Apple (AAPL) 28 Jan 202020 Q1 Earnings call transcript

Good day, everyone. Welcome to the Apple Incorporated First Quarter Fiscal Year 2020 Earnings Conference Call. Today's conference is being recorded.

At this time for opening remarks and introductions, I would like to turn the call over to Tejas Gala, Senior Analyst, Corporate Finance and Investor Relations. Please go ahead.

you. Thank thank us. and for you afternoon, joining Good

Speaking he'll Maestri. be is Apple's from After Cook, and CEO, Tim analysts. questions followed to we'll the first open today that, call by CFO, Luca

materially the of consist outlook. capital revenue, our allocation expenses, will statements, from gross some that operating forward-looking could results note information hear or other discussion of those during limitation, without business taxes, expenses, and Actual you'll trends including margin, future today our regarding differ forecast. and Please income

For please in to Form or of statements risk Apple's to associated and with the most Form speaks the which their release. on respective information, dates. with filed the press and obligation more update reports the Apple refer any information, along no as factors SEC Form X-K forward-looking recently discussed filed XX-K today, XX-Q periodic assumes

over to like the turn now remarks. I'd Tim call for introductory to

to you afternoon, Good of for all Tejas. us. joining and Thanks, thanks

all-time which and we report to of $XX.X is thrilled We're of Geographically, Asia generated above for China revenue with growth records the the quarter. saw earnings. the our billion, in accelerating new Apple's and both consecutive third of which revenue growth. high-end all-time quarter Europe ever, revenue Greater and range, We guidance set set Americas, records biggest Specific in rest return to

growth quarter record blowout double-digit quarter up all-time X% was and of another where of year-over-year a revenue performance our Wearables. record quarter December by by fifth fueled services Our consecutive iPhone was iPhone for and for new outside including

particularly all-time for and the million product main reaching billion, of each up Our alone, of surpassed geographic XXX high now our new months XX base X.X active installed a last in devices our has categories over of customers, board, base is and growth only services. loyalty it's the to powerful a satisfaction, Not across but also the our engagement in our and installed fueling testament growing segments. large

category by one. each one take Let’s

Pro X% up again iPhone to and XX ago, quarter over in for iPhone thanks was the XX that’s On $XX the December iPhone, Max. exceptional iPhone a Pro revenue the billion, demand year XX,

iPhone XX new three models week model every the and fact, our In top-selling most December was popular the quarter our iPhones. three were during

and iPhones double-digit had emerging the France the we've performances led and shipped in with by also Turkey. UK, our far experience. leap best technologies digits Singapore, through battery and and markets, camera day developed double These U.S., advance in get and models are new including to grew life best-in-class We markets the India, by China, Brazil, in easily unprecedented many growth the in ever strong Thailand, Mainland

the We in month. photo have photos this our Mode all-new been wild with shared customers challenge have Night

records all-time payment setting December new Turning established billion, including saw from to we all-time and App revenue for and our business, over of categories AppleCare. quarter double-digit last record, our Once Store services five music, geographic QX cloud search an $XX.X well ad the segments year. as a growth services, reached Store multiple and again, App all XX% in growing record services. as

some on our XXXX and I’d was services year touch to highlights. a business, for historic like

day across For Apple year. off over million our App new a started New game the Arcade, on with blocks XXXX and new added won’t Day find increase last the service a single record has month. Store, XXX games else, expansions subscription spending XX% customers new devices alone, strong Year's $XXX you been new anywhere over fast catalog Apple and games off every playable exclusive with a with of all

Crudup her congratulate Critics I award and Globes to Billy want team Screen Jennifer Apple The nomination. Show on TV+ start, a Guild is and to rousing Morning at Golden entire on for Choice their the off his multiple Actors award. Aniston

using content personalized widespread telling in access to on critical active to still to UK, to recommend recently Apple of to America, come. top a monthly publications Little the XXX draws million more devices. premiered and the users matter, great over provides world’s like to continue which stories. now News much on-device seamless that intelligence stories curated focus Apple titles, acclaim We and across and Australia add Canada, new all subscribers U.S., offering their experience News+ continues with

