MacDailyNews presents live notes from Apple’s Q416 Conference Call with analysts starting at 5pm EDT/2pm PDT today.

Apple will provide live audio streaming of its Q416 Results Conference Call using Apple’s industry-leading QuickTime multimedia software.

The live webcast will begin at 2pm PDT/ 5pm EDT today here.

Apple today announced financial results for its fiscal 2016 fourth quarter ended September 24, 2016. Apple posted quarterly revenue of $46.9 billion and quarterly net income of $9 billion, or $1.67 per diluted share. Analysts’ consensus estimates were looking for revenue of $46.9 billion and EPS of $1.65 (FactSet).

For their fiscal 2016 fourth quarter, Apple guided for revenue between $76 billion and $78 billion. Analysts had expected revenue guidance of $74.88 billion.

Live notes from Apple’s Q415 Conference Call in reverse chronological order:

• AAPL: 115.20, -3.05 (-2.58%), After hours: 6:01 PM EDT

• End of conference call.

• Cook: We review the capital return annually. We announce changes usually in April. We believe that AAPL is very undervalued. Via buybacks, we are investing in confidence in the company we know very well. We have a good track record of raising our dividend annually. We’ll say more on capital returns in April 2017.
• Maestri: Gross margin is guided to improve sequentially due to better leverage and mix in Dec. quarter, but they are offset by cost structures of new products we’ve launched and plan to launch; YOY gross margin is impacted by one-time patent infringement award (from Samsung) and U.S. dollar appreciation – Apple generates 2/3rds of their revenue outside the U.S. – all of this impacts gross margin

• Maestri: We want to continue to invest in the business in all areas while being efficient.

• Cook: The number of people that are or will move into the middle class in India is significant. India population is very young. This year and next year, there are enormous LTE/4G investments happening in India (which is good for iPhone). The government is more focused on infrastructure and job creation. The population of India will exceed China within the next decade. There will be a lot of people that will really want a smartphone and Apple intends to compete. There is a lot of headroom in India.

• Cook: We saw a lot of competition in the U.S. among carriers this year
• Cook reiterates iPhone 7 Plus is severely supply constrained
• Cook: iPhone 7 Plus camera is loved by users – tremendous amount of technology in that camera system

• Cook: We have a strong sense of where we want to go (longer term plan) while also remaining very nimble
• Cook: “We have the strongest pipeline that we’ve ever had and we’re really confident about the things in it. But as usual, we’re not going to talk about what’s ahead.”
• Steven M. Milunovich, USB analyst: “Does Apple today have a grand strategy for what you want to do? …Do you know what you want to do over the next three to maybe five years? Or is it more a read the market and quickly react?” (No, the CEO of the world’s most valuable company has no plan. Foolish, impertinent question. – MDN Ed.)

• Cook on balance between privacy and AI. It’s a false trade off that some people would like you to believe that you have to give up privacy to get a service. Apple is working to deliver great services while maintaining users’ privacy
• Cook: Most people would like a personal assistant with them all the time. We live in a mobile society and the advantage of having Siri on your phone is obvious. That’s not to say having one anchored to the home isn’t useful and a nice potential market. Our focus is globally, not just in the U.S.

• Maestri: The growth of the services revenue has been accelerating over the year; people that are using Apple services, over time tend to spend more as they are very loyal and engaged customers

• Cook: Television is a segment of intense interest at Apple; we have some original content creation happening; it’s an area we’re focused on

• Maestri: We are very confident on trajectory of iPhone going forward
• Maestri: We are supply constrained on iPhone 7 and iPhone 7 Plus, so competitors’ issues don’t mean that much as Apple is selling as many iPhones as they can produce

• Cook: We are open to acquisitions of any size when they can help drive innovation and improve customer satisfaction

• Much headroom in Chine with the LTE adoption rate being relatively low today and the growth of the middle class in China
• Cook: We are confident in forecasting return to growth overall and are very bullish on China in particular
• Cook: Some mis-forecasting and channel inventory issues (too much) contributed to China declines YOY
• Cook: Upgrading returned to more normal levels with iPhone 6s/Plus
• Cook: Apple saw a surge of iPhone 6/Plus upgraders
• Cook: Fiscal 2016 hurt by about 3% due to currency devaluation
• Cook: Down 17% in China in fiscal 2016 vs. fiscal 2015

• Cook: We feel really great about what’s in the pipeline and we’ve also spent to make the ecosystem even better
• Cook on Apple’s R&D more than doubling YOY: There is clearly some amount of R&D happening on products that have not yet reached market

