Apple reports results for the second quarter of its 2019 fiscal year. When the iPod was still a bestseller, this quarter from January to March was as soft as the previous quarter, the Christmas and New Year’s Eve quarter. And then China grew in power. The second fiscal quarter has become a second Christmas quarter.
But the Chinese market shrank, and the beautiful mechanics stopped. Worse still: iPhone sales, which represent more than half of Apple’s business, are leveling off. It explains the relative underperformance of this quarter, anticipated by the Cupertino firm’s management. Because all the other signals are green: the iPad continues to rise, the Apple Watch and AirPods weigh almost as much as the Mac, and services continue to grow.
A quarter in the green, a quarter in the red, Mac sales continue to play the yo-yo. After increasing by 8.68% at Christmas, they fell by 4.55% to $5.513 billion. It is not quite a surprise: both IDC and Gartner had warned. Apple is not immune to the contraction of the PC market, but maintains its third place in the US market and its fourth place worldwide, ahead of Acer and behind Dell.
Services and other products
Services continue to grow wildly: they grew 16.24% again this quarter, reaching $11.450 billion. While it has just devoted a unique event to them and should open new services in the coming months, Apple confirms its ability to reach 500 million paying subscribers by 2020.
Revenues from operations
International sales represented 61% of the company’s business. Without China, sales would have fallen by only a very minor 0.66%, with sales increasing both in the Americas (+3.04%) and Japan (+1.17%). That said, the situation in the Chinese market has not worsened: the drop in sales in the second quarter (-21.54%) is less significant than in the first quarter (-26.66%). Tim Cook sees this as the effect of the recent VAT cut and the relative lull in the trade war between China and the United States.
The first results seemed encouraging: the iPhone’s market share is actively growing in the United States, the latest models have entered the Chinese top 5, and the iPhone XR is a hit. But they are not reflected on the balance sheet: iPhone revenue fell by 17.32%, even worse than in the first quarter, to $31.051 billion. As a result, in two years, the iPhone’s share of Apple’s revenue has risen from 66% to 53%.
With a turnover of $4.872 billion, up 21.55%, the iPad is once again a pillar of Apple’s business. The recent refresh of the iPad mini, designed to meet the continuous demands of a concrete customer base, should continue this success in the third quarter. For the past two years, Apple has been adapting its model to the longer renewal cycles of the iPad, playing a lot on the range effects.
The iPad Air is a crucial component in this device: without being much less capable than the iPad Pro, it is much cheaper, but also more profitable. Now that Apple no longer details sales figures, it will be more challenging to assess its success. However, financial analysts will undoubtedly provide some answers in the coming months.