MacDailyNews presents live notes from Apple’s Q123 conference call

MacDailyNews presents live notes from Apple’s Q123 Conference Call with analysts starting at 2pm PT / 5pm ET today, February 2, 2023.

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Apple’s live conference call webcast will begin at 2pm PT / 5pm ET here.

Apple today posted quarterly revenue record of $117.2 billion (vs. $123.9 billion YOY), down 5 percent year over year, and quarterly earnings per diluted share of $1.88 (vs. $2.10 YOY).

For the quarter, analysts’ consensus estimates (per Refinitiv) called for Apple to report EPS of $1.94 per share on revenue of 121.19 billion.

Live notes:

• AAPL after hours: $148.53,-$2.29 (-1.52%) @ 06:08PM EST

• End of conference call

• Over the long run, Apple has a big market and low share, so the company is well-positioned in the personal computer market
• Cook: Some softening in product (Mac and wearables), the least in iPhone, and some softening in services (despite upside surprise)
• Softening macro affecting what?

• Apple is seeing sustained growth in Services
• Luca: Primarily the increased level of engagement in Apple Pay, Apple Music (very strong), etc.
• Q: Why were Services a surprise to the upside?

• Cook: “I am very bullish on India.”
• Cook: Apple did fairly wel thru COVID in India; even more bullish now. Apple is investing in India
• Q: Apple now entering a situation of even more opportunity in India post-COVID, new networks, etc.?

• Apple made it easier for customers to get engaged and added more services
• Paid accounts tend to grow over time
• Luca: Over the last 7 years, Apple has doubled the installed base
• Installed base vs. Services growth

• iPhone has become so integral into people’s lives; people are willing to stretch to get the best they can afford
• Apple is happy to now be able to ship Pro iPhones to the demand
• The product innovations speak for themselves
• Cook: iPhone 14 Pro and iPhone 14 Pro Max have been extremely strong
• Q: iPhone Pro vs. non-Pro models vs. prior years?

• Cook: We are all-in on being TSMC’s largest customer in Arizona
• Q: Elasticity of demand relative to small price increases in products?

• Apple grew iPhone market share around the world despite supply chain challenges
• Apple is taking what they learned in Chia years ago and using that in India
• India is a hugely exciting market for Apple; the company is focused on India
• Cook: Apple set quarterly record in India in Q123 despite headwinds
• Q: Emerging markets? India?

• Apple continues to launch new services over time which contributes to the growth
• Apple Pay started in the U.S. It is now in over 70 markets; keeps growing
• Level of engagement continues to grow; both transacting and paid accounts grew double digits in the quarter
• Luca: Installed base is the engine for Services growth; it is growing very nicely
• Q: Services growth?

• Cook: Difficult to estimate
• Q: What have consumers done when faced with iPhone supply constraints in the past?

• AI will continue to affect every product and service Apple has
• Cook: AI is a major focus of Apple
• Q: AI?

• Luca: Component costs, 50 basis points of foreign exchange headwinds in much less than 250 basis points YoY
• Q: Why such strong march quarter gross margin guidance?

• Cook: In Q123, Apple estimates iPhone would have grown during the quarter without the supply shortages due
• Cook: Difficult to estimate iPhone demand destroyed vs. deferred
• Cook: iPhone channel inventories below target range as company exited Q123
• Q: iPhone channel inventories? iPhone demand destroyed or deferred?

• Apple saw strong double digit growth in emerging markets (India, Brazil, for just two examples; bodes well for the future)
• Cook: Installed base in now over 2 billion active devices; up over 150 million YoY
• Q: 2 billion in active devices installed base? Can you break out iPhone?

• China opening started in December and Apple saw increased foot traffic in retail stores and demand
• Cook: Decline 7% YoY, but actually grew on a constant currency basis in China
• Q: China demand?

• Forign exchange is a negative of about 50 basis points sequentially
• Luca: Apple has historically had strong margins, this will continue in March
• Q: March margin guidance of 43.5-44.5%?

• Apple is currently at decent inventory levels across all products
• The last 3 years have been a difficult time with COVID, silicon shortages; Appel has overall had a resilient supply chain
• Supply chain is now at a point where Apple needs it to be; “The problem is behind us.”
• Cook: Supply was disrupted from early Nov. thru most of Dec.
• Q: Supply chain disruptions? Inventory levels?

