Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Apple Inc (AAPL, Financial) reported a new June quarter revenue record of $85.8 billion, up 5% year-over-year.
- EPS grew double digits to $1.40, achieving a record for the June quarter.
- Services revenue reached an all-time record of $24.2 billion, growing 14% year-over-year.
- Apple Inc (AAPL) set quarterly revenue records in more than two dozen countries and regions.
- The installed base of active devices reached an all-time high across all products and geographic segments.
Negative Points
- iPhone revenue was $39.3 billion, down 1% year-over-year.
- Wearables, Home and Accessories revenue was $8.1 billion, down 2% year-over-year.
- Mac revenue growth was modest at 2% year-over-year.
- Foreign exchange had a negative impact on revenue of about 1.5 percentage points.
- Operating expenses increased by 7% year-over-year to $14.3 billion.
Q & A Highlights
Q: Tim, can you help us understand where you see iPhone replacement cycles today and the potential pent-up demand as we enter a new iPhone cycle?
A: The installed base hit an all-time high during the quarter. iPhone in general grew in constant currency, and the iPhone 15 is performing better than the iPhone 14. It's difficult to call upgrade rates mid-cycle, but with Apple Intelligence, we believe we provide compelling reasons for upgrades.
Q: Can you share color on the China market and how sustainable the recent improvement is?
A: We decreased by 6.5% year over year for Greater China, but on a constant currency basis, the decline was less than 3%. The installed base set a record, and we saw a June quarter record for upgraders in Mainland China. We remain confident in the long-term opportunity in China.
Q: How do you see Apple Intelligence impacting your services business?
A: We started the rollout of Apple Intelligence this week with developers, enabling them to take their apps to the next level. We are excited to see what amazing things they will do with it.
Q: Can you provide more color on how you're managing gross margins amid component price inflation and mix changes?
A: For the June quarter, our gross margin was 46.3%, driven by a different mix within products and favorable cost savings. For the September quarter, we expect gross margin to be between 45.5% and 46.5%. We've seen some increases in memory prices, but other commodities continue to decline.
Q: Have you seen a shift in demand for iPhone 15 Pro and Pro Max models since WWDC?
A: It's too early to tell as we just announced the system and silicon requirements in June.
Q: How do you expect the US promotional environment to impact the upcoming iPhone upgrade cycle?
A: We are excited about Apple Intelligence and its compelling upgrade reasons. The promotional strategies are best answered by the carriers themselves.
Q: Will Apple Intelligence features be launched all at once or staggered?
A: The rollout started with developers this week and will continue with more features and languages over the course of the year. ChatGPT integration is expected by the end of the calendar year.
Q: What factors are driving the strong services growth, and how do you see this evolving?
A: It's a combination of installed base growth, increased customer engagement, and the launch of new services. We continue to improve the quality and content of our services, which drives strong double-digit growth in paid subscriptions.
Q: How are you managing the regulatory aspects of Apple Intelligence rollout in regions like the EU and China?
A: We are constructively engaged with regulatory bodies in both regions. Our objective is to move as fast as we can while ensuring compliance with regulatory requirements.
Q: What is driving the sequential acceleration in the Wearables category?
A: Despite a difficult launch compare, the wearables, home, and accessory business has grown to almost $40 billion over the trailing 12 months, which is double what it was five years ago.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
