MacDailyNews presents live notes from Apple’s Q223 conference call

MacDailyNews presents live notes from Apple’s Q223 Conference Call with analysts starting at 2pm PDT / 5pm EDT today, May 4, 2023.

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

Apple today posted quarterly revenue record of $94.836 billion (vs. $97.278 billion YOY), down 3 percent year over year, and quarterly earnings per diluted share of $1.52 (vs. $1.52 YOY).

For the quarter, analysts’ consensus estimates (per Refinitiv) called for Apple to report EPS of $1.43 EPS (vs. $1.52 actual) on revenue of $92.960 billion (vs. $94.835 billion actual).

Live notes:

• AAPL After hours: $169.15 +$3.36 (+2.03%) @ 06:00PM EDT

• End of conference call

• Cook: I think we can do better on everything, so I wouldn’t single out just one segment; there’s opportunity in many of them
• Greatest Service opportunity?

• Cook: I don’t see Apple participating directly, but would be a beneficiary indirectly as Apple’s chip making partners partcipate and increase capacity
• Apple is one of the largest chip companies; is the company a benefactor of the Chip Act?

• Cook: Feedback for Apple Pay Later and Savings have both been “really good.”
• Apple Pay Later?

• In the June quarter last year, iPhone SE and iPad Air both launched
• Luca: we expect our revenue performance for the June quarter to be similar to that of the March quarter

• Luca: Component pricing is expected to be favorable in the June quarter
• Q: Component pricing?

• Cook: China revenue grew on a constant currency basis; Apple pleased with China performance; four of the top five bestselling smartphones in Urban China are iPhones; Apple gained smartphone share in Q2 in China; Services hit an all-time quarterly record in the country
• Q: China repopening effect on demand?

• Cook: I think there’s a good opportunity across the borad from prosuct to Services in India
• Q: Potential for Services in India?

• Cook: Those are internal numbers. Enterprise business is growing; Apple is focused on BYOD companies; Apple is primarily a consumer company based on revenues
• Q: How much of Apple revene comes from consumer vs. enterprise?

• Cook: Each country is different, so I hesitate to compare too much; I do see a lot of people entering the middle class in India; Appel wants to convince them to buy an iPhone
• Q: What is Apple seeing in India today vs. China a decade ago?

• Luca: We are guiding to stable gross margins; foreign exchange expected to be flat on a sequential basis; seasonal loss of leverage will be offset by cost savings
• Q: Gross margins seem to be holding up; what’s driving the strength?

• Luca: Apple has great momentum in emerging markets, where there is much headroom for growth
• Q: Consumer spending trends?

• Luca: Macro environment is hurting digital advertising and mobile gaming (bit of a slowdown, especially due to tough compare from COVID lockdown years)
• In general, paid subscription in the App Store continue to grow
• Luca: Macroeconomic environment negatively affected advertising and mobile gaming in Q2, but other services continue to consistently grow
• Q: Services customers’ behavior changes?

• Cook: In Q2, emerging markets saw stellar demand
• Q: iPhone demand?

• Apple is very pleased with the initial uptake of Apple Savings accounts
• Cook: On our financial products, as with Apple Watch and health/fitness, we’re helping people have better financial health/fitness
• Q: Apple Pay, Apple Pay Later, Appel Savings expansion?

• Cook: We recaptured some, but it’s difficult to quantify
• Q: Product mix for iPhone? Recapture deferred sales from previous quarter?

• Over the past few years, despite COVID, chip shortages. etc. the supply chain has been incredibly resilient
• We’ll continue to invest everywhere and optimize the supply chain everywhere
• Cook: Our supply chain is truly global and we are invsting all over the world
• Q: Moving production out of China?

• Cook: We view A.I. as huge and we’ll continue weaving it into our products on a very thoughtful basis
• AI is weaved into many Apple products: Fall detection, crash detection, etc.
• Cook: We don’t comment on product roadmaps.It is important to be deliberative on these things
• Q: Artificial Intelligence, especially generative AI?

