Apple Q3 2020 Earnings Report: iPhone Sales Surge & Stock Split Announced at $403 Share Price

Apple delivered a strong Q3 2020 earnings report, surpassing analysts' expectations despite ongoing store closures amid the pandemic.

Highlights

• Reported EPS of $2.58 outpaced the $2.21 forecast.
• Revenue significantly exceeded projections, driven by robust iPhone sales.
• Services revenue met expectations, maintaining steady growth.

Q3 2020 Earnings Overview

On July 30, 2020, Apple announced impressive quarterly results, defying concerns from ongoing antitrust investigations and global economic uncertainty. Notably, the revenue surprise stemmed from iPhone sales, which rebounded strongly after a prior decline, rather than from the services segment that Apple has been strategically expanding. Additionally, Apple declared a 4-for-1 stock split, reducing the share price from approximately $403 to near $100, making shares more accessible to investors. Following the announcement, AAPL shares surged in after-hours trading.

Below is the original earnings preview published on July 23, 2020.

Investor Focus Ahead of Earnings

Apple's stock has climbed roughly 73% since mid-March 2020, reflecting investor confidence amidst the COVID-19 pandemic. After a significant drop earlier in the year, optimism grew when Apple surpassed expectations in its April quarterly report. Investors eagerly awaited the Q3 FY 2020 earnings release on July 30 to assess the company’s resilience against the economic impacts of the pandemic. Analysts anticipated a year-over-year decline in both earnings per share (EPS) and revenue, with Apple's fiscal year ending in September 2019.

One critical area of interest was Apple's services revenue. CEO Tim Cook has prioritized accelerating services growth, although this segment still accounts for less than 20% of total revenue. Analysts expected healthy, though slightly slower, growth in services revenue compared to previous quarters.

Apple’s long-term services strategy and new product launches have contributed to the company’s strong market performance. Over the 12 months leading up to July 22, 2020, Apple’s shares delivered an 89.6% total return, vastly outperforming the S&P 500’s 9.5% return.

Despite a slight dip following the Q2 FY 2020 earnings report ending in March, Apple’s fundamentals remained strong. The company exceeded analyst estimates with EPS growth of 5.7% and revenue growth of 0.5%, despite supply chain disruptions in China and global store closures. These challenges constrained both product availability and consumer demand.

In Q1 FY 2020, reported before the pandemic, Apple set a revenue record of $91.8 billion with EPS growth of 19.4% and revenue growth of 8.9%, driven by new iPhone sales and expanding services and wearables segments. However, analysts forecasted a 10.1% EPS decline and a 3.7% revenue decrease for Q3 FY 2020, marking the largest EPS drop since FY 2016 and the first revenue decline since mid-2019.

Apple’s pivot toward services remains a key focus. This segment includes offerings such as Apple TV+, Apple Arcade, the App Store, Apple Pay, and AppleCare. Services generate higher margins—between 61-65%—compared to hardware products, which average 30-34%. In Q2 FY 2020, services revenue grew 16.6% to an all-time high of $13.3 billion, demonstrating resilience despite the pandemic.

Analysts expect continued services growth of 15.4% in Q3, though this rate is slower than previous peaks. This suggests that Apple’s strategic shift is effective even amid economic headwinds, though growth is moderating.

For more news updates on Apple and market insights, stay tuned to ZAMONA.

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