• The dividend is payable on February 16, 2023 to shareholders of record as of the close of business on February 13, 2023
• Apple’s board of directors has declared a cash dividend of $0.23 per share of the company’s common stock

• Mac and iPad expected to decline double digits YoY due to challenging compares and macroeconomic headwinds
• Luca: “For iPhone, we expect our March quarter year-over-year revenue performance to accelerate relative to the December quarter year-over-year revenue performance.”
• Apple expects March quarter to be similar to December quarter

• Apple ended Q123 with $165 billion in cash and marketable securities
• $3.8 billion in dividends and 19 billion in buybacks during the quarter
• Returned over $25 billion to shareholders during the quarter

• Enterprise: Continued adoption of Apple’s services for business

• Growth is coming from every major product category and geographic segment
• Apple Pay set purchases record over the holiday season
• Paid subscriptions now exceed 935 million
• Services revenue: $20.766 billion

• Active installed base in Wearables, Home, and Accessories (especially Apple Watch) is at an all-time high and growing
• Wearables, Home, and Accessories revenue: $13.482 billion

• Active installed base in iPad is at an all-time high and growing
• iPad revenue: $9.396 billion

• Active installed base in Mac is at an all-time high and growing
• Mac revenue: $7.735 billion

• Active installed base in iPhone is at an all-time high and growing
• iPhone revenue: $65.775 billion

• AAPL after hours: $144.60, -$6.22 (-4.12%) @ 05:18PM EST

• 43% overall gross margin (37% products gross margin and 70.8% services gross margin)
• Apple returned over $25 billion to shareholders during the quarter while continuing to invest in our long-term growth plans
• Apple generated $34 billion in operating cash flow
• Apple faced a very difficult macroeconomic environment in Q123
• Apple grew total company revenue on a constant currency basis
• Faced significant iPhone 14 Pro and iPhone 14 Pro Max supply constraints in November and into December
• Luca: We faced very difficult currency headwinds

• Cook touts Apple’s charitable endeavors

• 100% recycled gold in the plating of multiple HomePod circuit boards
• Apple is committed to the environment
• Cook touts Apple privacy and security
• Apple celebrated 25 years of the Apple Online Store during Q123

• Cook touts Apple Fitness+ and Apple Business Connect
• Cook: Ted Lasso will return this spring
• Cook touts MLS Season Pass and Apple TV+

• Apple now has 935 million paid subscriptions
• Apple set a new all-time Services revenue record
• Cook: Apple now has more than 2 billion active devices in its growing installed base (doubled in the last 7 years)
• Cook touts Freeform app for iPhone, iPad, and Mac

• AAPL after hours: $144.99, -$5.83 (-3.87%) @ 05:08PM EST

• Cook touts new HomePod, Apple Watch Series 8, and Apple Watch Ultra
• Wearables down 8% YoY driven by foreign exchange headwinds and macroeconomic environment
• iPad revenue grew 30% due to favorable compare vs significant iPad supply constraints last year
• Cook touts the M2 and M2 Pro and the new Mac mini and MacBook Pro models
• Apple is confident of the Mac future
• Mac revenue was faced with a difficult compare due to M1 MacBook pro being announced last year
• iPhone down 8% YoY. On a constant currency basis, sales were flat YoY

• China’s COVID shutdowns impacted supply during the quarter
• Cook blames inflation, war in eastern Europe for macroeconomic malaise
• Apple grew YoY in terms of constant currency
• 800 basis points currency impact
• I’m proud of the way we have navigated the challenges of the past several years
• Cook: Good afternoon.

• Please note that comments made during this call may include forward-looking statements that are subject to risks and uncertainties, and that actual results may differ materially from these forward-looking statements.
• For more information on the factors that could influence results, please refer to Apple’s SEC filings.
• December quarter spanned 14 weeks. March quarter will span 13 weeks, as usual.
• Conference call begins

• AAPL after hours: $145.41, -$5.41 (-3.59%) @ 4:54PM EST

• Apple CEO Tim Cook said three factors impacted the results: A strong dollar, production issues in China affecting the iPhone 14 Pro and iPhone 14 Pro Max, and the overall macroeconomic environment. – CNBC

• AAPL after hours; $145.26, -$5.56 (-3.69%) @ 4:41PM EST