MacDailyNews presents live notes from Apple’s Q323 conference call

MacDailyNews presents live notes from Apple’s Q323 Conference Call with analysts starting at 2pm PDT / 5pm EDT today, August 3, 2023.

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

Apple today posted quarterly revenue of $81.797 billion (vs. $82.959 billion YOY), down 1 percent year over year, and quarterly earnings per diluted share of $1.26 (vs. $1.20 YOY), up 5 percent YoY.

For the quarter, analysts’ consensus estimates (per Refinitiv) called for Apple to report EPS of $1.19 EPS (vs. $1.26 actual) on revenue of $81.700 billion (vs. $81.797 billion actual).

Live notes:
• AAPL After hours: $187.05, -$4.12 (-2.16%) @ 6:02PM EDT

• End of call

• Cook: We just opened two new retail stores in India last quarter
• Cook: Stores are a key part of Apple’s approach and will be very key to the launch of Apple Vision Pro
• Q: Apple Retail Stores?

• Cook: The iPhone compare has a bit of a headwind as iPhone SE was announced last year, but we see iPhone sales accelerating YoY regardless
• Cook: Switching is a huge opportunity for us
• Cook: Switchers set a record in greater China, in particular
• Q: iPhone switchers?

• Cook: We could not be more excited about Apple Vision Pro; I am using the product daily
• Q: Apple Vision Pro?

• AI and ML is absolutely critical; Apple has been doinf research in AI for years, including generative AI; we do not discuss unannounced products
• Cook: We view AI and Machine Learning (ML) as core fundamental tech that are integral to every product that we build
• Artificial Intelligence (AI) strategy?

• Cook: India is the second largest smartphone market in the world; we have a huge opportunity in India
• Cook: We set June quarter record; we continue to build and invest in India
• Prospects for iPhone in India?

• Cook: We could not be happier with MLS Season Pass; Messi in the MLS is a big help
• Cook: Sport is a part of that; it’s the ultimate original story
• Cook: We are focused on original content with Apple TV+
• Q: Live sports?

• Cook: Generally speaking, it would be quite easy to find an iPhone promotion especially if switching services; expect that to continue in September quarter
• Q: U.S. carriers have had programs for iPhone upgrades for years; are these programs in place this year?
• Luca: We try to hedge foreign exchange as best we can; about 60% of Apple business is outside of the U.S.
• Q: foreign exchange?

• France, Italy, The Netherlands, Austria all did well in June quarter
• Luca: Emerging markets in Europe includes India
• Western Europe?
• AirPods continue to be a great success; Wearables, Home and Accessories has become a very big part of Apple’s business
• Wearables install base is growing quickly with 2/3rd of Appel Watch buyer being new to the product
• Luca: Wearables growth very strong in China
• Q: Wearables growth?

• By offering better and more content over time, Apple believes it can attract more and more subscribers
• Luca: Customers with multiple Apple devices tend to be more active with Services
• Q: Hardware install base of 2+ billion; Services per device?

• Apple keeps enhancing the ecosystem
• Install base continues to grow
• Services growth shows a high level of engagement
• Many Services categories are showing growth
• Luca: Clearly we’ve seen an improvement in Services; we expect more in September
• Q: Services acceleration this quarter and next, why?

• AAPL After hours: $186.11, -$5.06 (-2.65%) @ 5:40PM EDT

• Luca: We look at the environment and we know it’s an uncertain period, so we deliberately control our spending, hiring; we’re very pleased with expense growth currently
• Q: OpEx?
• Really good signs in most places in the world
• Cook: A challenging smartphone market in the U.S. currently
• Cook: U.S. saw a slight acceleration
• Cook: China went from -3 to +8, it’s an acceleration
• Cook: We did exceptionally well in emerging markets last quarter

• Luca: We continue to take advantage of favorable commodity prices
• Luca: Guidance takes into account the expectation of a better foreign exchange

• Luca: Majority of iPhones (well over 50%) are sold via affordability programs around the world (trade-ins, installment plans, etc.)
• Q: iPhones sold in installment vs. full purchase price?
• Luca: Mac and iPad will decline double digits due to difficult compare; last June Apple had factory shutdowns and Mac and iPad sales were fulfilled in September 2022 quarter
• Q: Guidance color? Seasonality changing?

