and having success.”
Write to Tripp Mickle at Tripp.Mickle@wsj.com
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