Pay Watch including of XXXX, trains transactions Apple easily for customers Shenzhen year. XX ride Apple expanded will doubled tap For And Transit. even to on transport more transactions for Express Pay, buses Guangzhou. run and with billion Apple cities and revenue with London year-over-year more with a paying customers the able be iPhone Pay than spring to and rate journeys in exceeding and support simply Apple in more transit

what We the began for pay each And the great we've using with at Apple purchase retail the last for growth over new are and customers Apple promise and for installments monthly pipeline Card. online month, in of optimistic them. continued XX iPhones we're Card about to thrilled months. services, recently got Apple see and at launched We them these

and our noise the a Now, We an incredible Demand AirPods continues for particularly around family in category had company. we for features Fortune all-time that virtually launched turning XXX the Wearables. to product track recently cancellation. is record new this phenomenal, world, market active the now quarter, every addition another setting to AirPods our AirPods to size Pro, be of

have setting reach helping as Watch impact Apple even to Apple of Watch were continues Watch further purchasing the It its as to results category, supply were unprecedented gifts, during an great XX% and customers’ during the fiscal AirPods for customers AirPods face constraints Pro. continues quarter X to and Both for we XXXX, our quarter. the it Apple had on and record revenue lives Apple Series the new a all-time drive must start Watch. over have Watch to Apple a profound holiday

iPad both and $X.X $X the new loyalty base geographic respectively, customer and level and high all drove and billion iPad Mac and in to billion generated of installed in both satisfaction records Mac revenue, products for segments. active the of

Turkey, along with emerging India, the the and an Mexico, key can. iPad Malaysia, of hardware, with will tablet Philippines saw only iPad, and iPad For Air, Poland, customers like services iPad in current experience markets new Vietnam, our unparalleled iPadOS Pro, Mini that give a way and growth the Apple software integrating line-up Thailand, iPad, we in

as Display has the strong put response already life’s from the to developers, into and Pro hands best a Pro, and also on quarter seen work. the our to ever. as Pros. was for exciting create most Mac MacBook the filmmakers music we most And ever well very a This of XX-inch Pro as their launched Mac tools powerful powerful rely Pro notebook photographers from scientists Mac and The Apple XDR, who community producers we’ve

XX the want and to we to Mac music nominated also a create love. incredible this who on the to and We past all take congratulate moment Grammy rely artists all Logic Pro winning weekend

online I retail want out the to call and and teams. work of celebrate our exceptional

beautiful a versus ensure set we an And these in great taking in all-time quarter, efforts retail growth an a very Apple location every opened Japan. This has record year, future last innovate in and and retail things new in part inside to a Kawasaki, a online place visits delivered iPhone strong to and each store exciting we and stores doubling bright our everyone trade-ins are store. experience. who that to Thanks see iPhone. continue double-digit for We

materials. do place. world line-up help world more our for students Can commitment even the and Can to and November, coding. and We Code includes we and are Coding in completely develop Club to new of skills, resources a curriculum part ever redesigned only curriculum middle Everyone creativity, and more new The we better our students a a students our their life deepening product Code to teachers, important more guide curriculum began bring including elementary schools to make than XXXX use millions X,XXX with to the Today, of for updates released to worldwide In introduce collaboration, school problem-solving. Swift greatest brand ideas Everyone

studies and saw U.S. the user. also our launch hands every health we leading multiyear the user the into Heart as the with The our up. Study, ground research that from health latest Health in app in institutions. new three research undertaking November the ongoing the Women's put Movement future And Apple in build of the research academic Hearing Customers landmark privacy app, to in in the do, enroll of we’re can the effort we of Study and Apple Study, everything

to the quarter place ensure who firefighters community, it that a to to plan $X.X and great raise This and housing a and in everyone our so help remains billion have the responsibility including We vibrant address those a to crisis like home to always also of state feel a California. the serve we family, much live for region we called affording do availability announced home great help teachers. stay and

contain members closely with affected two we’re development that We're all news, the working outbreak, the groups recent closely our we're the in and working partners In are across and much more the of team Apple region. coronavirus. those with the thoughts areas, are to affected of donating following our

well for the As Apple’s be the its like Luca. innovation, we turn results, different. new But and be to future. I are and now, year call strength on on this to over on more record-breaking and already for quarter, always details underway close December developments we books will the no some for the boundless exciting would a will creativity

Good Thank afternoon, you, Tim. everyone.

per major all-time U.S., in a December the we year Vietnam. revenue, quarter Canada, Thailand, established Our from we France, records records $XX.X new Italy, of as income and Poland, in Spain, many Germany, others, net a ago, performance the from earnings Malaysia emerging and up the Mexico, spite in among share. X% Revenue business or Geographically, exchange. headwind billion for including, and $X.X financial all-time markets were was foreign Brazil, quarter the billion, $X UK, exceptional and for billion revenue set developed

