AAPL Apple Inc

By Tripp Mickle 

Apple Inc. reported a slight uptick in revenue for the second quarter despite the coronavirus shutting down factories and denting sales in China, as the tech giant's growing services business offset declining iPhone sales.

The company said revenue rose 1% in its fiscal second quarter to $58.3 billion, with iPhone sales momentum stalling after Apple closed stores, first in China and later world-wide. Profit fell about 3% to $11.25 billion, or $2.55 a share.

The results exceeded analysts' revised expectations for nearly $55 billion in revenue but fell short of the company's pre-pandemic projections for more than $63 billion for the three months ended March 28.

The quarter's results highlight the strengths of big technology companies even during an economic crisis that has rocked markets around the world and consistently tested corporations. Some have seen increased business as the virus keeps people at home. Facebook Inc. and Microsoft Corp. on Wednesday reported higher revenue and signaled more gains in the current period as home-bound social-media usage swells and cloud-computing rises. Google parent Alphabet Inc. last week posted revenue gains but provided a sober outlook, saying it experienced a sudden slowdown in ad sales in late March.

Apple's performance also underscored the value of its strategic shift from selling more devices to selling more software and services across those devices. The company reported quarterly sales from services rose nearly 17% to $13.35 billion, offsetting a 3.4% decline in its legacy hardware products such as iPhones, iPads and Macs, which posted sales of $44.97 billion.

Apple said it would add $50 billion to its continuing share-buyback program, a decrease from last year's addition of $75 billion but still an encouraging sign of its commitment to return capital even as buybacks have become controversial in the U.S. Its board also approved a 6% increase in its quarterly dividend, building on last year's 5% increase

Other companies with large businesses in China also struggled amid the pandemic. Starbucks Corp. reported Monday that same-store sales in China were down 90% at the peak of the outbreak and said it would reduce the number of new stores it plans to open this year by 17% to 500. Adidas AG, which counts on China for a fifth of total revenue, said Tuesday its sales in Greater China fell sharply amid store closures.

Apple offset declines in China with strong sales in the U.S. and Europe, where shutdowns didn't begin until the final weeks of the March quarter. Apple relies on the U.S. and Europe for about two-thirds of total sales, and those economies are now suffering historic contractions that could lead to an unprecedented drop in sales for Apple if those markets trace China's decline in the March period.

"Few companies are able to outrun this pandemic, and Apple is no exception," said Daniel Flax, senior research analyst at Neuberger Berman, an investment manager with $356 billion in assets under management that counts Apple among its holdings.

Despite the near-term challenges, Mr. Flax said Apple stands to gain in the future with critical products for people working remotely and a strong balance sheet to fund innovation.

Apple has been quick to react as the coronavirus outbreak gathered speed.

In February, it became one of the first companies to signal trouble ahead, saying it wouldn't meet its revenue projections because of weak demand in China and supply shortages. It also closed its China stores that month and later extended the shutdown to all stores world-wide in mid-March. The company has since reopened stores in China and elsewhere such as South Korea, although U.S. stores remain closed.

After the virus hit the U.S., Apple donated 20 million masks to health-care workers and partnered with Google to create software that enables smartphones to help track the spread of the virus.

Write to Tripp Mickle at Tripp.Mickle@wsj.com

(END) Dow Jones Newswires

April 30, 2020 17:13 ET (21:13 GMT)

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