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Apple Management Talks AirPods, Greater China, and New Services

By Daniel Sparks – Updated May 3, 2019 at 8:33AM

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Here's a look behind the quarter's numbers.

Apple's (AAPL 1.96%) fiscal second-quarter results impressed. Shares jumped after the report, rising about 7%. The company reported better-than-expected financial results and provided a promising outlook for its fiscal third quarter.

But there's more to the quarter than the headline figures in the earnings release. During the company's fiscal second-quarter earnings call, management elaborated on a number of other key topics. Three items from the call that are worth looking at are management's commentary on AirPods, Greater China, and its services business.

Apple News subscription service on a MacBook Air, iPad, and iPhone

Apple News+. Image source: Apple.

"Incredible" demand for AirPods

When discussing Apple's thriving wearables, home, and accessories segment, the product usually taking center stage is the Apple Watch. Launched four years ago, it set the foundation for the company's foray into wearables. But the success of Apple's AirPods has arguably been just as impressive.

Discussing Apple's recent launch of its second-generation headphones, Apple CEO Tim Cook said that "demand has been incredible. This is nothing less than a cultural phenomenon." Later in the call, Cook added, "Interest in AirPods has been off the charts and we're working hard to catch up with incredible customer demand."

Helped by the Apple Watch and AirPods, Apple's wearables, home, and accessories segment is Apple's fastest-growing segment, with revenue rising 30% year over year in fiscal Q2. But wearables products specifically saw revenue rise nearly 50% year over year, Cook said.

Encouraging signs in Greater China

One item of concern for Apple shareholders has been headwinds in Greater China. After posting 16% year-over-year revenue growth in Greater China in Apple's fourth quarter of fiscal 2018, the geographic segment's momentum ended abruptly. Revenue in the market fell 27% year over year in fiscal Q1. 

But Cook noted in Apple's earnings call that there are signs of recovery in the market.

Our year-over-year revenue performance in Greater China improved relative to the December quarter and we've seen very positive customer response to the pricing actions we've taken in that market, our trading and financing programs in our retail stores, the effects of government measures to stimulate the economy and improved trade dialog between the United States and China.

Revenue in the market still fell in fiscal Q2, but not by as much. Greater China revenue was down 22% year over year.

Expect more new services

When asked whether investors can expect more new services beyond the four announced in March (Apple News+, Apple Card, Apple Arcade, and Apple TV+), Cook responded affirmatively: "Yes. I wouldn't want to get into announcing things in the call, but obviously we're always working on new things." But Cook also said it's prioritizing getting its recently announced services launched.

Apple News+ is already available, but Apple Card is launching this summer and Apple Arcade and Apple TV+ won't launch until this fall.

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: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.

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