$XX.X we we grew record, all-time strong and where records growth $XX.X to Wearables Watch portfolio. billion, across as AirPods. revenue billion X% in both Services geographic and set growth, all-time to was a revenue our all-time up results new and new iPhone had double-digit every Apple XX% returned in records for segment with Products incredibly

by was impact higher points from foreign revenue, XX exchange. Company gross negative basis-point of sequentially, margin despite XX.X%, XX basis driven from up a leverage

Products sequentially, by XX was to XX.X%, favorable gross leverage mix. driven basis thanks sequentially, margin mix. margin points was XXX points up basis up XX.X%, favorable Services gross and

for reported Our tax the quarter was rate XX.X%.

favorable A rate by guidance. XXX with one-time discrete exactly basis line item was items, the our points. rate Before the impacted in XX.X%,

of income record year or was billion, $X.XX, at billion of all-time Net record all-time $X.X flow also up improvement cash $XX.X over a operating and was XX% year. very an Diluted last strong was up XX% EPS billion billion, $X.X ago. $XX.X an an over a

revenue our saw a we X% Vietnam. as response records more of revenue in $XX of for UK, U.S. the year-over-year, and Mexico, get me France, grew including categories. all-time our countries, great Spain, revenue We iPhone launch the of Malaysia the several Poland, Let into newest each iPhones. customer set detail billion to Thailand,

in installed Research XX% to Pro active XX, an base and satisfaction consumers growing combined. geographic purchase U.S., of the the Our from purchase high next In XX Max reached iPhones XX each segments. business our of buyers the for all-time Among smartphones in XXX latest has customer Pro planning survey quarter, of plan iPhone and iPhone iPhones. indicates of is to XX%

Turning an to all revenue billion in all-time with We five double-digit of geographic record our segments. of set $XX.X growth services.

As new services, and App App quarter AppleCare. December our cloud business Tim and Apple search established Store for the Music, services ad Store records we for mentioned, records and all-time payment

‘XX goal accomplishing year of the are the that actually revenue We goal basis doubling during services a our with XXXX. run-rate our on our on December fiscal well of results reached quarter. We've to already way

our from quarter. million surpassing goal our new platform, engagement this during XXX expect a the stores million and year And continues content ecosystem of transacting at to the accounts of a to have subscriptions of and both, across digital over ago. growing XXX number on all-time digits million Customer segments. our March the accounts grow hit paid We in our high all services our paid point, geographic we XXX with reached paid already now up on the in double mark

services our before million end XXX target across subscriptions to experiencing we're reach for increasing we're our and aim momentum calendar XXXX. offerings, tremendous the Given paid of the

subscriptions. App double strong and purchases Store digits, demand customer revenue to thanks robust for grew both in-app

subscription third-party across grew almost XX% categories year-over-year. multiple Our increased and business

very-strong distribution, AppleCare, Music a strong record, a million customers revenue for Our all-time to expanded to to first-party songs with well. service we of while our That see world. more an of strength continued growing offering safe, ability generated the all XX double catalog and are to Apple users. experience quality subscription brand the deliver iCloud also an and record both support to and value extremely happy customers. of It service secure delivered AppleCare very thanks to partners the services agreement our revenue attach many of partners also and rates in devices. of seamless offering December very-best was over digits appreciate all-time our our and have record, and come more our the a that our across to experience perform and customers, quarter their set our resonates

of to channels to our billion iPad. the and revenue year. like Mac compare, and the iPad due performance and Pro December a iPad around billion. both had and quarter and difficult even during fill. mini $X.X here, Despite Air talk subsequent about I’d for Mac a was Both the year basis, demand ago Mac MacBook last to tough on Next, was iPad Mac revenue year-over-year products was the launches $X a comparison

Importantly, during the Mac installed the base new iPads were a reached tablets purchase in to and half the from and the businesses, most from among rating iPad XXX both March product. planning Macs of purchasing quarter new to high. And for Research world purchase XX% surveys customers satisfaction The around businesses iPad and the and recent customer were of a quarter, that XX% consumers around and to active both from all-time XX% consumers plan iPads. measured

in growth accessories we Apple and of performance new Wearables, up $XX track, segments record year-over-year double-digit home. shortages Wearables, the market established some virtually product to Watch demand strong and as customer Wearables all-time home and all strong accessories every during even very with records experience for very with five set we a for We geographic due XX% and billion, across both revenue all-time quarter. AirPods across

