Apple Earnings Preview: What To Expect of Apple Music

Daniel Martins

The time has come: Apple’s earnings report is only a couple of days away from hitting the wires. This is my last written article in the series “Apple earnings preview”. Over the past couple of weeks, I addressed the following topics:

Lastly, I look at Apple Music. In my very first Apple Maven article ever, I explained that Apple Music has been a “silent revenue grower”: not making the financial headlines very often, but likely driving about one-fifth of the services segment’s fiscal 2019 top line growth, per my estimates.

Below, I am keeping the same format of other previews: (1) a brief discussion of what happened in the second fiscal quarter, (2) what could have gone right and (3) what could have gone wrong in the most recent period.

What happened last quarter?

In fiscal second quarter 2020, Apple Music was one of the stars of the show. Here is what CFO Luca Maestri had to say about this service in the last earnings call:

What could go right

  • The same tailwinds supporting services like the App Store and Apple TV+ higher will likely do the same for Apple Music. The trends in the stay-at-home economy have not shifted as much as some might have hoped three months ago. Spending in digital products have stayed high in the second quarter, as suggested by major US-based banks during the current earnings season.
  • According to Verto Analytics, Apple Music was the most popular mobile music and video app by reach in the US in 2019 among its main competitors– i.e Spotify, Pandora, Amazon Music, etc. While this piece of data does not necessarily speak to the popularity of the app in 2020, it hints at a favorable trend that has been forming since last year. Keep in mind that Apple Music is barely five years old, while Spotify has been around for 12 years.

What could go wrong

  • In my view, there is one single risk to Apple Music’s revenues this quarter, one that I don’t find particularly concerning: macroeconomic challenges. Consumer spending has been recovering but very slowly, and fears over the extent and the depth of the current recession could discourage users from spending in discretionary services like music streaming.

Check out these articles next:

iPhone SE: The Hero of Apple’s Quarter

What Has Happened to Apple Stock After Previous Rallies?

Apple: Finally, A Bearish Perspective

(Disclaimers: the author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)

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