Apple (AAPL) 30 Jul 202020 Q3 Earnings call transcript

Good day, everyone. Welcome to the Apple Incorporated Third Quarter Fiscal Year 2020 Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn things over to Mr. Tejas Gala, Senior Manager, Corporate Finance and Investor Relations. sir. ahead, go Please

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

the Tim today impact Maestri. taxes, he'll outlook, gross or open without operating information from you'll from is today expenses, of first our operations. consist that potential Cook; expense, regarding including Please After and business future to revenue, note of margin, forecast. analysts. Apple's COVID-XX our we'll hear Luca Speaking company's the capital CFO, of CEO, those trends and forward-looking some including questions by be that, the discussion and during call limitation income allocation, results materially on business will of the followed other could and differ results statements Actual

to or today factors any most Apple risk information, with release. like assumes press For and discussed Form and statements to refer SEC I'd more filed the dates. recently Form their Form please to associated speak the along Tim Apple's the with to turn XX-K now XX-Q reports periodic remarks. the call no update as filed introductory respective in over X-K of the forward-looking information, for obligation which

joining for call Thanks, afternoon, everyone. Tejas. Good Thanks today. the

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Good Tim. afternoon, you, Thank everyone.

June a testament ability execute Our during innovate to quarter to times. challenging was Apple's and

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billion final And share ASR. of accelerated program retirement We in an shares. finally, of also the X.X repurchase settlement XXth delivery initial and our the XX.X May began a shares in million resulting $X additional we million retired in

into the be types quarter, Similar provide to ahead like quarter, on are includes of information which move around at to given we Tejas guidance that quarter. of referred in issuing to the we what forward-looking September seeing, the we uncertainty some As call. the the the revenue last I'd the beginning coming will margin the near-term, for and not color world

our However, provide see including we additional lineup, expectations On our the September for for some SE. to for our iPhone, for will current product product categories. the on recent strong insight iPhone response continue performance customer quarter we expect

last know, iPhones to a project as This year weeks we you new year we in few late September. started available later. addition, supply selling be In

We expect year-over-year rest to of performance. the categories have product strong our

quarter ago September that we quarter AppleCare expanded June For where the the for during to significantly. a September we expect services, observed have year quarter our we have the except same the trends distribution during

a consequence, related As the expect point of this also comp considering AppleCare we difficult COVID sale closures year. a for

explained. in prior margin, just we have gross as that than mind For years will in I mix keep a different

be we billion to OpEx, expect For $X.X and $X.X billion. between

for of shareholders of cash million. of today XX, split finally, the a And a on XXXX. With begin and and four August August be questions. OI&E we're call share of XX, XXst, a split-adjusted about held stock the of will August record to our tax three date broader declared Board to on of per will of investors. Each stock one to share expect shares the record outstanding record that to payable trading XXXX. announcing a Apple $X.XX $XX Also We August more XX, accessible common shareholder basis Directors our at let's common open as dividend rate on additional of the to XXXX business make today to receive XXXX for every on stock XX.X% of on has be base close

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

be Morgan Huberty with will Stanley. Katy that from Yes,

during affordable Tim Thank us the of just and afternoon. addressing talked more that can to trade-in accessible opportunity is light finance prepared you also and Apple have programs you. this in economic adversity in while maybe Good these the the time you period, then make through how also might expand and walk follow-up. technology about to leveraging remarks, a extend over recycle products and and reuse how to I that programs

Yes.

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just a category to growth. specifically returned And then, as follow-up, the to iPhone

today. installed base pointed out, larger is you the As

after of combine revenue decline? that that replacement that entering iPhone longer elongated. build period in suggest confidence just the to Does would math growth all Our you you what's have been affordability And some element a of then cases are discussed. six of quarters we're that cycles

largely remarks We're was It we with June very much because we out on thought were how better. May pleased and did as we the better pointed prepared than iPhone. in

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you, Thank Katy.

Thank you. Congrats on the quarter.

Thank you so much.

the have we Can next question, please?

& Company. Yes, that with would be from Cowen Sankar Krish

I my thanks question. have two Hi, them. of for taking

terms revenue such have your you want sooner the a restrictions have and when your in services premonition the $XX along make content impacted business a and ago at And content think four look Tim, expected, be. any years of out four TV+ First billion business on in if path being Luca. for the forecast going the I movement efforts? same production know services Then one, you I services years don't how is you than to XXXX follow-up came to production

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prediction Tim, to I was ago billion to you wanted XXXX. services see, road? that see to any you down great years the to I trying the prediction if four $XX going is have Yes, be by years four made a update

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could I for Luca. one If squeeze just in

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

Yes. Research hear we'll Shannon From from Cross Cross.

bit have about what just you Thank can you're out? talked record as and seeing market talk how given but about a I Tim, XG follow-up. think very iPad, you're to China? play a much. [indiscernible] the you X% the up Thank I And was you. then I curious in revenue their know Luca seeing

bit affected Greater we -- in more China quarter that it in other basis growth Shannon, the the see X%, a we points. China, of currency growth affected for than places, did XXX

constant we have currency, in so grown at would And X%.