Fortune our loss and helps This outcomes in in areas as apps. both, accurately businesses and smaller birth iOS continued also and clinicians whether with surgery. see enable We enterprise such communications Core information innovation patient Surgical, in in estimate uses an companies our sector market technology as use best experience, needs One can on drive which to during sector patient intervention, technology for healthcare complete have is their a our child of costs. workflows, seeing in solutions clinical and nursing more work. this and and Gauss timely do example which to ML technology the blood XXX impact strong the also more demand to clinical products XXX% we're companies Apple

to to Another anywhere Butterfly medical solutions example in today. other lower that Network, or the which handheld dramatically iPad than is a cost imaging enable at company, makes ultrasound device an ultrasound iPhone clinicians market that a to take is connects

billion. $X euro-denominated turn of with commercial the plus Let retired marketable by us cash during total the maturing $X positions. We debt cash securities. me with bond, green ended now billion a quarter, quarter in $XXX reduced our billion We and X billion to issued leaving billion debt of $XXX paper

was cash $XX and position cash target our at neutral of net we maintained time. the reaching result, quarter billion of As a net a over the end

We returned resulting of December shareholders the accelerated the quarter. XX.X billion began a billion in share $XX during shares. repurchase $XX delivery initial nearly We November, in retirement and program million to

We also dividends market equivalents. paid shares Apple million in $X.X and we through $XX repurchased and XX for open billion, transactions, billion

phase next program the would for for the for done have we quarter. several we report the results of our plans share we when return capital last years, As our March

to that to which beginning of we our information as the the Tejas Finally, of call. includes the the March outlook, into I'd quarter, ahead move types like at referred forward-looking review

wider unfolding be health range public than to billion. to $XX situation China. comprehends revenue usual $XX recently related The We billion the in revenue uncertainty expect between and

between to XX%. expect margin gross XX% We and be

be billion We between expect and OpEx to $X.X $X.X billion.

OI&E to rate be We expect $XXX be expect we the tax XX.X%. to about million and about

XX, as Board our dividend cash on stock, of of XX, per of declared shareholders XXXX Also of today, of common record share to February a has payable Directors February XXXX. $X.XX

With to that, questions. the call let's open

We the may first please? yourself limit to Thank you two you, Luca. questions. that Operator, have ask question,

will with Evercore. be from Yes. That Amit Daryanani

AirPods in two for Wearables, lot. those how for touch base, so or the impressive your the How guess, think you buyers just coming Apple long be be see Watch fairly is just Thanks a on is growth that time just products on looks I of low versus have, should you folks the billion there first they Could a seem see, guys. that are to because one seeing that the on to rate you love it’s fairly growth it already upgrading us divided to business Good growth guys. the much side? understand Wearables between buckets. run you adoption first way, me but installed from $XX a the you afternoon, to

Yes. Amit, it’s Tim.

If as look and within the you a Accessories revenue, Home Wearables, category Wearables XX%. Wearables the the at grew Apple,

say. was did new very collecting Apple Watch Apple new the terms AirPods it customers Watch. of are in you customers. So, very to Both and the particular, well strong, as XX% of in Apple Watch

still to customers And new so, it’s a very this point. much selling at

guess, deleverage Perfect. have quarter point. think to XX XX, because margins. March actually gross rare of gross on you happening. The up And high for Luca, guide March in I could to a It's up think you you margins implies flat fairly guide I guys gross basis actually touch just I sales seasonal margin

gross better So, are what what enabling looks than offsets seasonal that's the like for guide margins? a

will mix higher we Amit. are be sequential That's year-over-year offset cost from we a leverage one of savings. by expect seasonality better loss flat But you It’s of that basis, side got a the about that the and but on Yes. and on leverage sequentially, usual way significantly right, loss the basis. by on right,

next please? Can question, Amit. you, Thank have the we

from D.A come Forte Davidson. Tom with will That

getting TV+. revenue, launch internally, it cetera? you're number on it using truly is know contribution cetera, consumers et service, I of to is congrats success, of So, Thank are you. on service Apple the critical wanted how on acclaim, et and the that

Hey, it’s Tom, Tim.

