MacDailyNews presents live notes from Apple’s Q117 Conference Call with analysts starting at 5pm EDT/2pm PDT today.

Apple will provide live audio streaming of its Q117 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 2017 first quarter ended December 31, 2016. The Company posted all-time record quarterly revenue of $78.4 billion and all-time record quarterly earnings per diluted share of $3.36. Analysts’ consensus called for the company to report revenue of $77.4 billion and $3.23 EPS.

For their fiscal 2017 second quarter, Apple guided for revenue between $51.5 billion and $53.5 billion.

Live notes from Apple’s Q117 Conference Call in reverse chronological order:

• AAPL After hours: $125.09, +$3.74 (+3.08%) @ 5:57PM EST
• End of call.

• Cook: “We’ve got some exciting things in the pipeline.” (Ugh – MDN Ed.)
• Home automation, enterprise, health, CarPlay, etc.
• The smartphone is still in the early innings of the game and there is still a lot more to do
• We are still in a shortage situation now and not projecting to totally get out supply/demand imbalance throughout the quarter
• We have some things coming regarding iPad in the future; customer sat. numbers for iPad Pro are 99%
• We did under-call the number of iPad models that would be in demand, so there were supply issues there, too
• Cook: 1.6 million unit swing in iPad inventory YOY

• Cook expects it to take time, but, in the end, the courts will see it the way Apple sees it
• Qualcomm withheld a billion dollars in payments they owed Apple, so Apple had no choice but to litigate
• The more Apple innovated, the more Qualcomm charged for technology they had nothing to do with
• Qualcomm instead on charging for technologies they had nothing to do with
• Cook: I don’t like litigation and view it as a last resort. Qualcomm lawsuits should be viewed as a last resort

• Pent-up demand for iPhone 7 Plus surprised Apple
• Strong dollar forces price increases in certain countries which doesn’t help Apple move product in those countries
• In the U.S. annual upgrade programs are proving to become popular; that is good for Apple’s iPhone sales
• Apple feels very good about iPhone unit growth in many markets around the world
• Maestri: iPhone install base growing in strong double digits

• iPhone 7 Plus was the most popular Plus model Apple has ever had
• The way Apple looks at this is that in a quarter where there is a significant supply constraint, it’s difficult to draw firm conclusions
• Number of upgraders and switcher were highest Apple has seen in any quarter
• Apple had an exceptional iPhone quarter; did not predict iPhone 7 Plus demand well
• In the longer term, I feel good about how we’re doing in India; fully intend in investing in the country
• Cook: Despite demonetization move in India that created lots of economic pressure, Apple has all-time quarterly revenue results

• Revenue ahead of expectations, so Apple gained some leverage
• Apple brand is very strong around the world
• Level of interest for Apple products is very strong
• iCloud storage is also growing very quickly as is the AppleCare business
• Apple’s music business has returned to growth over the last three quarters
• We are the market leader in digital music
• We can grow in various parts of the world; grow our developer community
• Maestri: App Store is driving significant growth (43% growth 13 weeks/13 weeks YOY) for Services business

• Challenges include currency headwinds and Hong Kong remains a very, very difficult market
• We also saw 50% of iPhone sales in China were to switchers and to first-time buyers
• Apple set a new revenue record in China in Q117
• Cook: Greater China revenue down 12% and 4 points of that was due to currency, so 8% in constant currency; much better performance in China vs. previous 3 quarters

• Apple Services will be a Fortune 100 company this year and we have a goal to double it in the next four years
• Maestri: The number of people transacting on Apple stores [iTunes, iBooks, Music, Movies, etc.] is increasing in double digits

• We are learning about the original content business and thinking about our opportunities
• We have put out toe in the water on creating original content for Apple Music and we’re learning. They will roll out throughout the year and we’ll build from there
• We’ve acquired 15-20 companies every year for the last few years; based on strategic value
• Cook: I am optimistic given what I’m hearing that there will be some sort of tax reform and tax repatriation this year; very good for the country [U.S.] and for Apple

• If dollar is weaker than expected, we’ll do a bit better; we’ll see where we land
• Maestri: Foreign exchange is very volatile, so we’ve broadened the range of gross margin

• The dividend is payable on February 16, 2017 to shareholders of record as of the close of business on February 13, 2017
• Apple’s board of directors has declared a cash dividend of $0.57 per share of the Company’s common stock
• Apple is providing the following guidance for its fiscal 2017 second quarter:
– revenue between $51.5 billion and $53.5 billion
– gross margin between 38 percent and 39 percent
– operating expenses between $6.5 billion and $6.6 billion
– other income/(expense) of $400 million
– tax rate of 26 percent
• Apple will update capital return program as usual this spring
• Apple has $246.1 billion in cash on-hand; $231.2 outside the U.S.A.
• Apple Retail Stores posted strong, double-digit growth

• NPD: iPad has 85% market share of tablets priced over $200
• iPad was ahead of internal expectations (13.081 million units (-19% units, -22% revenue YOY))
• App Store revenue continues to outpace industry; more than double the revenue of Google Play during calendar 2016
• Services: $7.172 billion revenue
• 451 Research: 97% customer satisfaction rating for iPhone owners; 99% sat. rating for iPhone 7 Plus owners
• $695 ASP for iPhone due to strong demand for iPhone 7 Plus
• Strong customer demand left Apple scrambling to meet supply for many products during most/all of the quarter
• Apple had the benefit of a 14th week this year during the quarter
• Very challenging currency headwinds during quarter due to strength of the U.S. dollar
• Apple CFO Luca Maestri reviews results

• Cook thanks developers, business partners, employees, and Apple customers for the outstanding quarter.
• SAP SDK for iOS coming soon
• Enterprises using IBM MobileFirst for iOS in increasing number

• Cook pitches Apple’s iOS, Home app, and HomeKit for home automation
• Cook: We are unmatched when it comes to securing your home with IoT locks, etc.
• Cook: Number of HomeKit accessories growing rapidly
• Every major car maker incorporating CarPlay
• Cook: We could not be more excited about Apple Watch
• Apple could not make enough Apple Watches to meet strong demand throughout the quarter
• MacBook pro supply-constrained throughout quarter; now coming into supply/demand balance
• Apple’s goal is to double Services business within the next 4 years
• Comcast to accept Apple Pay for bill payments beginning this quarter
• App Store customers broke all-time quarterly revenue record
• iPhone 7 Plus demand did not come into supply/demand balance until after the quarter ended
• iPhone: exceptional demand beat Apple’s internal expectations
• Tim Cook: Highest quarterly revenue in Apple’s history
• Start of conference call

• Other Products: $4.024 billion revenue (-8% YOY) (includes Apple TV, Apple Watch, Beats products, iPod and Apple-branded and third-party accessories)
• Services: $7.172 billion revenue (+18% YOY)

• Unit sales:
– iPhone: 78.290 million (+5% units, +5% revenue YOY)
– iPad: 13.081 million (-19% units, -22% revenue YOY)
– Mac: 5.374 million (+1% units, +7% revenue YOY)

• AAPL After hours: $124.41, +$3.06 (+2.52%) @ 4:57PM EST
• AAPL After hours: $124.40, +$3.05 (+2.51%) @ 4:48PM EST

AAPL Q117 Results

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