App Store And Other Services Buoy Apple As Overall Product Revenue Slips

The three months ended March 31 were an eventful time for Apple Inc., as they were for most companies, but unlike many the company managed to largely contain the damage wrought by the Covid-19 pandemic. “We’ve seen our products take on renewed interest” in the wake of Covid-19 and the lockdowns it inspired, Apple chief executive Tim Cook told equity analysts Thursday during a quarterly earnings call.

Much of this momentum started to show up with the year’s second quarter well underway as consumers settled into shelter-in-place routines and workers rigged the technology they need to work at home. “In the second half of April we’ve seen an uptick across the board not related to a certain [geography] or product.” Cook said. “Some of it’s due to new products, some due to the stimulus, some was due to work at home more.”

Apple’s celebrated iPhone business logged $29 billion in sales for the first quarter, while the active installed base has “reached an all-time high,” noted Luca Maestri, the computing giant’s chief financial officer, though he did not disclose specifics. The device serves as the instrument for Apple Pay, the company’s mobile wallet, which can be used for online and in-store purchases. Neither Cook nor Maestri updated numbers for Apple Pay, though Maestri stressed the importance of “leading grocers around the world” accepting Apple Pay during a pandemic that has led consumers to put a premium on contactless payment methods. Cook reported in January’s earnings call that Apple Pay was already on pace to record 15 billion transactions annually.

New services, he added, “continue to add users.” These include the Apple Card, a virtual and physical credit card that Apple launched last year and that works with the iPhone. The issuer is investment-banking giant Goldman Sachs. Apple’s services business as a whole was a prime beneficiary of this and other entries in the March quarter, with revenue climbing a healthy 17% year-over-year to a record $13.3 billion. Helping out here was the App Store, which like most e-commerce businesses benefited from stay-at-home consumers’ turn to online channels. App Store revenue “grew by strong double digits,” Maestri said.

The result in services more than offset a 3% dip in the products business, to $45 billion. Sales of iPhone models slipped 6.7% compared to the same period last year. But wearables, which include the Apple Pay-capable Apple Watch, logged $6.3 billion in revenue, up fully 23% year-over-year, good enough to rank second only to the iPhone among Apple’s product categories.

Overall, Cupertino, Calif.-based Apple’s revenue, at $58.3 billion, was up 1%.