ApplecareSource: Apple

What you need to know

  • Apple published its Q2 earnings yesterday.
  • Surprisingly, it recorded growth despite COVID-19.
  • It did, however, mention two aspects of its business that it expects to be more strongly impacted.

Yesterday, as part of its Q2 earnings call, Apple gave us a few pointers as to what it thinks we can expect from a business standpoint over the coming months.

As noted by Business Insider, two sections of its business, in particular, look set to lose out, AppleCare and advertising.

The report states:

Apple says two planks of its services arm will take a hit next quarter.

According to the tech giant's chief financial officer Luca Maestri – speaking during an earnings call with investors Thursday – two of Apple's services-related offerings are going to be impacted by "overall economic weakness" and "uncertainty" during its fiscal third quarter for 2020, which runs from April to June.

"One of them is AppleCare," Maestri said. "AppleCare is essentially comprised of our product repair business and the warranty agreements that we signed with our customers when they purchase our devices.

When Apple says 'AppleCare', it refers to both its product repair business and warranty agreements. Apple has previously stated that it does not profit from device repairs. CFO Maestri noted:

"Both these businesses have been affected obviously by the store closures. And not only our retail stores, but also our partners points of sale, and obviously, the reduced level of customer traffic because of the social distancing measures."

He also stated that Apple's advertising business, which lets companies advertise on the App Store will also take a hit. He didn't give specific reasons for this, but one can imagine that developers and platforms that usually pay for advertising are perhaps feeling the pinch a little, and one of the first items on the balance sheet that can be tinkered with is ad spending.

Apple didn't provide official guidance for Q3 but did reveal how it expects iPhone, Mac, iPad and wearables to perform.