Apple Inc. Q3 2023 Earnings Conference Call Insights

Key highlights from Apple Inc. (AAPL) Q3 2023 Earnings Concall

Administration Replace:

• [00:01:46] The corporate noticed robust leads to rising markets, pushed by sturdy gross sales of iPhone.

• [00:02:13] AAPL set an all-time income report in providers, pushed by greater than 1 billion paid subscriptions.

• [00:11:28] Apple doubled its preliminary dedication to the Racial Fairness and Justice Initiative to greater than $200 million.

• [00:22:09] AAPL mentioned FX will proceed to be a headwind, and Apple expects a adverse year-over-year income impression of over 2 share factors.

• [00:22:16] Apple expects iPhone and providers year-over-year efficiency to speed up from the June quarter. Nonetheless, the corporate expects the income for each Mac and iPad to say no by double digits year-over-year attributable to troublesome compares, notably on the Mac.

Q&A Highlights:

• [00:23:57] Shannon Cross with Credit score Suisse requested concerning the developments in iPhone demand on a geographic foundation in an uneven macro surroundings. Luca Maestri CFO replied that iPhone gross sales in rising markets grew double digits in fixed foreign money, with robust efficiency in China, India, Indonesia, Southeast Asia, Latin America, and the Center East. The corporate additionally noticed a slight acceleration of efficiency within the Americas, primarily within the US.

• [00:28:14] Wamsi Mohan of Financial institution of America requested if there’s something altering when it comes to seasonality that’s inflicting the decrease sequential step-up in product income. Luca Maestri CFO answered that AAPL expects sequential acceleration for iPhone and providers. Nonetheless, the corporate additionally expects Mac and iPad to say no double digits attributable to a troublesome comparability with the earlier 12 months when AAPL was in a position to fill pent-up demand from manufacturing facility shutdowns in the course of the Sept. quarter.

• [00:29:47] Wamsi Mohan of Financial institution of America enquired concerning the share of iPhones which are offered on installment plans, and the ideas on service promotional exercise within the U.S. Luca Maestri CFO mentioned that AAPL has applied affordability packages world wide, with nearly all of iPhones offered utilizing some sort of program, trade-ins, installments, or financing, which has helped cut back the affordability threshold for AAPL’s merchandise. This method has been profitable in each developed and rising markets, and AAPL plans to proceed pushing on this entrance.

• [00:33:53] Erik Woodring at Morgan Stanley requested for insights on how the patron conduct has modified in final 90 days, if there are any regional variations, and any indicators of elevated willingness to spend on client electronics or continued warning out there. Tim Prepare dinner CEO mentioned that AAPL noticed robust efficiency in rising markets, with China main the way in which. The corporate additionally noticed a slight acceleration within the U.S., however the Americas section remains to be declining YoY. Europe noticed a report quarter for the June quarter.

• [00:36:17] Erik Woodring at Morgan Stanley additionally requested for extra particulars about the price actions that Apple is taking, and the symptoms giving larger confidence in returning to a extra seasonal cadence of opex spending. Luca Maestri CFO clarified that AAPL has taken deliberate steps to manage spending in response to the unsure financial surroundings. The corporate has slowed down hiring and decelerated some expense progress, whereas persevering with to put money into R&D.

• [00:38:10] Michael Ng from Goldman Sachs requested about the important thing drivers for AAPL’s confidence in providers acceleration subsequent quarter, and what’s contributing to the expansion in Apple Search Adverts and Apple TV Plus. Luca Maestri CFO answered that AAPL’s providers enterprise is performing properly, with all classes seeing enchancment within the June quarter. The corporate expects additional enchancment within the Sept. quarter, pushed by components reminiscent of a rising set up base, extra engaged prospects, and a wholesome subscriptions enterprise.

• [00:42:29] Amit Daryanani at Evercore queried concerning the spectacular progress within the wearables section and the way it’s anticipated to carry out in Sept. Luca Maestri CFO replied that AAPL’s wearables enterprise is quickly rising, with robust efficiency in Better China and demand for the Apple Watch. It has turn out to be a $40 billion enterprise previously 12 months, diversifying the corporate’s revenues and earnings.

• [00:45:23] Harsh Kumar with Piper Sandler requested how a weakening of the US greenback would impression Apple’s revenues and prices. Luca Maestri CFO answered that AAPL hedges its FX exposures to attenuate volatility, however the impression on income and prices is delayed as a result of approach the hedging program works.

• Harsh Kumar with Piper Sandler enquired about any service improve packages in place for the Dec. quarter, and the way AAPL expects these packages to impression iPhone gross sales. Tim Prepare dinner CEO answered that it’s usually straightforward to search out promotions on telephones when hooking as much as a service, both by switching carriers or upgrading with the identical service, and AAPL expects this to be the case within the Dec. timeframe as properly.

• [00:49:04] Aaron Rakers of Wells Fargo requested how sports activities content material is driving progress in AAPL’s Providers enterprise, and what are the plans are for growth on this space. Tim Prepare dinner CEO clarified that AAPL is concentrated on unique content material with TV+ and offering a venue for nice storytellers. AAPL’s partnership with MLS goes properly, exceeding expectations when it comes to subscribers.

• [00:50:10] Aaron Rakers of Wells Fargo requested for an replace on the continued progress in India and if there are any evolving components that might speed up the chance for iPhone in that giant cellular market. Tim Prepare dinner CEO mentioned that AAPL is making robust progress in India, with double-digit income progress and two new retail shops which are exceeding expectations. The corporate sees India as an enormous alternative and is investing closely to develop its market share.

• [00:52:00] Sidney Ho with Deutsche Financial institution enquired how does Apple’s AI technique differ from its friends, and the way does the corporate plan to show its funding on this space into monetary efficiency sooner or later. Tim Prepare dinner CEO answered that AAPL views AI and machine studying as core basic applied sciences which are integral to just about each product that it builds. AAPL is dedicated to investing and innovating in AI applied sciences to complement individuals’s lives.

• [00:55:14] Krish Sankar with TD Cowen requested how is the alternative cycle for iPhone holding up within the face of weak macro and client spending. Tim Prepare dinner CEO mentioned switchers have been a key a part of Apple’s iPhone leads to the June quarter, particularly in Better China. The corporate is seeing robust demand for the iPhone within the September quarter.

• [00:57:09] Krish Sankar with TD Cowen enquired about foot visitors and gross sales in Apple’s retail shops, and the way does the corporate see the developments for the again half of the 12 months. Tim Prepare dinner CEO replied that AAPL sees its retail shops as a key a part of its go-to-market technique, and it plans to proceed increasing its retail footprint.