We of the are subscribers. primarily measuring our number on sales

As in if with device, addition price to year you free. the started can from aggressive that any for have that a tell the buy getting very a you’re much our product, we And we launched you pretty at $X.XX. where we way bundle

be those And the storytelling. with that find that seeing That is product some others. acclaimed. on and we're Little do we be focused itself we're that critical number subscribers. we very there of morning about so, if show, then will said, well, also And think will America we the And we're that with will that seeing

Great. And think iPhones? then, to indicated month talk about sales had to unit Can last an on we impact use buy consumers for basis. the my second that’s you I Card is their question ability Apple on started how an iPhone your that an you installment offering

And So, enabled one retail fantastic double-digit of simple. point -- a stores the on was very iPhone iPhone, to a getting the factors of did from in Apple it the make view. to strong payments monthly Card very growth year-over-year that that on

at U.S. U.S. point, for course, very only that’s us. the Of market is this key but

of it And was an it. important so, part

Tom. Can have the we you, Thank next please? question,

will That Cross, Research. Shannon come Cross from

much. the dual-sourcing, region Thank very managed? you seeing just And to have you manufacturing revisit some to the so -- were geographic Thank China. health prior diversification, you back will idea talk of Tim, you you seeing with then, you. in us the be about bit your in we go are in region, region what this of wanted the even to strategy, crisis? also I update can terms how a can what

Shannon. Thanks,, Yes.

will into and a the last results of in get terms In coronavirus second. quarter, the China, I then from

quarter, Mainland double-digit from iPhone in results we for China. the had For last growth

been an from change running. we've So, that was important where

we extremely in We double-digit services had also Wearables. growth on had and Mainland strong double-digit China in

very factors terms were battery XX is its there that really, of customers the unbelievable. so, of a well-received camera has is And life different responding been number well the there, and things with are in doing the iPhone to. product

well certain and going as received. programs you been These know, probably have trading have also, also financing We programs.

Three of so, And quite a like iPad a Mac customers of of are And on of of the products sort buying nearly and new of two-thirds buying tracking it’s quarters this. are large China all customers new. the in percentage are the sum new, Mac. the customers we

Kantar. was We it in a quarter. of urban to three according had four the terrific So, smartphones China selling top

all In as mentioned, the are of I've our region. that we’re working across the terms contain that And outbreak. to of affected as first and mentioned groups earlier, are coronavirus, I the donating those to foremost, thoughts with are

our with and in We gathering it emerging of team The situation as partners areas, is travel very the we're situations closely. of and are also to last points working very and have week. monitoring data our business affected we critical lots closely limited still and

mentioned, had As for than the revenue quarter a range we wider usual uncertainty. due Luca second have to the greater

and some customer in demand give some I'll With talk do color. the have the about supply to chain, respect Wuhan to you chain suppliers we supply some area.

sources, best suppliers, these to make the factored they’re production our obviously and you. expected of All plans provided that loss. any We've we’re up we've mitigation guidance thinking ultimate working on and

of up depending that sources the reopening end account XXth, upon factories time. the With clear this mentioned are earlier. Chinese this has supply month to delayed attempted area, from start Luca at of outside impact after we've is less outcomes the moved been our Year to larger those New range this that the supplier through and to location, The for February Wuhan of respect

fronts. With taking to have as of of opened precautions stores and store deep-cleaning a hours. well demand retail customer also additional conducting operating closed temperature stores and remain the sales, currently stores our closed Many and also one partners their as employees. channel our that for we've checks respect reduced We're of frequently have number

also been last for has the country this outside again, Wuhan hope that I across provided While guidance retail are some our impacted in sales gets attempted in to this within days. our few you. area, itself that small, have account And range color. the the area of you traffic we’ve we

on pricing some the has gross and environment Obviously, maybe there margin NAND. Luca, could touch if on helpful. perspective, very from DRAM and commodity movement was been That from a you Yes. availability. just

thinking So, forward? about how are if managing you. levels you about talk and inventory you that Thank can going

Yes.

earlier said margin quarter, the expect around the we to seeing Most December same been the I quarter, benign March the environment. during are the we in commodity a gross declining question quarter. As happen commodities the March have and to guidance for

know, move these As times we and at when buy in prices look we way probably at advance. we the it’s always, and as feel commodities appropriate you certain

And that so, as go the we continue we through will practice year.

