MacDailyNews presents live notes from Apple’s Q224 conference call

MacDailyNews presents live notes from Apple’s Q224 Conference Call with analysts starting at 2pm PT / 5pm ET today, May 2, 2024.

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

Apple today posted quarterly revenue of $90.753 billion (vs. $94.836 billion YoY), down 4 percent year over year, and quarterly earnings per diluted share of $1.53 (vs. $1.53 YoY).

For the quarter, analysts’ consensus estimates (per LSEG) called for Apple to report EPS of $1.50 EPS on revenue of $$90.01 billion, both of which Apple beat.

Live notes:

• AAPL After hours: $184.25 +$11.22 (+6.48%) @ 5:57PM EDT

• Luca: 45.5% – 46.5% gross margins for June; memory and foreign exchange will be slight headwinds
• Q: Commodity pricing for June quarter

• Cook: I am hearing about so many use cases; similar to how the Mac is used – you use it for everything, so, too, with the Vision Pro. It’s an enormous number of different verticals; we’re off to a good start with Vision Pro in the enterprise
• Q: Top 2-3 Vision Pro uses cases?

• Luca: We you look aver the long arc of time, we’ve gone thru a long period of a very strong dollar; so that’s something to keep in mind when you look at results
• Cook: We price our product for the value we are delivering
• Cook: Innovation spurs the upgrade cycle; economic factors play in there; carrier promotions, etc.
• Q: Do you see ways to deploy capital more to spur demand Promotions? Price decreases?

• Luca: China is by far the largest emerging market, but when you look at all of the others, the numbers are getting large; the populations are large and growing and our products are makign a lot of progress in those markets. It is very good for us, So the gap vs. China is reducing
• Q: Emerging markets growth? Can they, added up, surpass China?

• Cook: We decreased during the quarter as normal and are very comfortable with the channel inventory
• Q: iPhone channel inventory

• Cook: I can’t address the data points; I can only address our results. We did accelerate last quarter and iPhone grew in mainland China; I can’t speak to numbers coming from outside Apple
• Q: What are we missing in China, at a high level?

• Cook: We are producing there. You need to produce in China to be competitive. We continue to expand channels and are optimistic in China
• Q: China supply chain?

• Luca: Growth rates improved during 2023, so the comps are difficult, but Apple expects Services to grow double digits in Q3 Services, similar to Q2
• Luca: Overall very strong. All-time records in both developed and emerging markets
• Q: Drivers of Services growth?

• Luca: we expect to grow low single digits in Q324
• Cook: If you make the YoY adjustment on iPhone, it would be flattish YoY, not down
• Cook: GenAI is an opportunity for many of Apple’s devices; I am extremely optimistic
• Q: June quarter iPhone business to be down again? Is AI (lack thereof so far) an issue?

• Cook: Long term in China, Apple sees a lot of customers moving into the middle class; continues to be optimistic
• Cook: Acceleration from Q1, driven by iPhone, especially in mainland China, but Apple has work to do in other product categories
• Q: Economy in China?

• Luca: One step at a time. We are working very hard to get there; free cash flow has been very strong for the last several years, so that’s one reason why Apple is increasing buybacks
• Q: $58 billion net cash currently; how to get to net cash neutral?

• Luca: In general, we continue to see a lot of interest at the top of the range of our products in each category
• Q: iPhone mix tilted towards Pro models?

• Cook: Enterprise is focused on selling iPhone, iPad, Mac, and Vision Pro units
• Q: AI for the enterprise

• Cook: I think AI and GenAI both are big opportunities across our products; I think there are numerous ways that are great for Apple and the company is well-positioned; we’ll talk more about AI soon
• Q: Is AI an opportunity to monetize your mobile real estate?

• Trip to China was fantastic; I maintain a great view of China long term
• Cook: iPhone in mainland China, we grew before normalization (before supply destruction we mentioned earlier)
• Cook: In Q2, for greater China, we were down 8% due to iPhone sales
• Q: China confidence?

