Apple's services revenue offsets falling iPhone sales

Brief:

Apple reported a 1% gain in revenue in its latest quarter compared with a year earlier, for a total of $58.3 billion as its services business helped to offset a drop in iPhone sales, per its quarterly report. The coronavirus pandemic disrupted its supply chain and led to a 7.5% decline in revenue for Greater China, where stores were closed temporarily.
The company's services business, which includes Apple Music, Apple Pay and Apple TV+, jumped 17% to $13.3 billion in its fiscal Q2 from a year earlier, a significant bright spot for the company. Its wearables, home and accessories category, which include Apple Watch, AirPods and the HomePod smart speaker, saw a 23% gain to $6.28 billion from a year earlier.
Sales for iPhones slumped 6.7% to about $29 billion, while iPad sales experienced a 2.9% slide to $5.35 billion. The company didn't offer guidance for the remainder of the year because of the pandemic, the first time since 2003 that Apple hasn't provided an estimate of future results, The Wall Street Journal reported.

Insight:

Apple's mixed results have several implications for mobile marketers, though the uncertainties with the coronavirus pandemic complicate that analysis. A key test will be whether Apple can maintain its market share amid dampened consumer demand for smartphones, a possibility that would affect how software developers market their apps in the company's App Store and its archrival, Google Play. The App Store is a key marketing vehicle for any company that has an app, and typically sees higher spending than Google Play, per researcher Sensor Tower.

Apple's results show that its services business performed well as homebound consumers boosted their media consumption, likely giving a lift to its Apple Music and Apple TV+ services that charge monthly subscription fees. Those services don't carry advertising, limiting the ability of mobile marketers to reach Apple's users in the same way they can for other platforms with ad-supported tiers, including Pandora, Spotify, Hulu and the startup Quibi. For Apple, the services business gives people another reason to stick with its products while also helping to diversify revenue and maximize the customer lifetime value (CLV).

There have been a few signs recently that Apple may be exploring making ads a bigger focus after years of shying away from this area. Apple recently updated its software for search ads in an indication the company may expand ad placements into more of its apps. The company is also now letting apps send advertising as push notifications with permission from users. Apple expects its ad business to be one of the areas impacted by the pandemic going into the next quarter.

Apple faces a significant test in being able to reopen its stores in countries outside of China, and bring its next generation of products to market by the key holiday buying season. It's discouraging that the company decided not to provide sales guidance for the remainder of the year, but it does indicate how much the coronavirus pandemic is affecting almost every aspect of the company's operations. Apple is delaying the production of its next iPhones until October or later in the year because of weaker demand and factory disruptions, the Wall Street Journal reported. That may still give the company enough time to ramp up sales for the holidays.