you, we next Shannon. Can Thank the have please? question,

Katy That come Morgan from Stanley. will from Huberty

you address growth can slowdown some deceleration accelerated see this services in the September? the Luca, modest did quarter, services Which you in XX% where growth? versus in categories XX% versus

me make Katy, XX%. of was couple December rate, here. fiscal ‘XX our it at quarter, XX% we The let comments growth which a year during the against look

very So, results we quarter. the December feel about for the good

I App December growth was for it double services, because geographies. categories, Tim We search payment during music, in broad-based our set many services AppleCare. very the across grew remarks, all As cloud, records and the records prepared five and Store we ads, for digits mentioned many, the all-time

goals had we set in the for remember, ourselves you If two segment. services

The December goal quarter. we first, our a goal it set already of double on at rate that a the basis, fiscal revenue results XXXX. during to with when the look And achieved ‘XX we we’ve run

end XXX also during already during mark XXXX. pass set that December, to expect to at XXX of paid that goal We a are subscriptions we at the given the pass March quarter. million we And

paid ourselves for for So, new now, target we subscriptions. are a setting

reach XXXX. we calendar to of are aiming the so, end XXX before now million And

growing well. business feel So, is incredibly services the that we

we have new launched very course, Of services recently.

launched in For November. Apple example, just TV+

results, the But, to And feel impact very have that material of while services we did time these quarter the services business. the so, growth a expect December we start in over with contributing happy our XX%. not they

follow-up, what that. a driver to perspective? capability Thank in do in be launch Tim, killer the And a view Apple from a view what's consumer will you handset? future, at XG as of XG will some your app point big a demand a for How you the iPhone. as

don’t future We Sorry. products. on comment

to couldn’t wouldn’t bit. XG, it’s our in think of and sidestep well be our innings will we're so, excited to about trade on I as We respect basis. a very and early anybody. lineup -- a prouder try deployment And of I obviously our are its the for position pipeline global With

Can the please? Katie. question, have Thanks, we next

from McNealy with We’ll hear Kyle Jefferies.

carriers seeing that deployed some a upgrades wireless are leverage that this of capacity, new signs being to do be get for XG deployments capacity? even these incentivize it upgrade continue accelerate? Do getting we use having new for handset spectrum positive much new How get and to helping, it’s more XG think sense So, the impact additional will and were you handsets of out to investments? a might to network already and you

that great think world I the as we’ve had only some helpful around the U.S. also in quarter, but partners. really this partners, not are that

customer it stick probably a forth. and back of that a environment I in them that think those part making level so, that have. And lot a the of where a trading sure of with part is they there's probably is of investments And then,

am I continue. So, optimistic will it that

capacity Okay, of of will the Watch division comment AirPods might on in with the be the Wearables capacity they X, side? then, unit great. the from that you workout additions constraints those And natural we alleviated? about when about what should come capacity Apple shipments think And timeline made and and something Pro the or demand

I'm to additional X working predict for substantially have we're capacity. hard that this in put balance this don't hopeful off come just I estimate be their to We in Pro, for and that On AirPods you. during to will at very the when fairly point. Series seem I quarter. can't

have Thanks, Kyle. we Can please? next question, the

Bank Wamsi Yes. Mohan, America. of

build see unique you you. future position Apple drive as and market, out a in ability Tim, ads can Thank targeted Apple Can the to Hi. have compromising without larger has users where you a could users. very privacy? base installed of become the advertising on TV+, valuable given to you

have in people's on I privacy. that to I about straightforward conjecture want wouldn’t it a advertising encroach to doesn’t that is in think, possible manner us business.

that I ads, aversion think a customer so we and not we add-free that wants product, the business, believe an feel for is what to it’s that's TV+ customer our the wants. strongly what

the how Okay. of you any Thank help you. just maybe all? with quarter TV+ content impact revenue years? us next at this the costs TV+ associated couple if Luca, of of had about And the And we clarify think deferrals Thank of impact can you amortization the size you. services associated with the as can

Yes.

yes. So,

the the and paid the two you the to and There there that is Apple Of contribution the actually the revenue service. of the to subscribers, think based offer, provided, into a three-year items, for over the revenue TV+ the recognize course, there components. deferral, pay also people, at launched TV+ TV+ point, subscribers We what bundle for the was service on eligible is was TV+. goes from are small and that about for this from contribution service customers that paying these are so services. are buy what And period. first Apple very subscription a customers we When deferred we Apple for revenue the of the we are revenue, this there subscribers. hardware that offer of the device These an service three the the one value revenue is redeem we and the one being call year the got then,

expected the of for redeem the eligible the offer. number third customers The of customers that the one the is second of will estimate one our is offer. And are number that

for sales, for for to of number in multiple you you to keep purchases sharing, a total that family mind So, device need eligible geographic make our from need availability. reductions device and

payment can local Also, the by we also the method also availability and on content, be impacted of rate file. require a take

offer. updated So, is and the this reviewed estimate on actual trends based quarterly gets of

recognized amount So, one-year gets that of these that service the over TV with each the device provided. for that sale inputs the period has revenue then plus deferred provide we us

