MacDailyNews presents live notes from Apple’s Q423 conference call

MacDailyNews presents live notes from Apple’s Q124 Conference Call with analysts starting at 2pm PT / 5pm ET today, February 1, 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 $119.575 billion (vs. $117.154 billion YoY), up 2 percent year over year, and quarterly earnings per diluted share of $2.18 (vs. $1.88 YoY), up 16 percent YoY.
For the quarter, analysts’ consensus estimates (per LSEG) called for Apple to report EPS of $2.10 EPS on revenue of $117.91 billion.
Live notes:
• AAPL After hours: $181.02, -$5.84 (-3.13%) @ 06:01PM EST
• End of call.
• Cook: I think there is a huge opportunity for Apple in both generative AI and AI in general.
• Q: AI and Apple?
• Cook: I remain very optimistic about China over the long term
• Q: Can China resume growth in the future?
• Luca: The COVID years had lots of turmoil; were actually stronger now that pre-COVID
• Q: Macros conditions by region?
• Cook: If you look at the U.S., iPhone grew and the installed base hit an all-time high; it’s very difficult to measure the replacement cycle at any given point, so Apple focuses on the installed base, which is growing
• Q: iPhone upgrader length?
• Cook: There is a nice opportunity in enterprise for Vision Pro, too
• Cook: We can do both. Employees are in a position in many companies to choose their own tech, took that decision away from (the IT doofus – MDN ed.) and people want Apple products
• Q: Consumer vs. Enterprise?
• Apple is guiding gross margins of 46%-47% for Q224 takes into account everything; products, services, component pricing, foreign exchange, etc.
• Luca: $5 billion entirely related to iPhone due to YoY factory shutdown disrupted production compare
• Q: Gross margins?
• Luca: We will never underinvest in the business. We are making all of the investments necessary across the board
• Q: Generative AI affecting R&D expense?
• Apple is guiding gross margins of 46%-47% for Q224
• Luca: Product side gross margins increase significantly due to favorable iPhone mix
• Q: Component pricing
• Luca: EU market represents roughly 7% of Apple global App Store revenue
• Tough to predict how EU customers will choose
• Cook: Privacy, security, and usability will be negatively affected due to the DMA regulations
• Q: App Store in Europe changes due to DMA affect business?
• Solid growth on iPhone upgraders YoY in China and 4 of the top 6 smartphones in urban China
• Cook: If you look at iPhone in China mainland in constant currency, it was down just mid-single digits
• Q: China was down, why?
• 5,000 patents in the Apple Vision Pro product; significant AI incorporated throughout the product
• Cook: We’ll report the results of Vision Pro in the Wearables category
• Cook: Each product has its own journey; we couldn’t be more excited internally
• Q: What does Apple Vision Pro success look like to you?
• Cook: We set an all-time record for iPhone upgraders; iPhone 15 family is outselling iPhone 14 family
• Cook: We were up 6% in iPhone revenue; very happy with that; really strong in Europe and rest of Asia Pacific
• Q: iPhone 15?
• Cook: We are working on generative AI. “We have some things that we are incredibly excited about that we’ll be talking about later this year.”
• Cook: Enterprise is working on so many; all over the map
• Q: Vision Pro apps? Generative AI?
• Luca: Couple points of negative foreign exchange headwinds
• Q: Services growth rate? Why not faster, when figuring in the extra week?
• Cook: Emerging markets have been a very key area of strength; India grew strong double digits; Indonesia hit a quarterly record; Latin America to the Middle East showing notable growth
• Q: Installed based hit record high – makeup of the new users?
• More than billion paid subscriptions across all of Apple’s services
• Paid subscriptions continue to grow strong double digits
• The 11% growth is stronger than it looks due to the extra week last year
• Services revenue of $23.117 billion was an all-time record
• Q: Services drivers?
• Questions…
• March quarter (Q224) outlook: Similar to year ago quarter; similar double digit growth rate for services as seen in Q124; 46-47% gross margin expected
• $3.8 billion in dividends paid during quarter; $20.5 billion in buybacks
• $108 billion total debt
• $173 billion in cash and marketable securities
• Enterprise is very interested in Apple Vision Pro spatial computing
• Enterprise: Target recently added M3 MacBook Pro to its Mac deployment
• Paid subscriptions showed strong growth
• Services revenue: $23.117 billion (double digit growth; Apple is very pleased with this growth)
• Wearables, Home and Accessories revenue: $11.953 billion (difficult compare here, too, and one less week)
• iPad revenue: $7.023 billion (difficult compare with iPads being launched in Q1 last year and one less week)
• Almost half of Mac buyers were new to the product during the quarter
• Mac revenue: $7.780 billion (returned to YoY growth despite one less week in the quarter)
• iPhone revenue: $67.96 billion (new all-time high active installed base)
• Diluted EPS: $2.18 (all time record)
• Services gross margin: 72.8%
• Products gross margin: 39.4%
• Gross margin: 45.9%
• Apple’s install base now has over 2.2 billion active devices
• Luca: Strong performance in emerging markets with double digit growth in the majority of emerging markets that Apple tracks
• Apple CFO Luca Maestri: Revenue: $119.575 billion
• Apple continues its environmental work
• Cook touts Black History Month and Black Unity Watch band
• Apple Vision Pro demos begin in U.S. stores tomorrow
• 100th retail store in Asia/Pacific
• Cook promos MLS Season Pass and Lionel Messi
• Cook touts new, redesigned Apple TV app and Apple TV+ content
• Services revenue: $23.117 billion (11% YoY increase despite one less week in quarter)
• Cook touts Apple Watch (does not mention Blood Oxygen monitoring