MacDailyNews presents live notes from Apple’s Q317 conference call

MacDailyNews presents live notes from Apple’s Q317 Conference Call with analysts starting at 5pm EDT/2pm PDT today.

Apple will provide live audio streaming of its Q317 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 third quarter ended July 1, 2017. The company posted quarterly revenue of $45.4 billion and quarterly earnings per diluted share of $1.67. According to Thomson Reuters, the analysts’ consensus estimates called for revenue of $44.89 billion and EPS of $1.57.

For their fiscal 2017 fourth quarter, Apple guided for revenue between $49 billion and $52 billion.

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

• Apple is very likely to open regular trading at a new all-time high tomorrow!
• AAPL after hours: $159.59, +$9.54 (+6.36%) @ 5:59PM EDT

• End of call.

• Cook: India reminds me of where we were in China several years ago; we are very excited about our opportunities in India

• Cook: I do think we can grow both in iPhone unit sales and market share; the installed base is growing which generates more upgrades; Apple feels good about ability to convince people to switch to iPhone; and in emerging markets [like India], Apple hasn’t even really gotten started

• Cook re next-gen iPhones: We have no comment on anything that’s not announced.

• Customers get on the App Store and start spending and then, in general, tend to spend more over time
• Apple Music is growing very fast as are iCloud storage subscriptions
• Quality and quantity of App Store content continues to improve
• Apple is making it easier for customers outside the U.S. to pay for apps on the App Store
• Services is accelerating because the App Store is seeing an increasing large amount of paying accounts
• Maestri: Our Services business is very broad

• It feels great to get this thing [AR] going at a level that can get so many developers involved
• Cook: AR is big and profound and we will look back someday and marvel at the start of it
• Cook: I could not be more excited about AR and ARKit – just take a look at the early ARKit projects we’re seeing the Web already
• Cook: autonomous systems goes beyond cars and that’s all I want to say about that
• Cook: We are very focuses on autonomous driving systems from a core tech point of view; it’s the “Mother of all AI projects.”
• Cook: Apple original content. We’re currently focused on Apple Music original content. It’s for our own learning and also to give Apple Music subscribers exclusive content. We’ve recently hired two producers of top notch content

• We think China performance will continue to improve and that drives of guidance
• Maestri: We feel very good about the performance of the business right now; Appel Watch and AirPods are doing incredibly well

• Cook hopes/expects to see some loosening of China’s stance on VPN apps in the future
• Cook: We believe in engaging the countries where we do business; se state our point of view in the appropriate ways
• Cook: In every country, we abide by the laws of that country
• Cook: There are VPN apps available in China App Store
• Cook: We were required to remove unlicensed VPN apps from App Store in China; other app stores
• Cook: Central gov’t in China tightened regulations on VPN apps. A license is required

• Cook ducks question about President Trump’s claim that Apple will build 3 “big, beautiful” manufacturing plants in the U.S.
• Cook: 2/3rd of employee base in the U.S. and we’ll have “some things we’ll say about that later in the year.”
• $200 million has already been invested in a Corning plant
• Apple has established a $1 billion (to start) fund for U.S. manufacturing and plants
• Cook: Apple has purchased about $50 billion worth of goods and services from U.S. suppliers
• Cook talks of Swift Playgrounds helping increase developer base
• Cook: Apple could have only been created here in the U.S., so we feel a responsibility to job creation in the U.S.
• Cook: Apple has created 2 million jobs in the U.S. (3/4 of that 2 million are app developers)

• Cook: Outside of China, Android switchers up YOY and helped with Apple’s successful channel inventory reduction during the quarter
• Based on the amount of “iPhone 8” rumors, Cook feels there is a “pause” in iPhone sales; bodes well for pent-up demand
• iPhone upgrade totals for this fiscal year are the highest that Apple’s seen
• Apple sees Tencent as one of Apple’s biggest and best developers; Apple looks forward to working with Tencent even more
• WeChat makes the switching opportunity for Apple even greater
• What Apple sees in mainland China is definitely encouraging
• iPhone held its own
• iPad grew dramatically more than market; Mac grew much more than market; Services grew extremely strongly
• We are very encouraged by the results this quarter; exceeded Cook’s expectations
• Cook: We’re looking very much forward to the product rollouts [to come in 2H 2017]
• Product transitions affect gross margins
• Maestri more difficult memory prices vs. a year ago

