MacDailyNews presents live notes from Apple’s Q321 conference call

MacDailyNews presents live notes from Apple’s Q321 Conference Call with analysts starting at 5pm EDT / 2pm PDT today, July 27, 2021.

Apple today will provide live audio streaming of its Q321 Results Conference Call. This stream is best experienced on an iPhone 7 or later, iPad (5th generation or later), or iPod touch (7th generation) using Safari on iOS 12 or later; or a Mac using Safari on macOS Mojave 10.14 or later. Streaming to your TV requires an AirPlay 2–capable device, or via AirPlay to an Apple TV (2nd generation or later) with the latest Apple TV software or tvOS. Other platforms may also be able to access the stream using recent versions of Chrome, Firefox, or Microsoft Edge (MSE, H.264, and AAC required).

Apple’s live conference call webcast will begin at 5pm EDT / 2pm PTD today here.

Apple today posted all-time record third quarter revenue of $81.4 billion, up 36% year over year, and quarterly earnings per diluted share of $1.30 (vs. $0.64 YOY).

For the quarter, Refinitiv consensus estimates expected Apple to post revenue of $73.30 billion and EPS of $1.01.

Live notes from Apple’s Q321 Conference Call in reverse chronological order:

• AAPL After hours: $144.59 -$2.18 (-1.49%) @ 6:01PM EDT

• End of conference call

• Cook: Strong quarter in China, embedded in that was a quarterly record for Services which includes the App Store; China economy has rebounded strongly from COVID
• Q: Regulatory focus on apps impact in China and elsewhere?

• Luca: Services: Very large portfolio, so even a slight change in mix can drive sequential differences (AppleCare has rebounded, for example)
• Luca: Products: Freight is higher cost than normal, but for everything else we are seeing good costs
• Q: Margins for products and servcies?

• Advertising in general (App Tracking Transparency); Apple has been getting positive reaction on tracking transparency
• Cook: Apple One is a great customer benefit
• Cook: We have recently begun to remind people of Apple One. I am very please with what we’re seeing with Apple One
• Cook: Apple One bundles make enjoying Apple’s subscription services easier than every before
• Q: How are Apple One bundles influencing Services?

• Cook: Early times. The top end buy is buying 5G for the future as they may hold their iPhone for 2 years or longer
• Q: 5G penetration?

• Cook: iPhone SE is Apple’s entry price point iPhone; we need that range of price points to accommodate the types of people we want to accommodate
• Cook: We had an incredible June quarter for iPhone in emerging markets – for the entire line of products, including the current iPhone SE
• Q: Less of a need for lower-prices iPhones in the mix?

• Cook: The legacy silicon nodes are where the supply constraints are
• Cook: Some industry shortages and some of it is demand is so great for certain products its difficult to get enough of some components
• Q: Supply constraints?

• Luca: Services growth has been strong for many quarters, double-digits, you can look back to past quarters and average it out
• Q: As peole return to the office ina post-COVID world, what sort of growth will Services show?

• Cook: M1 response is unbelievable; it is powering Mac and iPad sales into supply constraint territory
• The Apple M1 is a great example of that; it is appreciably better than something we can buy
• Cook: If we can make something better, we will make it; if we can find something on the market we cannot improve, we will buy it
• Cook: No comment on that acquisition
• Q: ARM being acquired by Nvida?

• With 5G penetration so low, we are at the front end of the 5G upgrade
• Cook: In January Apple said 1.65 billion installed base of device users, over 1 billion of which are iPhone users
• Cook: We did extremely well around the world on iPhone switchers and upgraders
• Q: Congrats n the quarter. Installed base – how old is i (how long have they had their iPhone)?

• We are going to continue to deliver great products and services
• Cook: We are in the very early innings of 5G – so there is much headroom left to go
• Cook: In many countries Apple has the top selling 2, 3 and 4 smartphones
• Cook: We have a very large install base, very loyal and satisfied customers, and geographic response in pervasive across the world
• Q: iPhone cycle changes?

• New normal after we exit COVID may be different; for example more hybrid work models, etc.
• On the negative side: Advertising and AppleCare and also Apple Watch were affected (people like to be able to try them on)
• Luca: On positive side: Digital services, iPad and Mac demand very, very strong
• Q: COVID response- was Apple more helped or hindered?

• Apple continues to increase Services with new launches and deepening existing services, both of which attract new customers
• Luca: Install base continue to grow and sets records all the time gives Apple a greater opportunity
• Q: Services growth rate?

• Luca: 43.3% gross margin in June had a very high mix of Services YOY (an last June was down due to COVID)
• Q: September quarter gross margin?

