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Apple Supplier Stocks Rise despite iPhone Revenue Falling 15%

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Nov. 20 2020, Updated 4:53 p.m. ET

Apple’s December-quarter earnings highlights

Yesterday, Apple (AAPL) announced its fiscal 2019 first-quarter earnings, just beating its lowered revenue guidance. However, it missed its previous guidance by a large margin. Apple’s revenue fell 4.5% YoY (year-over-year) to $84.3 billion, slightly above its revised guidance of $84 billion but way below its previous guidance of $91 billion. Its iPhone revenue fell 15% YoY to $52 billion, marking its first YoY December-quarter decline since iPhones were launched. The iPhone revenue decline was partially offset by other segments’ 19% YoY growth.

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Semiconductor stocks rise after Apple’s earnings release

Despite the company reporting disappointing earnings, Apple stock rose 5.7% after hours yesterday, while Apple chip supplier stocks Skyworks (SWKS), Qorvo (QRVO), Broadcom (AVGO), and Micron Technologies (MU) rose ~1.3%.

Skyworks and Qorvo lowered their December-quarter guidance based on Apple’s revised guidance. Semiconductor stocks rose slower than Apple stock as those companies depend largely on Apple’s iPhones for revenue, and iPhone revenue has been weak.

Apple chip suppliers diversify revenue streams

As the smartphone market slows, chip companies are diversifying their revenue streams to adjacent markets to boost revenue. The advent of 5G (fifth-generation) and IoT (Internet-of-Things) technology presents strong long-term growth opportunities for chip companies. However, the industry is currently in a downturn as the US-China trade war has weakened sales for companies with high exposure to China. The first half of this year is expected to be tough for semiconductor companies, but growth is expected to pick up in the second half as 5G deployment speeds up.

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