Today’s Q&A comes after Apple disclosed a second consecutive quarterly decline in sales, including modest dips in iPhone and Mac revenue offset by stronger services revenue, iPad sales, and wearable/accessory sales. Cook said that sales were weaker in developing countries than developed ones, yet suggested that they were turning up compared with the prior quarter.
While overall revenues were down by 5% over last year’s quarter, Cook focused largely on a collection of positives, noting that the company now has 390 million active subscriptions fueling its services business, which will only grow further due to the services it previewed at its March special event: Apple News+, Apple Arcade, Apple TV+, and the Apple Card, which collectively build upon the existing successes of Apple’s app, iTunes, and retail stores.
Cook said that the Mac business was held back by processor constraints, which reduced sales by 5% versus what was forecast — an issue that he doesn’t believe will continue to be a problem. iPad sales were improved by the release of iPad Air and iPad mini models with A12 Bionic chips and Apple Pencil support. The latest AirPods, he said, have had “incredible” sales and become a “cultural phenomenon.” He also suggested that sales in Apple’s retail stores have been improved by trade-ins, with more than four times the trade-in activity of a year ago.
Maestri drilled down on the company’s results, suggesting negative foreign exchange issues because of a strong U.S. dollar, and said that gross margin was 37.6%, with products at 31.2%, and services at a 63.8% gross margin — that enabled services to account for 20% of all gross revenue and one-third of profits. He also noted that the company’s loyalty is buoyed by 99% customer satisfaction across the iPhone XR and XS lineup.
Subscriptions, he said, are growing strongly around the world. Paid subscriptions went up 40% across each geographic segment over the last year, and the company expects the numbers to continue to go up over the next year.
iPad revenue grew everywhere, even including China, and the tablet had its best quarter ever in Japan. Revenue growth has resulted from strong customer response to the iPad Pro, and the iPad family has a 93% customer satisfaction rate overall. Wearables grew almost 50% year-over-year, with the Apple Watch having its best results ever in a non-holiday quarter, and AirPods demand continuing to outpace supply.