• We could not be happier with the results in Greater China
• Mac, iPad, Services, Wearables – all set June quarter records in China
• Strong response in China to iPhone 12 Pro and iPhone 12 Pro Max
• Cook: Set a June quarter reveneu record for Greater China
• Q: China growth?

• Cook: iPhone results are really strong around the world, but 5G penetration is still very, very low, so we feel really good about the future of the iPhone
• Cook: We had strong double-digit growth for switchers and for upgraders; strongest Q3 ever
• Q: What have you learned from this iPhone cycle?

• Cook: The company has been incredibly resilient. We could not be more pleased with the cadence of innovation
• Q: Congrats on a great quarter. It R&D being impacted due to COVID, China floods, remote work, etc.?

• Luca: We saw some really nice 41.5%-42.5% gross margins expected for Sept. quarter
• Cook: We are paying more for freight than I would liek to pay, but component costs in aggregate continue to decline. We’ll not predict out to future quarters, taking it one quarter at a time
• Q: Supply constraints to persist thru Holiday quarter?

• Luca: We are expecting to grow very strong double digits (below 36% seen in June quarter due to dollar headwinds, Services grwoth rate (33%) is significantly higher than in recent history due to advertising and AppleCare that were impacted last year du to COVID lockdowns, so compares will return to normal, and supply constraints will be higher in Sept. quarter (primarily for Mac and iPad).
• Q: iPhone launch differences this year vs. last?

• The dividend is payable on August 12, 2021 to shareholders of record as of the close of business on August 9, 2021
• Apple’s board of directors has declared a cash dividend of $0.22 per share of the Company’s common stock
• Apple expects tax rate of around 16% for Sept. quarter
• Apple expects revenue growth in Sept. quarter to be smaller YOY than it was in the June quarter
• No revenue guidance for September quarter due to COVID-19 impact
• Returned 29 billion to shareholders via buybacks and dividends
• Net cash of $73 billion at end of June quarter
• $122 billion total debt
• $194 billion in cash and marketable securities
• M1 Macs are doing well in the enterprise
• About half of Mac and iPad customers during June quarter are new to the products
• M1 iPad Pro response has been outstanding
• iPad revenue: $7.368 billion
• The last 4 quarters for Mac have been the best 4 quarters ever for Mac
• Mac revenue: $8.235 billion
• Nearly 75% of Apple Watch customers during June quarter are new to the product
• New Apple TV 4K with new Siri Remote and AirTags shipped this quarter to strong response
• Wearables, Home and Accessories: $8.775 billion
• Apple is adding new services and working to improve existing services
• Services subscribers reached new all-time high in each geographic segment
• Installed base of devices reached new all-time high in each geographic segment
• Services revenue: $17.486 billion
• Active installed base of iPhones hit new all-time high (number not disclosed)
• iPhone revenue: $39.570 billion
• 36.0% products gross margin
• 69.8% servies gross margin
• 43.3% companywide gross margin
• Installed base hit new all-time record (number not disclosed)
• Grew double-digits in each of the company’s product categories
• CFO Luca Maestri: Record June quarter results

• Cook: Grateful to teams who create tech to improve people’s lives
• Apple working to bringing more affordable housing to Bay Area and across California
• Cook touts App scholarship winners
• Apple’s Racial Equity and Justice initiative awarded grants to Historically Black Colleges and Universities
• Accessibility remains a bedrock principle for Apple
• Cook: Privacy is a fundamental human right
• Cook covers new features in forthcoming macOS, iOS, iPadOS, watchOS, etc. releases this fall

• Apple are diehard optimists in the promise of technology
• The App economy creates jobs around the world
• Spatial Audio launched in the June quarter
• Apple Podcasts Subscriptions launched in the June quarter
• “Ted Lasso” Season 2 started just last week
• 35 Emmy noms this year for Apple TV+
• Wearables, Home and Accessories set a new June quarter record
• Mac set an al-time June quarter rcord
• iPad had its best tirdquarter in a decade
• Customers lover iPhone 12 series
• Cook: We are only in the early innings of 5G
• iPhone: Very strong double digit growth in each geographic segment
• Apple Tower Theater opening reminded of the power of gathering together
• Cook: Uneven recovery and delta variant show that the road to recovery will be a winding one
• Quarterly earnings per diluted share of $1.30
• Especially strong growth in emerging markets
• New June quarter record revenue of $81.4 billion, up 36 percent year over year
• Today Apple is reporting a very strong quarter
• Apple CEO Tim Cook: Good afternoon, everyone.

• Start of conference call

• AAPL After hours: $145.21, -$1.56 (-1.06%) @ 4:56PM EDT
• AAPL After hours: $146.20, -$0.57 (-0.39%) @ 4:43PM EDT