• Cook: We try really hard to design our product so that they work seamlessly together, so there are a good deal of people out there who have multiple Apple devices
• Q: Monetization per user?

• AAPL After hours: $169.02 +$3.23 (+1.95%) @ 05:31PM EDT

• Cook: iPhone base is well over a billion active devices
• Cook: Installed base of active devices is over 2 billion; we set new record across each geographic segment in each of the major product categories
• Q: Record installed base in active devices?

• Apple sees a great opportunity in emerging markets
• In India, there are a lot of people coming into the middle class; Cook believes the country is at a tipping point
• Apple has a number of channle partners in the country as well; very happy with how that’s going
• Cook: We set a quarterly record in India in Q2; it’s a major focus for us
• Q: Emerging markets, especially India?

• Production levels during Q2 were where we wanted them to be
• Cook: Hard to quantify; we did recapture some amount of sales last quarter
• Q: How should we think about deferral of demand vs. destruction of demand from China’s shutdowns late last year?

• The dividend is payable on May 18, 2023 to shareholders of record as of the close of business on May 15, 2023
• Apple’s board of directors has declared a cash dividend of $0.24 per share of the company’s common stock, an increase of 4 percent

• Apple expects gross margin of 44.0-44.5% in June quarter

• The board of directors has also authorized an additional program to repurchase up to $90 billion of the Company’s common stock

• Net cash: $57 billion
• Total debt of $110 billion
• Ended quarter with $166 billion in cash and marketable securities
• Maestri touts Apple’s performance in the enterprise

• Over 975 million paid subscriptions across all Services, nearly double that of 3 years ago
• Apple installed base: Over 2 billion active devices
• Continued growth in Services is a reflection of Apple’s ecosystem

• During the quarter, Apple Watch installed base reached an all-time high
• Over half of iPad purchasers were new to the product
• iPad face tough YoY compare and headwinds from the macroeconomic envirnment
• During the quarter, Mac installed base reached an all-time high
• During the quarter, iPhone installed base reached an all-time high
• Challenging macro environment
• Net income $24.2 billion

• 71% services gross margin
• 36.7% products gross margin

• Services set an all-time quarterly record
• During the quarter, our installed base of active devices reached an all-time high
• $73.9 billion product revenue
• Luca: Foreign exchange had a negative impact of over 5 percentage points

• Cook promotes Apple’s use of recycled products
• Cook lauds Apple’s commitment to “carbon removal” and becoming “carbon neutral”
• Cook touts Apple values, being a “force for progress,” “culture of belonging”
• First two Apple Retail Stores opened in India

• Apple Pay Later and Apple Savings launched during the quarter

• Cook promotes Apple Music Classical

• Friday Night Baseball returned for a new MLB season
• First season of MLS partnership is underway. MLS Season Pass

• Cook touts Apple TV+ series and films
• More than 975 million paid subs
• Services: $20.907 billion (vs. $19.821 billion YoY)

• Wearables, Home and Accessories: $8.757 billion (vs. $8.806 billion YoY)

• iPad revenue impacted due to macroeconomic challenges, foreign exchange rates, and difficult compare with M1 iPad Air having been introduced last year
• iPad: $6.670 (vs. $ 7.646 billion YoY)

• Very difficult Mac compare due to M1 rollout last year
• Mac: $7.168 billion (vs. $10.435 billion YoY)

• Emergency SOS via satellite expanded to total of 12 countries
• iPhone: $51.334 billion (vs. $50.570 billion YoY)
• During the quarter, our installed base of active devices reached an all-time high
• Macroeconomic headwinds impact of more than 500 basis points
• We are pleased with our performance in emerging markets, setting quarterly records in several
• Cook: We are pleased to report an all-time record in Services and a March quarter record for iPhone despite the challenging macroeconomic environment

• AAPL After hours: $167.77 +$1.98 (+1.19%) @ 5:00PM EDT
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