Apple Inc (AAPL)

[Investors3]

MacDailyNews presents live notes from Apple’s Q423 conference call
Thursday, November 2, 2023 4:46 pm

MacDailyNews presents live notes from Apple’s Q423 Conference Call with analysts starting at 2pm PDT / 5pm EDT today, November 2, 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 $89.498 billion (vs. $90.146 billion YoY), down 1 percent year over year, and quarterly earnings per diluted share of $1.46 (vs. $1.29 YoY), up 13 percent YoY.

For the quarter, analysts’ consensus estimates (per LSEG) called for Apple to report EPS of $1.39 EPS on revenue of $89.28 billion.

Live notes:

• AAPL After hours: $171.97, -$5.60 (-3.15%) @ 06:00PM EDT

• End of call.

• Luca: Over time, we add new services which attracts more and more people
• Luca: we look at the installed base; we want to keep new customers; we look at daily engagement
• Q: How does Apple grow customer lifetime value

• Luca: Some of the R&D investments are also the drivers for gross margin expansion
• Cook: It’s a number of things; some things I can’t talk about, but it’s also Vision Pro, Apple Silicon, AI, ML, other silicon
• Q: R&D increase drivers?

• Luca: Extra week is 7 points of revenue, but we still expect iPhone revenue growth on normalized basis
• Q: Extra week in Q123 vs. Q124

• Cook: We are continually optimizing the supply chain; it is a global supply chain
• Cook: Our supply chain is truly global; we are investing all over the world, including in the U.S.
• Q: Supply chain diversification?

• Apple has a lot of headroom in India; ASPs are likely lower than worldwide, but that doesn’t bother Apple at all; “each country has its own journey.” Apple sees a lot of people moving into the middle class in India and distribution improving
• Cook: All-time revenue record in India, grew strong double-digits; an incredibly exciting market for Appl
• Q: How does Apple look at India growth opportunity and ASPs?

• Installment plans, trade-ins – this make products more affordable and drives margin expansion
• Our color for Q124 reflects that; product mix affects margins, too
• Luca: With new product launches, the cost structures increase and come down over time
• Q: Is there more room for margin expansion?

• Cook: We see them as important and make decisions in the best interest of our users
• Q: Default search partner deals?

• Cook: We set an all-time record in mainland China in the September quarter; very optimistic for the future there
• Q: Opportunity for continued [iPhone] share gains in China?

• Cook: Apple Silicon has enabled us to build products we could not have with outside vendors; I do not see going back to off the shelf chips; I see the benefit every day of Apple Silicon in our products
• Q: Custom Apple Silicon economically profitable or it is more strategic?

• Cook: In terms of generative AI, we have work going on; we are investing; we are going to do it responsibly; we do not talk about pre-release products/services.
• Cook: We view AI and ML as fundamental tech and are integral in very product we ship
• Q: Generative AI

• AAPL After hours: $171.29, -$6.28 (-3.54%) @ 5:41PM EDT

• Apple is purposely bringing Vision Pro out in retail stores only to educate and fit consumers properly
• Cook: There is some real “blow away” apps coming for Vision Pro
• Cook: We are every excited with Vision Pro; we have been sharing it with developers
• Q: Apple Vision Pro launch requirements?

• Services engagement continues to grow and so does the installed base; this feels Services revenue
• Apple Music set a September Quarter record
• Luca: We had a really strong quarter across the board; both geographically and from a category standpoint
• Q: Services huge growth rate; what is driving this?

• Luca: December is the quarter where products is very heavy towards gross margins
• Cook: With iPhone 15 Pro and Pro Max still constrained with supply, it’s too early to tell
• Q: U.S. iPhone sales? Gross margins increase due to mix toward Services?

• Luca: We are planning to make necessary investments to continue to innovate
• Q: Capital expenditures?

• Luca: We are constrained on supply for iPhone 15 Pro and Pro Max; we expect supply/demand balence by the end of the quarter and our guidance reflects that
• Q: iPhone 15 Pro and Pro Max supply constraints in Q124?

• Growth in Services is favorable. Foreign exchange has been a drag for several quarters give the strength of the dollar; we feel very good about the coming year
• Luca: results and guidance show Apple experiencing strong gross margins
• Q: Inflationary environment on component pricing?

