Apple Q3 Report Revealed That The Company Recorded $59.7 Billion In Revenue And Double-digit Growth In Its Products And Services Amid Pandemic

On Thursday, Apple (AAPL) reported a very surprising third-quarter earnings report which blew out analyst estimates and showed the company has been faring exceptionally well in this period of ravaging pandemic. In the third quarter report submitted by the company, Apple recorded $59.7 billion in revenue and double-digit growth in its products and services. In addition to this, the company announced that all investors in the company would get an additional three shares of Apple per share of what is already owned at the end of the month of August. The additional share is part of the company's 4-1 stock split.

Although Apple stores were also affected by the lockdown measure put in place to contain the spread of the coronavirus, the company adopted a work from home measure and strong online sales which helps to keep its business afloat despite the pandemic. Also, Apple revealed that it made more sales in its other products during the stay at home order. 

Meanwhile, the company has refused to issue new guidance for the second quarter in a row. The reason for this is because of the ravaging pandemic and the uncertainties of the situation. Usually, before the outbreak of the coronavirus, Apple often releases its set of new iPhones in late September. But this year might not be the same because of the pandemic and the resulting situations. The company's CEO, Luca Maestri, said in a phone call with analysts that the company might delay the release of new iPhones this year. 

However, after the report, Apple shares surge more than 6% in extended trading. 

Below is a breakdown of the company Q3 report in comparison to Refinitiv consensus estimates:

• Earning per share: $2.58 vs $2.04 estimate
• Revenue: $59.69 billion vs $52.25 billion estimate
• iPhone revenue: $26.42 billion vs $22.37 billion estimate
• Service revenue: $13.16 billion vs $13.18 billion estimate

“We’re conscious of the fact that these results stand in stark relief during a time of real economic adversity for businesses large and small, and certainly for families,” CEO Tim Cook said on a call with analysts.

Despite the fact that Apple's business is highly seasonal and that this year has been a very tough one for the company due to pandemic, the third-quarter earnings report revealed that the revenue recorded is the highest Apple has ever gotten in its third-quarter earnings reports. Apple's revenue surge with about 11% year-over-year and every major product line experienced the same increase. Also, when compared to the previous year, this year, Apple's service increased with 14.85%. This made the company achieve more than its internal goal of $50 billion. 

“We are proud to announce that we have achieved our goal of doubling our fiscal 2016 services revenue six months ahead of schedule,” Cook said.

Here is a break down of how the company performs in its product line in comparison to Refinitiv consensus estimates

• iPad revenue: $6.58 billion vs. $4.88 billion estimate.
• Mac revenue: $7.08 billion vs. $6.06 billion estimate.
• Other Products revenue: $6.45 billion vs. $6 billion estimates.
• Gross margin: 38.0% vs. 38.0% estimate.

Meanwhile, it is important to note a large percentage of Apple's reported revenue came from the company's other products. According to the report, iPhone sales only rose 1.66% year-over-year while other products experienced an increase in their demand and sales. Many of these products are things that are very useful during the stay at home order amid the pandemic. For instance, iPhone iPad sales skyrocketed up to 31% while Apple AirPods and the Apple Watch grew 16.74%. 

Cook added that irrespective of the inventory shortage, the company was also able to record Mac and iPad results. In an interview with CNN, he added that the stay at home order boosted the company's sales.

“It definitely has boosted Mac and iPad. We see both of those likely picking up share and, in addition, being a tool of choice for their productivity,” Cook told Lipton.

He added that about 75% of Apple stores have reopened during the gradual reopening of business activities after the lockdown. He also said there has been an increase in the number of users switching from Android to iPhone. This, according to him, was triggered by the cheap price of iPhone SE which sells for $399.

“Overall these were ‘blow out’ results which in our opinion will add another leg to the Apple long term growth story,” Wedbush analyst Dan Ives wrote in an email.

Apple stock split

The 4-1 Apple stock split is the fifth in the company's history. The company had the first stock split in 1987, then the second in 2000. In 2005, the company had another stock split of a 2-1 basis and a 7-1 basis in 2014.  Aside from the split, Apple also declared a cash dividend of $0.82 which would take force on August 13. 

Lastly, in the report, Apple recorded a $193.83 billion cash on hand which is also more than what is recorded in its fiscal second quarter.