• Luca: Generally favorable during the quarter
• Q: Rising costs for commodity and components?

• Cook: I don’t want to get in front of our announcements; we see GenAI as a big opportunity across our products
• Generative AI monetization?

• We haven’t seen anything different within the product categories
• Luca: Down sequentially primarily due to different mix YoY, leverage plays a big role
• Q: Product gross margins? Are customers mixing down within or across product lines?

• Cook: It’s really too early to answer the question
• Q: Effect of 3rd party app stores on iPhone and iPad in the EU?

• On the CapEx front, Apple has its own data center capacity and also with 3rd parties and plans to continue along the same lines going forward
• Luca: We are obviously very excited about GenAI
• Q: Artificial Intelligence to affect historical CapEX cadence?

• Services: We’ve seen very strong, brod-based performance across the board
• Luca: We expect total revenue to grow low single digitis YoY
• Q: Outlook for products?

• Expect 45.5% – 46.5% gross margin
• Expect iPad revenue to grow double digits
• Expect Services to grow double digits
• Color: June quarter total revenue to grow low single digitis YoY

• Apple continues to plan for annual dividend increases going forward
• Apple’s board of directors has declared a cash dividend of $0.25 per share of the Company’s common stock, an increase of 4 percent
• Board of directors has authorized an additional program to repurchase up to $110 billion of the Company’s common stock
• $105 billion total debt
• Apple $162 cash and marketable securities
• Apple particularly pleased with strong performance in emerging markets

• Maestri touts Mac and Vision Pro in the enterprise

• Apple has well over 1 billion paid subscriptions across Services
• Both transacting and paid accounts reached new all-time highs
• Services revenue: $23.867 billion

• Almost 2/3rd of Apple Watch customers were new to the product in the quarter
• Wearables, home and accessories revenue: $7.913 billion

• iPad U.S. customer sat = 96%
• iPad install base hit new all-time high
• iPad revenue: $5.559 billion

• Mac sales driven by M3 MacBook Air
• Mac revenue: $7.451 billion

• iPhone customer sat in U.S = 99%
• iPhone active installed base grew to an all-time high
• iPhone revenue: $45.963 billion
• OpEx $14.4 billion, up 5% YoY
• Installed base of active devices reached an all-time high
• iPhone had a challenging compare YoY
• Luca Maestri: Revenue: $90.753 billion

• AAPL After hours: $185.21 +$12.18 (+7.04%) @ 05:12PM EDT

• Cook talks “carbon removal” projects
• Cook touts emission reductions, recycling, solar and wind power
• Apple want to become “carbon neutral” by 2030

• Cook touts privacy and protections against quantum computing
• Retail: Shanghai store opening was very exciting
• Apple Sports app released during quarter
• Promos Apple TV+ productions which win major awards
• Services revenue: $23.867 billion; all-time revenue record
• Wearables, home and accessories revenue: $7.913 billion
• Cook talks up Apple Watch; mentions AI and ML again
• iPad revenue: $5.559 billion; down 17% YoY due to difficult compare
• Cook touts M3 MacBook Air; mentions AI again
• Mac revenue: $7.451 billion, up 4% YoY
• Cook visited Southeast Asia; excited for the future
• iPhone revenue: $45.963 billion
• iPhone faced a difficult compare YoY
• Apple believes it has AI advantage that will distinguish itself; mentions neural engines and privacy focus
• Apple bullish on generative AI
• Next month WWDC – exciting!
• Exciting event coming next week
• Cook talks up Vision Pro
• Services set all-time revenue record
• Cook: Set revenue records in Latin America and Middle East, Canada, India, Span, Turkey, Indonesia

• Conference call begins
• AAPL After hours: $185.51 +$12.48 (+7.21%) @ 04:56PM EDT
• AAPL After hours: $183.99 +$10.96 (+6.33%) @ 04:46PM EDT