• iPhone set a revenue recored in mainland China (Mac and iPad suffered from the difficult compare)
• Cook: In greater China, we came in minus two, but we grew in constant currency
• Q: Demand environment in China?

• Cook: We are thrilled to announce the new M3 MacBook and iMac lineups; we expct a significant acceleration in Q124 (factory disruption last year made the September quarter a record for Mac)
• Q: Mac?

• Cook: iPhone 15 Pro Mac starts at 256GB, so that is a shift; outside of that, no significant changes
• Q: Mix shift towards higher iPhone storage? iCloud+ storage?

• Apple’s board of directors has declared a cash dividend of $0.24 per share of the Company’s common stock.
• The dividend is payable on November 16, 2023 to shareholders of record as of the close of business on November 13, 2023.
• Apple expects 45-46% gross margin
• Expect iPad and Wearables to decelerate YoY due to different launch compares
• Expect Mac YoY performance to significant accelerate
• iPhone revenue to grow YoY on a normalized basis
• Revenue will be similar to last year
• Luca: Apple expects a negative YoY of about 1 percentage point in currency headwinds

• Apple is very excited in momentum in emerging markets
• Apple is particularly pleased with performance in emerging markets (India, Vietnam, Chile, etc.)
• Apple began a $5 billion accelerated buyback program in August
• Over $162 billion in cash on hand at end of quarter, $111 billion total debt
• Starbucks is a big Apple customer; Luca highlights its use of Apple products
• Enterprise: Businesses expanded their use of Apple products
• Both transacting and paid account hit new all-time high; double-digit growth YoY
• Installed base of over 2 billion devices
• Services had a great quarter; growth from all categories and evry geographic
• Apple Watch: Nearly 2/3rds of buyers are new to Apple Watch
• iPad also faces a difficult YoY compare; Over 50% of iPad buyer are new to iPad
• Mac install base at an all-time high; Ovr50% of Mac buyers are new to Mac
• Apple has great confidence in its Mac lineup
• Mac revenue was down due to challenging conditions and a difficult compare YoY; also launch timing differences
• iPhone set a new record for switchers
• iPhone revenue saw strong performance in India, Canada, Latin America, and Southeast Asia
• 70.9% Services margin
• Apple set new records in every Services
• Services performance was broad based
• All-time high installed based in all products in all geos
• September quarter record on iPhone
• Luca: On a constant currency bais, Apple revenue grwe YoY

• Cook: Apple is working towards a “greener, more equitable future.”
• Cook touts “carbon neutral” products
• Apple Retail Stores: First ever retail in India; new stores in UK, China, and more
• Subscriptions to MLS Season Pass have exceeded Apple’s expectations
• Apple Tv+: Nearly 1600 award nominations and nearly 400 wins
• Cook promotes Apple TV+ content and Apple Original Films’ movies
• Services revenue set an all-time quarterly record
• Cook touts Apple ecosystem
• Cook: Double tap on Apple Watch “feels like magic”
• Cook touts Apple Watch Series 9 and Apple Watch Ultra 2
• Apple Watch has become essential in our lives
• Cook: Apple’s competitors are unable to compete with the iPad experience
• Nearly 2 out of 3 college students chose Mac
• Apple is excited to offer M3 Macs
• Mac faced challenging market conditions and a difficult YoY compare
• iPhone 15 debuted this fall. Cook touts new lineup
• iPhone revenue came in ahead of company’s expectations, set quarterly revenue record, and iPhone set quarterly revenue record in mainland China
• Apple set records in several countries
• Tim Cook: Good afternoon. Apple posted quarterly revenue of $89.5 billion

• AAPL After hours: $176.23, -$1.34 (-0.75%) @ 05:01PM EDT

• CEO Tim Cook and CFO Luca Maestri will speak today.
• Conference call begins.

• Apple now has $162.1 billion in cash on hand. For some perspective, Intel is currently valued at $158.9 billion.

• AAPL After hours: $175.87, -$1.70 (-0.96%) @ 04:51PM EDT
• AAPL After hours: $175.91, -$1.66 (-0.93%) @ 04:45PM EDT

https://macdailynews.com/2023/11/02/macdailynews-presents-live-notes-from-apples-q423-conference-call/