Following its fiscal third-quarter update on Tuesday afternoon, Apple stock rose sharply on Wednesday. The gain added to the stock’s sharp year-to-date gain this year. Shares are up 38% since Jan. 1.
Apple’s fiscal third quarter showed how segments beyond iPhone are helping the tech giant return to top-line growth. Revenue rose 1% year over year during the period, despite a 12% decline in iPhone revenue. This performance was fueled by strong growth in services, wearables, Mac, and iPad.
To get a better look at how trends are improving for Apple, consider these three takeaways from the company’s fiscal third-quarter earnings call.
Apple’s all-time records in services
Apple’s second-largest segment after iPhone – services – continued its strong growth in fiscal Q3. Revenue in the segment grew 13% year over year, or 15% when excluding a one-time favorable item in the year-ago quarter.
Highlighting the segment’s strength, it’s benefiting from broad-based momentum, with strength across a range of services and growth in all of its geographic segments.
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“We set new all-time records for AppleCare, Music, cloud services, and our App Store search ad business and we achieved a new third quarter revenue record for the App Store,” explained Apple CEO Tim Cook during the call. “What’s more, we had double-digit services revenue growth in all five of our geographic segments.”
Accelerating growth in wearables
Apple’s fastest-growing segment in fiscal Q3 was its wearables, home, and accessories segment. Revenue in this segment rose 48% year over year. Playing a key role in this robust growth were Apple’s wearables products: the Apple Watch, AirPods, and Beats-branded products.
“[I]t was another sensational quarter for wearables, with growth accelerating to well over 50%,” explained Cook. This is up from a year-over-year growth rate for wearables revenue of “near 50%” in fiscal Q2.
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The CEO continued:
We had great results for Apple Watch, which set a new June quarter revenue record and is reaching millions of new users. Over 75% of customers buying Apple Watch in the June quarter were buying their first Apple Watch. We continue to see phenomenal demand for AirPods…
Progress in China
Apple’s revenue fell 27% and 12% in Greater China in fiscal Q1 and Q2, respectively, sparking concerns about the iPhone maker’s prospects in the important market. But performance in fiscal Q3 shows that sales are improving in the region.
“[E]ach of our categories – iPhone, iPad, Mac, wearables, services – everything improved sequentially [in Greater China],” Cook explained. “[W]e actually grew in constant currency for Greater China and we grew in Mainland China on a reported basis.”
On a reported basis, Greater China revenue in fiscal Q3 fell 4% year over year – a much smaller decline than in the previous two quarters.
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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: short January 2020 $155 calls on Apple, long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, and long January 2020 $150 calls on Apple. The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
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