• Maestri: Apple is very supply constrained on iPhone 7 Plus, certainly more supply constraint vs. last year’s iPhone 6s Plus
• Maestri: Last Dec. quarter (Q116) set Apple’s all-time record revenue; Apple is guiding for a new quarterly record in Q117

• Cook: On iPhone 7 we will come into supply/demand balance this quarter; working to bring iPhone 7 Plus into balance, but demand is very strong
• Cook: Cannot comment on rumors (Apple Car). We’re always looking at new things and, with the car space in general, it’s clear that technology will be important and Apple sees it as “interesting.”
• Cook: iPhone 7/Plus – carriers that had upgrade plans say demand is very robust. Demand is outstripping supply on worldwide basis, esp. for iPhone 7 Plus

— analysts’ questions begin —

• Apple’s board of directors has declared a cash dividend of $0.57 per share of the Company’s common stock. The dividend is payable on November 10, 2016 to shareholders of record as of the close of business on November 7, 2016

• Apple is providing the following guidance for its fiscal 2017 first quarter:
– revenue between $76 billion and $78 billion (return to growth over all-time record)
– gross margin between 38 percent and 38.5 percent
– operating expenses between $6.9 billion and $7 billion
– other income/(expense) of $400 million
– tax rate of 26 percent

• Apple tax rate for fiscal 2016: 25.6%
• Total buyback activity reduced total AAPL share count by 1.5%
• Apple returned $9.3 billion to investors through dividends and share repurchases during the quarter

• IBM: Now more than 90,000 Macs at IBM, 81,000 iPhones, 48,000 iPads
• iPad Pro is the top choice for planned purchases
• iPad gained share in U.S. market during Sept. quarter: 82% share of $200+ tablets
• iPad channel inventory is below 5-7 week target range

• Mac install base reached new all-time high – exciting news to share very soon (Thursday)
• Apple saw strong double-digit growth in several services categories
• App Store growth rate 45%
• Average ASP of $619 for iPhone in quarter
• Worldwide demand significantly outpaced supply, particularly iPhone 7 Plus
• Exited quarter with iPhone channel inventory well below target range (supply greatly constrained)

• Services: $6.325 billion (quarterly record)
• Mac: 4.886 million units, $5.739 billion
• iPad: 9.267 million units, $4.255 billion
• iPhone unit sales: 45.513 million units, $28.160 billion in revenue
• Gross margin: 38%
• Luca Maestri goes over earnings figures…

• Apple and Deloitte will help companies quickly and easily transform the way they work by maximizing the power, ease-of-use and security the iOS platform brings to the workplace through iPhone and iPad. As part of the joint effort, Deloitte is creating a first-of-its-kind Apple practice with over 5,000 strategic advisors who are solely focused on helping businesses change the way they work across their entire enterprise, from customer-facing functions such as retail, field services and recruiting, to R&D, inventory management and back-office systems.

• iPhone sales in India up over 50% and “we believe we’ve just begin to scratch the surface” of the Indian market
• Siri has just arrived on the Mac and, via APIs, Appel is encouraged by developers’ efforts
• Machine learning makes the fitness features of Apple Watch more accurate and makes Siri even smarter
• Apple has been using AI for years and is investing heavily. Machine learning drives many features throughout Apple’s ecosystem

• Aetna will provide Apple Watch to nearly 50,000 of their employees to encourage healthier living
• Cook: We are off to a great start with Apple Watch Series 2, the world’s most popular smartwatch
• Cook: In fiscal 2017, Apple serices will be the size of a Fortune 100 company
• Apple Pay transaction during September quarter exceeded all of 2015
• Apple Pay transactions up nearly 500% YOY in September quarter
• JD Power: Apple Music has highest customer satisfaction in industry
• Cook: Record quarter for services, up 24% YOY
• Cook: We saw more customers switch from Android to iPhone that ever before
• Cook: We are excited to hold a special event this week on Thursday on the Apple campus

• AAPL: 115.90, -2.35 (-1.99%), After hours: 4:55PM EDT
• AAPL: 115.73, -2.52 (-2.13%), After hours: 4:47 PM EDT
• Awaiting start of conference call

Apple Inc. Q4 2016 Unaudited Summary Data (Units in thousands, Revenue in millions)

Apple beats Street, services revenue grows 24% to all-time quarterly record of $6.3 billion – October 25, 2016