Record demand for Mac and Services helps Apple offset iPhone slump

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Apple has benefited from the ongoing shift to flexible working and demand for entertainment services during lockdown, with record revenues for its Mac and services division helping to offset a slump in iPhone sales in Q4.

The mobile industry in general has suffered during the pandemic. The early phase of lockdown created supply chain issues, while demand was hit by the associated economic challenges of Covid-19, store closures, and restrictions on people’s movement.

Apple has fared better than many of its rivals but still saw iPhone revenues fall by 21% to $26.4 billion (£20.2bn) during the three months leading up to the end of September. However, the same period last year saw the launch of the iPhone 11 whereas the release of the iPhone 12 was delayed until this week.

Apple Q4

This helps explain such a steep drop and also means that Apple isn't too concerned as delayed purchases are set to contribute to a bumper Q1.

The iPhone 12 is Apple’s first 5G-compatible handset and there is hope that support for next-generation networks will stimulate demand. Not that investors will have much idea about what Apple expects to happen – it hasn’t published any guidance.  

Overall revenues were relatively static at $64.7 billion (£49.9bn) and met analyst expectations, aided by a 28% jump in Mac revenues to $9 billion (£7bn) and a 31% increase in iPad sales to $6.8 billion (£5.24bn) . Services, which have been a bountiful source of growth for Apple in recent times, increased by 16.3% to $14.6 billion (£11.25bn) as consumers bought apps, made microtransactions and signed up for subscriptions for music, tv, movies and cloud storage.

Meanwhile, the launch of new Apple Watch models helped wearables and accessories report revenues of $7.9 billion (£6bn), up 16.3%.

“Apple capped off a fiscal year defined by innovation in the face of adversity with a September quarter record, led by all-time records for Mac and Services,” said Tim Cook, Apple CEO.

“Despite the ongoing impacts of COVID-19, Apple is in the midst of our most prolific product introduction period ever, and the early response to all our new products, led by our first 5G-enabled iPhone lineup, has been tremendously positive. 

"From remote learning to the home office, Apple products have been a window to the world for users as the pandemic continues, and our teams have met the needs of this moment with creativity, passion, and the kinds of big ideas that only Apple can deliver.”

With the busiest shopping season of the year ahead, Apple has made moves to ensure as many people can get their hands on the iPhone 12 as possible. In the US it is allowing retail stores to act as distribution points, while it is expanding the 'express' store format to more locations in Europe.

The idea is that even if stores are forced to close due to lockdown restrictions, they can still perform a vital role. A bigger concern might be supply chain issues, with Cook telling investors the company was working hard to remedy the situation. 

Steve McCaskill is TechRadar Pro's resident mobile industry expert, covering all aspects of the UK and global news, from operators to service providers and everything in between. He is a former editor of Silicon UK and journalist with over a decade's experience in the technology industry, writing about technology, in particular, telecoms, mobile and sports tech, sports, video games and media.