• Analysts’ questions begin…

• Apple is providing the following guidance for its fiscal 2017 fourth quarter:
– revenue between $49 billion and $52 billion
– gross margin between 37.5 percent and 38 percent
– operating expenses between $6.7 billion and $6.8 billion
– other income/(expense) of $500 million
– tax rate of 25.5 percent
• Apple repurchased 30.4 million Apple shares for about $4.5 billion in the quarter.
• New record of $261.5 billion in cash and marketable securities
• Apple Stores now total 497 locations worldwide
• Maestri reviews U.S. schools deploying Apple iPads and other products

• AAPL after hours: $159.40, +$9.35 +6.23%) @ 5:22PM EDT

• SAP app for human resources will support 45 million users worldwide
• New Cisco partnership ads to enterprise security; will make cyber insurance more attainable to businesses
• Walmart to deploy over 19,000 iPads to train associates across the U.S.
• iPad customer sat. ranges from 95-99% across all models
• iPad had 55% share of U.S. tablet market; 89% share of tablets prices over $200
• iPad within Apple’s channel inventory target range
• Mac within Apple’s channel inventory target range
• MacBook Pro is a strong performer (97% customer sat.)
• Apple Pay is by far the #1 NFC payment service on mobile devices with over 90% of transactions worldwide
• App Store generates nearly twice the revenue of Google Play
• In the U.S. (451 Research) 95% customer sat. for iPhone 7 and 99% customer sat. for iPhone 7 Plus
• Apple very pleased with iPhone results, especially since it was a tough compare (Apple launched iPhone SE)
• Apple now has lowest iPhone channel inventory in over 2 years
• Luca Maestri reviews financials…

• Cook: Apple might even have some more innovations to share with you later this year
• HomePod has strong home automation capabilities
• HomePod coming this year with astounding audio quality – unlike any other wireless home speaker on the market
• Apple Watch will become more intelligent than ever with watchOS 4 this fall
• iOS will become the world’s biggest AR platform as soon as iOS 11 ships
• Apple believes AR has broad mainstream applicability
• With ARKit, it’s clear that the imagination of developers has been captured

• Apple very excited about iOS 11, macOS High Sierra, tvOS, and watchOS 4 coming this fall

• Apple has increased AirPods production; still working to meet strong demand
• 98% customer sat. for AirPods
• Apple Watch sales up over 50% YOY in the quarter
• Apple off to a great start to Back to School with newly refreshed Mac portables
• Mac gained global unit marketshare; revenue grew 7% YOY

• iPad sales up 32% YOY to U.S. education purchasers
• iPad unit sales have returned to growth
• Apple achieved highest worldwide tablet marketshare in over four years thanks to new iPads
• Apple Services up strongly – now the size of a Fortune 100 company
• 1.2 billion cumulative iPhone units sold to date
• iPhone 7 was the most popular iPhone. iPhone 7 Plus was up strongly over iPhone 6s Plus
• Apple had a very strong WWDC and the announcements will help delight Apple customers in the coming year
• Apple CEO Tim Cook: Apple is proud to announce every strong results with unit and revenue growth in all of Apple’s product categories

• Start of conference call

• AAPL after hours: $158.15, +$8.10 (+5.40%) @ 4:55PM EDT

• Apple returned $11.7 billion to investors during Q317, bringing cumulative capital returns to nearly $223 billion.

• Other Products revenue: $2.735 billion (+23% YOY) (Other Products includes sales of Apple Watch, Apple TV, Beats products, iPod and Apple-branded and third-party accessories.)
• Services revenue: $7.266 billion (+22% YOY) (Services includes revenue from Digital Content and Services, AppleCare, Apple Pay, licensing and other services.)