• Similar gross margin expected for September quarter
• Foreign exchange continues to be a considerable drag
• Commodity environment is favorable to Apple
• Gross margin driven by cost savings and mix shift to Services
• 44.5% for the June quarter is a Q3 record
• Gross margin so high?
• Slight acceleration of iPhone primarily in the U.S.
• iPhone performance set record in India, Indonesia, southeast Asia, Latin America
• Luca: On a geographic basis, great iPhone performance in emerging markets
• Q: Uneven macro environment? iPhone demand on geographic basis?

• The dividend is payable on August 17, 2023 to shareholders of record as of the close of business on August 14, 2023
• Apple’s board of directors has declared a cash dividend of $0.24 per share of the company’s common stock
• Tax rate to be around 16%
• We expect Mac and iPad to decline double digits due to difficult compares
• iPhone and Service expected to accelerate vs June quarter
• 44-45% gross margin expected in September quarter
• Outlook for September quarter: We expect YoY revenue performance to be similar to June quarter
• $57 billion net cash at end of quarter
• total debt $109 billion
• Apple continues to enhance services from Apple Arcade to Apple TV to Apple Card Savings accounts
• Paid subscriptions showed strong growth, over 1 billion paid subscriptions
• Active install base of over 2 billion
• We are very pleased with Services performance
• 2/3rds of Apple Watch buyers were new to Apple Watch
• Over half of iPad buyers during quarter were new to iPad
• Nearly half of Mac buyers during quarter were new to the Mac

• iPhone active install base grew to an all-time high due in part to strong switchers
• iPhone revenue grew YoY on a constant currency basis
• $26.4 billion operating cash flow
• Service gross margin: 70.5%
• Products gross margin: 35.4%
• Gross margin 44.5%, a record level for the June quarter; driven by cost savings and favorable
• Installed base reached all-time high in all geographic segments
• $60.6 billion in products revenue
• Luca: On constant currency basis, Apple’s revenue grew YoY

• Cook: We’ll continue to manage for the long term
• Cook promotes Apple’s efforts in education
• Apple’s goal is to be carbon neutral by 2030 throughout its operations
• Cook touts Apple’s DEI efforts
• Cook touts Apple security and privacy focus
• Cook touts Apple’s commitment to accessibility

• Apple Store Online launched in Vietnam
• Apple Music launched new live music features
• Messi’s arrival in MLS is very exciting for Apple
• Apple TV+ is highly nominated, awarded
• Apple Card high-yield Savings now has over $10 billion in deposits
• Services revenue: $21.213 billion; 8% YoY, better than Appel expected; all-time quarterly record
• Cook touts WWDC 2023 announcements, features
• Wearables, Home and Accessories revenue: $8.284 billion
• iPad revenue: $5.792 billion (down due primarily to a difficult compare YoY)
• Mac revenue: $6.840 billion
• iPhone revenue: $39.669 billion
• Cook touts new Macs, new OSes, and Apple’s introduction to the world of spatial computing with Apple Vision Pro in June, “a marvel of innovation only possible at Apple”
• We grew YoY on a constant currency basis
• Set an all-time quarterly Services revenue record
• Set June quarter records in many countries
• Cook: Apple reported revenue os $81.8 billion, better than our expectations

• Apple CEO Tim Cook to speak first, followed by Apple CFO Luca Maestri, and call will conclude with analysts’ questions

• The analysts’ consensus, per Refinitiv, expected Apple to report revenue of $81.7 billion and EPS of $1.19
• Apple reported quarterly earnings per diluted share of $1.26, up 5 percent YoY
• Apple posted quarterly revenue of $81.8 billion, down 1 percent YoY

• AAPL After hours: $,189.01 -$2.16 (-1.13%) @ 5:00PM EDT
• AAPL After hours: $189.50, -$1.67 (-0.87%) @ 4:58PM EDT
• AAPL After hours: $188.37, -$2.80 (-1.46%) @ 4:55PM EDT
• AAPL After hours: $187.45, -$3.72 (-1.95%) @ 4:52PM EDT
• AAPL After hours: $189.67, -$1.50 (-0.78%) @ 4:45PM EDT