Apple reports flat revenue and does not offer guidance because of coronavirus uncertainty

Apple CEO Tim Cook speaks during Apple’s annual Worldwide Developers Conference in San Jose, California, June 3, 2019.

Mason Trinca | Reuters

Apple shares were down slightly in extended trading on Thursday after the company’s second-quarter earnings in which it reported $58.3 billion in revenue, a slight year-over-year increase, during a quarter in which supply and demand for Apple’s products was negatively affected by the Covid-19 pandemic.

Here’s how the company did:

  • EPS: $2.55 per share, adjusted
  • Revenue: $58.3 billion
  • Gross margin: 38.4%

Analysts surveyed by Refinitiv had expected $2.26 in adjusted earnings per share on $54.54 billion in revenue for the fiscal second quarter, with a 38.4% gross margin. With respect to fiscal third-quarter guidance, analysts polled by Refinitiv were looking for $51.54 billion in revenue and a gross margin of 38.5%. However, the impact of Covid-19 on impact on economic activity has made it more difficult for analysts to accurately predict companies’ results.

However, Apple did not issue guidance for the quarter ending in June, as it usually does. The company withdrew guidance for this quarter in February as the Covid-19 coronavirus spread in China.

Apple will also continue to buy back its stock amid the pandemic, the company said. It has authorized an increase of $50 billion in the company’s share repurchase program, in addition to a $0.82 cent dividend. In Apple’s fiscal 2019, it spent $67.1 billion repurchasing shares and $14.1 billion on dividends.

“We have great confidence in the long-term of our business. In the short-term, it’s hard to see out the windshield to know what the next 60 days look like, and so we’re not giving guidance because of that lack of visibility and uncertainty,” Apple CEO Tim Cook said in an interview with CNBC’s Josh Lipton. “It was a very unique quarter. I’ve never had anything quite like this. I hope to never have it again, but I’m incredibly proud of the company and what was achieved during that period of time.”

 iPhone revenue was down to $28.96 billion, a 7% year-over-year decrease. The shortfall was partially made up by a 16% rise in services revenue, which include iCloud, Apple Music, and other subscriptions, to $13.34 billion. Total revenue growth for the quarter decreased to 0.5% from 9% on quarter ago.

Cook said that the company’s TV subscription service, Apple TV+, was doing well as more people watched content while under lockdown, and that people were turning to iPad and Mac, the company’s larger computers, in increasing numbers. 

“It’s clearly helping the iPad and the Mac and, for that reason…we envision both of those to have improving year-over-year performances in this current quarter,” Cook told CNBC. ”If you look at TV+ as an example, we’ve seen a significant uptick in the number of people that are viewing content as well as the engagement with content.”

Apple’s cash hoard now stands at $192.8 billion, down from $207.1 billion at the end of the previous quarter.

Apple had addressed the impact of the Covid-19 pandemic while it was still mainly affecting China, but on Thursday Cook struck an optimistic note about worldwide recovery in his interview with CNBC. “There was a significant, very steep fall-off in February. That began to recover some in March, and we’ve seen further recovery in April. So, it leaves us room for optimism,” Cook said. 

Apple’s stores around the world, except in China and one location in Korea, are shuttered until further notice. Apple’s critical engineers and designers are working from home as the company’s headquarters of Santa Clara County has recommended through the end of May. Its annual developers conference in June, WWDC, has moved to an online format. 

Executives will discuss the results with analysts on a conference call starting at 5 p.m. Eastern time.

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