• Unit sales:
– iPhone: 41.026 million (+2% YOY)
– iPad: 11.424 million (+15% YOY)
– Mac: 4.292 million (+1% YOY)

• Apple’s Q417 revenue guidance of between $49 billion and $52 billion exceeded expectations, with analysts’ consensus at $49.2 billion

• AAPL after hours: $158.28, +$8.23 (+5.48%) @ 4:45PM EDT
• Apple is trading above its all-time high in after hour trading
• AAPL after hours: $157.65, +$7.60 (+5.06%) @ 4:42PM EDT

15 Comments

    1. For however long it lasts, speaking as a stockholder myself. What investors giveth they usually soon taketh away, for one stupid unfounded reason or another. But yes, let’s hope we go onward and upward from here.

  1. Apple’s results more or less in line with what I expected.

    Wallstreet sending the stock soaring was WAY more than expected or usual (in the past stock seemed to tank even with good news)

    It’s clear that if Apple update their products sales would increase and the more market share they gain the bigger the services.

    iPad did great after so many disappointing quarters with the $300+ model and the smaller Pro but note Macs still make more revenue. The entry level Mac category is still weak.

    (I’m an aapl investor, haven’t sold a share in years).

    ——–

    What I’m REALLY curious about is China.
    The only big segment in decline. Note China by itself is almost as big a revenue earner as the whole of Europe.

    I would be really interested to see Apple put more info out it as as they make the rounds with reporters in the days following an earnings call (if they follow their usual behaviour ).

    What I’ve researched from China is this:

    1) Chinese users live in apps such as WeChat — they do all kinds of stuff within one app.
    Also In cities they use their phones to do almost all payments but NOT via the Apple Pay type technology but with primitive QR codes which works very well over there.

    Even roadside NOODLE SHOPS have sign boards with QR codes and everybody just aims their phone’s cameras at them and money is deducted. The payments go through two main banks. In cities nobody uses credit cards or even much cash anymore.

    These two things have tied the phones to their localized systems (Visitors without access to either find it hard to even move around. Without bank accounts to do the local QR codes they have to carry wads of cash around with irritates vendors and other customers in line no end as it slows things down — everybody uses the QR codes)

    Polls show that many Chinese think phones that can do these two things are ‘good enough’.

    Which leads to:

    2) Many APPS which make the iPhone a SUPER COMPUTER are CRIPPLED in China like Facebook, WhatsApp, Twitter , Google services (like Gmail), Amazon , even web surfing. Some not totally but they don’t function like in USA.

    So without such apps the iPhone is an expensive Brick! (sorry I’m going to get one starred but it’s true).
    The super powered chips etc in the iPhone aren’t much use if there aren’t apps (like I said Chinese live in WeChat and use QR codes they just need phones that can handle that. ).

    Apple is working really hard in China like making the automating the camera to read QR codes , appointing a head of China which understands the local conditions to innovate etc.

    Still I am REALLY curious to see more info from Apple leadership on China issues.

    (personally I’d Iike to see more entry level Apple devices, high quality but lower priced, bigger the eco system — Watches, headphones, Mac, iPads all tied together — the bigger the usefulness of iPhone )

    1. people down voting maybe you can explain why, which of my points are wrong?

      if you are reading this article and commenting you must be a investor I assume and not just a ‘fanboy’ with NO SKIN in the game. An investor who doesn’t look at FACTS is kinda of silly, cheer leading for sake of cheer leading? I’ve made tens of thousands in one day ( if the share price holds tomorrow) , didn’t sell a share when aapl tanked 40% or so in 2007-08 BECAUSE I KNEW from FACTS that the Apple story is intact.

      So one star down voters FACTUALLY CONTRADICT my China research, I REALLY want to know if you have better info about China market.

      (i’ve worked in Asia for over ten years earlier in my life, went to Asia last year going again this year , speak Cantionnese. and another Asian language. My brother had worked there for decades, including several years in Shanghai. SO down voters enlighten me….)

    2. I recently referred to the way that the Chinese have widely adopted digital payment ( different system to Apple Pay ) and contrasted it with the way that America is slow to adopt payment technologies such as chip and PIN or Apple Pay. Those systems are very widely used in other countries and in the case of chip & PIN have been used for decades. Here in the U.K. I use Apple Pay as my usual method of paying in shops, with just hardware warehouse being the major exception due to still not being equipped with contactless terminals. I can’t understand why Canadian businesses readily embrace new payment technology while the in U.S. much older systems are the norm.