Apple subscribers, take of bundled when So, subscribers you combination and revenue. paid the you get the TV+

Of service recently, course to launched we our the we’ve because revenue the very during recognized was quarter, amount immaterial results. the of that

balance amortize With we the the content, of -- and we them content of regard on we period cost the type put costs, to time incur these sheet essentially over depending a the we as we produce. on of that developing then certain

question, next please? Thanks, Wamsi. we Can have the

Company's Krish Cowen We’ll and hear from Sankar.

questions. had I two

out a be more same phones like like when looks little a view expensive brain there that the your geographies pick XG the SE. phones low you bit they’re proven to but that have overall general higher component wanted is on guys going market. iPhone come market just I due Tim, smartphone cost it at a one, There First to to costs, to time, for is

So, next how one two And these a to different Luca. over follow-up smart three do you then, see the I market had years? within segments phone the for evolving

look about generally, world to important away commenting think different at it’s when products. is about to I’m the stay XG you schedules. Again, going think from deployment around the I future But,

than some those what very look And perhaps of might you different here. be seen

so, And very important. that’s

aren’t In terms comment want of the price, price to on that I of announced. handsets the wouldn’t

follow-up a a XX% think is go -- purchases a of by e in Intel curious of than asset about part do for quarters. is some forward of looks Luca. much about on sales or how higher March TV+ modem as the then, like OpEx your it prior OpEx driven And of that we percentage your basis? for of it how or Kind in

Yes.

were And the felt make results, necessary think about TV+ in all at want period XXXX, guidance baseband services, our of acquisition in And advertising you the in they terms that of in for business. end and correctly of the the where only business we’re good the that we completed because marketing, necessary range. this investments But reflected low we launched quarter. investments and is OpEx our in December services to our the as the new is new the not I stated, making we Intel clearly, all of investment but results. also, level unit during we OpEx

the that the to related business, transaction. rate the after And quarter, important during reflected of for of partially completion the And core run so, expenses the Company. technology we a had -- the is we that very

continue have of valuable make investments will is we certain and the a affected to there. December it’s So, a third we was expenses. expenses that There revenue the that and our very also quarter, necessary category strong, all fact

card that volume of results. For example, credit course and impacted the associated OpEx fees our with are higher

we have please? the next Can Thanks, question, Krish.

be Mike will Piper Olson with from Sandler. That

for questions. Thanks afternoon. Good taking the

many buyers are So, you is ecosystem? mentioned an Apple watch that people slightly Apple customers, impact XX% a but devices new you You Mac the them driving is, on into Wearables, are question think earlier different and of the Watch, to to take what Wearables on other new to ecosystem I'm Wearables a users iPads iPhone, Wearables to going material Apple are the into in overall? sure do lot or but existing buy bring think of people way?

Tim. -- get is they're the because a Apple like buys, customer they that that they reason experience, it’s think tighter experience. like think, the buying ecosystem the they -- into customer that's product into it, the Mike, that each I I With

view, products in can there's comes each there's ecosystem the Watch. but that into from mind first, I think that product. people that the another in case think, it’s point of would more the drive doubt my came likely no so some iPhone I that that for of And our

augmented it if Okay. will about And you I'm entire share impact thoughts then, And starts our you to mentioned lives. pervade that could significantly. I your think reality most wondering think our you recently lives how

industrial For inflection person come category? from example, significant of way? where of usage a their feel average impact or the some the AR first in or other AR Thanks. words, lives in on kind will gaming that will In point other

are to see consumer a business there are is, you consumer I them. see I'm have that at is applications, would This technology where when enterprise so it key today, look applications. as AR it you excited reason you about are both think, rarely the and there new

because so, going And is the going reason, is pervade home --- your answer life. and it’s I I it’s your to to across the go lives think that's business think,

deep you There for -- of business things enterprise more already to are and of course coming. AR store, apps are happen are these see this thousands at on are that even And go companies I you can in working into will the that time would on see that applications parallel. enterprise. enabled think, kit

Thank next question, we have you, Can please? the Mike.

