Apple smashes sales in third quarter, outpaces rivals in growth

iPhone SE and iPhone 11 sales contribute to record June quarter as Apple defies expectations in first true half of the year

Not even Covid-19 seems to have affected Apple, which has posted strong third-quarter revenues and, according to research, is the only one of its peers to have grown unit shipments in the second quarter of 2020.

For its fiscal 2020 third quarter ended 27 June 2020, Apple posted quarterly revenue of $59.7bn, an increase of 11% from the equivalent quarter in 2019. Operating income was $13.091bn, a rise of 13.4% on Q3 2019, while net income for the quarter was $11.253bn, an annual rise of 12%.

International sales accounted for 60% of the company’s record revenue for the June quarter, driven by double-digit growth in both products and services, and growth in each of its geographic segments.

Product sales in the quarter amounted to $46.529bn, up 9.857% on an annual basis, while services rose year on year by 14.85% to $13.156bn. Apple grew earnings per share (EPS) by 18% and generated operating cash flow of $16.3bn during the quarter – a June quarter record for both metrics.

However, Apple’s strong performance came as it was identified by research firm Canalys as the only grower in a global smartphone market that had declined in the period from April to June 2020. Canalys calculated that the global smartphone market had plummeted by 14% in Q2 2020, with Apple the only leading supplier to grow. It shipped 45.1 million iPhones globally, 25% more than in the previous year.

The smartphone market worldwide fell to 285 million units in a second consecutive quarter of what Canalys described as “freefall”, as lockdown orders caused by the Covid-19 pandemic persisted through April and May.

Overall market share leadership rankings changed as Huawei surpassed Samsung in unit shipments for the first time during the quarter. Canalys observed that in Q2 2020, Huawei shipped 55.8 million units, compared with Samsung’s 53.7 million. Xiaomi came fourth, shipping 28.8 million units, which was down 10%, and Oppo reclaimed fifth place from Vivo, shipping 25.8 million units with a 16% decline.

Looking at the key regions for smartphones, the study revealed that the world’s largest smartphone market, China, declined by 7% in Q2 2020, but noted that its economy was gathering momentum amid successful virus suppression. Huawei was the clear market leader in China, taking 44%. The US was the second-largest market. Apple, its longstanding leader, showed double-digit growth in the quarter.

By contrast, India, the world’s third-largest market, was found to have shrunk by 48% to 17.3 million units amid a strict lockdown.

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“Apple defied expectations in Q2,” said Canalys analyst Vincent Thielke. “Its new iPhone SE was critical in the quarter, accounting for around 28% of its global volume, while iPhone 11 remained a strong best-seller at nearly 40%. iPhone SE will remain crucial to prop up volume this year, amid delays to Apple’s next flagship release.

“In China, it had blockbuster results, growing 35% to reach 7.7 million units. It is unusual for Apple’s Q2 shipments to increase sequentially. As well as the new iPhone SE, Apple is also demonstrating skills in new user acquisition. It adapted quickly to the pandemic, doubling down on the digital customer experience as stay-at-home measures drive more customers to online channels.”

Canalys said smartphone companies need to adapt rapidly to the new normal of the pandemic. Suppliers will need to switch channel focus at short notice to adapt to second-wave outbreaks, it said, adding that geopolitical uncertainty also hangs over the global smartphone market, with countries becoming polarised between the interests of the US and China.

Senior analyst Ben Stanton said: “So far, consumer purchasing power in major markets has remained relatively stable. Governments have undertaken extraordinary stimulus initiatives to prop up their economies. However, the real test will be in the coming months, as stimulus money is tapered off and furlough schemes withdrawn.”

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