Apple earnings climb on strength of iPhone 11 sales, strong holiday season

Edward C. Baig, USA TODAY
CEO Tim Cook greets shoppers inside the store.

iPhone 11s have been very kind to Apple's bottom line. 

Driven by what CEO Tim Cook called "exceptional sales" of its latest premium smartphones, Apple posted record 2020 first-quarter revenues of $91.8 billion, up 9% from the same period a year ago.

Earnings-per-share registered $4.99, well above Wall Street forecasts of $4.54, as  estimated by S&P Global Market Intelligence.

The iPhone alone generated nearly $56 billion during the holiday quarter; the iPhone 11 was the best-selling model within the period.

Cook indicated that Apple’s active installed base of devices has reached more than 1.5 billion.

Apple also reported record revenues in the services (iCloud, Apple Music, App Store, Apple Care, Apple TV+) and wearables sectors (AirPods, Apple Watch), the latter of which Cook referred to as having a "blowout quarter".

By itself Apple's wearables business has grown to the size of a Fortune 150 company, Cook said.

The iPhone 11s went on sale in September, the same month the company launched the Apple TV+ streaming service. Apple TV+ faces still competition from rivals Netflix, Hulu, Amazon Prime and most recently Disney+, but Cook says it is off to a "rousing start."

Though it costs $4.99 a month to subscribe to Apple TV+, Apple gave away service for 1 year to consumers who bought pretty much any new device from the company. 

Cook also said the curated Apple News service now draws more than 100 million active users.

While Cook said that the iPhone is typically the first driver to bring people into the Apple fold, the Apple Watch has also lured consumers.

"With each Apple product that a customer buys, I think they get tighter into the ecosystem. It's more likely that the iPhone comes first, but there's no doubt in my mind that there's some people that came into the ecosystem for the Watch."

Apple shares have risen 8% since the beginning of the year, while the Standard & Poor’s 500 index has risen slightly more than 1%. Apple shares closed at $317.69, more than doubling in the last 12 months, Shares reached $322.59 in after-hours trading.

The impact of China's health crisis

One cautionary note concerns a "wider than usual" revenue guidance range of $63 to $67 billion for the next quarter, because of the uncertainty tied to the unfolding coronavirus health crisis in China. Cook said Apple has "alternate sources" for suppliers in the affected Wuhan area.

Apple closed one of its retail stores in China due to the crisis; a number of channel partners have also closed stores. Many of the stores that are still open have reduced their hours, he said.

"We're donating to groups that are working to contain the outbreak (and are) also working with our team and our partners in the affected areas and we have limited travel to business-critical situations as of last week."

Among additional precautions, Apple is frequently "deep cleaning" its stores and conducting temperature checks of employees in China.

"While sales within the Wuhan area are small, retail traffic has also been impacted outside this area across the country in the last few days," Cook said.

Cook sidestepped an analyst question pertaining to a potential 5G-capable iPhone that would be compatible with the next generation wireless network. 

"We're in the early innings of (5G's) deployment on a global basis," he said, adding that we "wouldn't trade our position for anybody."

Cook also would not comment about the possible release of a less expensive iPhone SE. 

Contributing AP

Email: ebaig@usatoday.com ; Following @edbaig on Twitter

This article originally appeared on USA TODAY: iPhone 11 sales drive Apple to record holiday earnings