Raymond will Chris from That come James, Caso.

And expand the first mix. within gross about Good well if you Wondering the the But, could point is and to else favorable And the mix you. also is margins? I overall overall clearly, could bit. margins. year-on-year. would And regard mix happening spoke on well to is about to you in afternoon. mix you Thank Yes. with question guess, iPhone is iPhone, on if that helping that doing little growing improving there what's talk as anything that you margins? within the a

think has helped guidance that the of the Max with that exceptional. And helped iPhones. top the our mix. its selling Yes. And helping of is being you iPhone XX The single us Pro was mix as response us QX. XX, for some the I said, both in iPhone Pro our XX mix customer quarter. is it And and throughout for every of clearly XX QX quarter, and model week

so better within certainly, And iPhone. mix

would that services other of from like holiday is margin that And that QX, up I to well. end move as Company, from from we versus to the quarter. a revenue The out as the better gross point proportion to services coming the that accretive QX given we services fact are for point mix increases getting

spending when some return faster three guess us has growing or a Can investments faster new investment? rate understand OpEx. And largely you leverage in And the level to for return are function it Thank get set I on on Is a guess, some years future? than follow-on in at you. off going now. revenue that with point happening of I so. how growth or regard get the there think it been time just that where last about with a and to potential are regard expectation revenue that to you I a forward? Okay. there over is you question we should tend But, the OpEx

expense our by companies also faster to than had grows ratio revenue would our the we recent years our There start incredibly saying in past competitive sector. when is in I the OpEx to has our revenue Well, opposite happened. relative that but other where are years

believe the continue only to this which marketing also that And you with front example, appropriate front, initiatives, launched lot R&D. have we the of not many of we opportunities if great a look us. of level for and support advertising We in we investment, to but on new want past in and just year, services

because returns business Intel a in profitability terms that that As from for for we’re the going it’s of a And important pretty and I think job March good of provided we’re mentioned the seen Company we acquisition investments baseband think we’re think the the front, the that we you’ve forward. the quarter terms of during of and core both level of doing get expense making that this earlier, guidance we results that of strategic closed quarter, in getting. very with I the we I the on balancing technology revenue the level

December was Our net quarter. XX% example during the up income for

Thank you. please? next question, Can the we have

Samik That will JP come with from Morgan. Chatterjee

and the to kind ask through return And I definitely sustaining just exiting iPhone wanted have on comfortable products to momentum year? for to Based growth, iPhone growth you’re growth. how a in of revenues about good seeing feeling the revenue follow-up. I are quarter, you on velocity see the the

have current We practice forecasting quarter. of a the

that beyond range range a the and we’ve And that. we give given so, for don't you expect the really current quarter

Okay.

terms of obviously, can you in maybe just growth returned -- of report. So, most follow up regions you’ve the in if I then to

declining One Japan. of is are the regions that

segment take that kind you headwind can to return there? that's you limiting what your and if on and the what there to And product So, actions grow? the there geography need are trends to share growth of what's thoughts that probably

Yes.

more in would the during did same made. I So, contract challenged within which the At incredibly of quarter, Japan that six the primarily the smart top It from that iPhones. mobile are was performance, difficult quarter. of pricing December amount and the due December October environment, were where during iPhone essentially say, regulators selling effect Japan carrier capping the well quarter maximum to models during down the XX% a macro of the time, on changes phone seven took decoupled be two-year discounts were was can iPhone there some the regulatory the because was Xst

Japan, it growth average. by very difficult very we Company environment. and So, average; double-digit Also, stronger in very Company Wearables, was iPhone from a stronger growth in had performance than strong services, in also than double-digit strong strong

very had great and we’ve where we historically have based The Japan customers engaged. are success. there, very a And we well very country good. feel momentum. position good feel a we on So, loyal is

replays apple.com/investor, Thank for Please available by additional with Samik. enter of will XXX-XXXX. available you Apple joining and Members Podcasts, via again XXX-XXX-XXXX. call are Financial Pacific be the code as today. weeks XXX-XXX-XXXX. replay numbers us. confirmation telephone. at Time webcast questions at contact Huguet pm A me XXX-XXX-XXXX. the of X:XX will two questions be with can can additional Kristin analysts today's for The a approximately contact replay on or These you, press Thank XXX-XXX-XXXX, on for telephone

you participation. Again, conclude Thank your for all conference. that today's will