      One thing that you can always rely on is for the Chinese to be pragmatic and inventive. Their payment system may not be anywhere near as technically sophisticated as Apple Pay is, but it doesn’t require special equipment at the retailer, works on a customer’s fairly basic smartphone and is almost universally used around China, even in small towns. It has caught on very rapidly and in a way that few would have predicted.

      China often has its own way of doing things and it’s good that Apple has people who understand that China has unique preferences and are making Apple products better suited to the Chinese. It’s also reassuring to see that Apple are now taking a similar approach with another huge market with its own values and traditions – India.

      Don’t ever worry about getting any one star votes. I quite often see non-contentious factual postings being down-voted for no apparent reason. There seem to be people who just do that sort of thing. The important thing is to make an intelligent and insightful contribution and you have certainly done that.

      1. thank you for your thoughtful post.

        The one stars would have been ok if someone had given me a great argument and REASSURED me why China was alright ! . (I have aapl shares !).

        Thinking about it a bit more : Some of the lost in sales was due to exchange rates and not tech issues Also Some bright spots : I think Tim Cook believes the AR/VR thing might be so big it would transcend the barrier and be a hit (Android with it’s scattered OEM technology and razor margin competition can’t match it for years). — I don’t know enough about the tech but who knows : scan a QR code –so popular over there — and get a AR response ?

        The Growing size of China and it’s middle class also maybe means more Chinese in the future would be willing to pay for a more expensive iPhone even for using WeChat etc (iPhone comes with better camera etc) ( I think there was so much emphasis on the camera in recent ads in China due to this) etc.

        Also Apple setting up research centres in China are manifolded : satisfying the govt. Making Apple more a ‘China ‘ company to counter the recent load of ‘patriotic’ propaganda there to ‘support local’ (just like many countries in the world) i.e to gain consumer mindset, AND building tech SPECIFICALLY to attract the China market.

        Tim Cook is actually pretty good at working at growing in foreign countries and he seems at least focused on the China issues (vs my recent criticisms of him on the pro Mac issues). Apple donating money to China earthquake relief etc is besides just ‘doing the right thing’ is also good for Apple’s image etc.

        1. Tim Cook started laying the groundwork for Apple’s Chinese operation for many years ago. He’s now doing the same thing in India and having visited both countries, my impression is that the middle class in India are much more aspirational that their counterparts in China and enjoy displaying signs of their success, which makes them a particularly attractive market opportunity for Apple.

  2. All of the various OS’s look to be undergoing an actual exciting positive bump in abilities, now if only Apple had paid more attention to it’s Mac line those profits would no doubt be even bigger.

    Let’s hope the appearance of languishing Mac efforts is really another quantum leap shortly ahead (with the admitted exception of the Mac Pro and that unforgivable debacle). The iMac certainly looks more promising though it’s model is not terrible desirable for a pro who likes to update components on his or her machine without actually completely replacing it.

    1. Recently, I upgraded my 2013 Mac Pro with a bunch of RAM and a terabyte hard drive from OWC. This will keep it going for a while, but I am steamed that a more robust GPU is just not available. Apple played the wrong Tarot card with that design decision, and hopeful consumers like me who blindly trusted Apple were left holding the bag. Sometimes, and this was one of those times, early adopters get hosed. — it happens with every vendor, and Apple is no exception. You fall in love with the specs, and buy in to the hype, and write a budget for the equipment, it gets purchased, you use it for five years, then scrap it. Then you find out that the vendor has gone EOL, and you’re forced to develop another proposal. At least with Gateway and then Dell it was rubber-stamped every three years, like clockwork. The only downside was that the hardware sucked.

  3. just purchased AirPods at Target (no stock at Apple, six weeks)

    Just one pair left in stock at the local Target.

    Absolutely the finest Apple product in a long while… lots of WOW factor.

  4. Just a thought
    I know how you dislike the s branding
    But is there a correlation between apples low inventory, ability to cut costs and maintain its 37% profits during the s year?
    Does it help them to clear out inventory without write downs?
    Does it help maintain profit margin?
    Along with The SE model does this broadening of there scope and market penetration allow cost cutting to make the s year worthwhile?
    Just some questions to think about
    Sorry no answers

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