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

That will Daryanani Evercore. with come from Amit

have I guys. as question my taking and a for lot well. one a follow-up Thanks

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things stores, going the of the that you think the we're when there. combine there plus strong cycle a so I plus iPhone in And cetera, launch, and right et lot were reopening of direction SE -- the a

follow And to really not think the lower on see a quarters next quarter, because gross but forward, margin starts I of get how years? go one point just And guess, trending the gross September XX% the you where over improve of the they with margins? this do now. I your up have Perfect, in to somewhat could if as product been What stabilize think do couple you overall perspective for to we love that's last do about you you. that context, levers two the to I'd helpful. then Luca,

with on exchange during the negative start basis what big been was a on the same let strength XXX June basis. amount We impact for now at impact sequentially basis felt were so several Well, basis foreign quarters we really XX%, we've And a but was Yes. quarter. a the slightly the the the US points. has year-over-year down of me dollar, points that up year-over-year seen basis we on sequential XX were

different something is that They obviously the to we other is important aspect; profiles. products. So then, to keep Amit, mind, margin that keep mind. it's in have different And sell I think in many always

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

come Kyle will Jefferies. from It with McNealy

lot a the thanks for question. Hi,

wonder customers cycle you've programs we an work we else installed I doing Thanks. whether and you on showed proportion when about that bases some think your there these Our for X, smartphones that in be how been It in doing of more might devices. talked X, can high anything strongly in you the looking those get is a about that recently, customers know latest Asia the you're should on What did there upgrade come tell China? X in technology? is survey and promotions I there. team still trade-in there us if made on to China.

upgraded the innovating, keep be And the in financing much I rolling the can't less, out And is quite that pace Customers like a programs key the other The about. during rest obviously of trade-in China installed can and people you in are the the point. and and some this from extended life these the in base have is to in do much purchase imagine, things the I some product like do going of front this going different pandemic data keep depths of good But China. if will deliver upgrades me that front-end programs happening mentioned. you that feel at geographies, exact at that different still things extended it those we makes degree have some, probably geographies. like of the is and in world, number don't a through

future And strong should guess obvious think the and great, one share Okay, pull-forward here the of thanks. think question ever results, much few how iPad after season Mac a you what back-to-school upgrades about be growth or and there again may. whether if I maybe be helpful. that hangover in is, Congrats Anything about else more from the be impressive. season. on years? really would how next holiday I is that's might we can on you Thanks. or That might period the

numbers the to new aggregate is base are XX% that over very in of close Luca high in range. kind the and growing customer installed The the went still

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Kyle. you, Thank

very Thanks much. Great.

the question, we have next Can please?

Research's Bollin. from come Ben Cleveland will That

taking Good about hoping Interested, major then the everyone. exiting Mac you I where for had you share across saw I little You question. iPad. June product think inventory the channel a the was and for talked Tim, a for is? could think about inventory Thanks Luca. is where bit follow-up And categories. you you evening, tightness quarter

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employee had company the any employees in the about it is could Luca, also OpEx? OpEx costs. permanently could about on interested, And quarter, home, considerations and that COVID how support Thanks. remotely color of working stipends, work other many the be how thinking maybe opportunity then, you travel, more from influence the I'm impact And Okay. share the future longer-term

example, affected very reductions. on difficult some that travel, initiatives have reduced. are front, those terms perfect we we're obviously been a have certain Obviously, there invested cost Well, being the of a things We've in during of heavily meetings circumstances. for example. of OpEx The that also costs been really number have internally, to in help it is trying

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virus that the some track what to We've here up. how there with in of in We've of or is is geographies around here re-close And is will number we're gone a you've to we And had to reopened the vaccine the world. stores hopefully get doing. cure. think some I as where continue going point, cases there retail has to a the point is at the reopened a number we the of stores States, States. yet United in seen United have

we will as so make information. we decisions And those get more

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

Ong Bank. from That Jeriel with will Deutsche be

curious much. a so thank as you whether if will two and I'm gross well. focus have I services services record Yes, understand the I'd on range margins pretty to continue business, all-time like for you gross questions I'm improve. I wondering within by the expansion is the should wide within just to think line that that quarter. sustain, of margin

was we've you had for Well, gross And said, that by as seen, a in obviously, sequential margin expansion right. mix driven you've primarily services. as

be We impact We one on have the services a Services we over is board very broad our with and to we that it products great matters a did do are an recurring to portfolio Services We which company same because margin. the successful business type on competitive the margins and made to I very products. services offer -- it's have of better and think -- I'm comments to want same depending gross on us is and margins. services everything customers. like we to than provide but the What I revenue the quarter, of and XX% make that this the going does across to accretive

a the the byproduct with products marketplace our a margins in are, margins in will drive the that's relative and of services the certain success success of marketplace. our are So extent to our

a maybe first appreciate I of back to resume of Wearables time pent-up hasn't is pandemic demand the least at AirPods. a that while impact drivers the perhaps similar on Watch Watch bit and and get the little Wearables materially being And really will might thoughts Wearables going to predominantly I your a you're whether recent It iPhones. the on normalized being are there seems little to Wearables guess and that. environment? And that to bit that in as me memory. upsided more ads from it's What it, a forward ask wanted Got categorizing business that question the the segment.

it store affected more people Watch the try on like to iPhone looks on things. -- see different think like, band in the and I at some is want Watch choices closures, of by and sorts those the particular look what because people

sort it so out we you. stores way -- from more to out on the of that. going the we last told think closed, did quarter, as color we gave pressure And come was you come that puts I I were we

because decelerate knew we things of the So closures. would

very will we affect we the end we're up iPhone. being, So store pleased wearables how definitely with closures the and But the did.

Jeriel. you, Thank

that. appreciate Really it. Got

Yes. have we Can the question, next please?

That will with Citigroup. come from Jim Suva

same ask one your of for very you job fantastic one time the questions. have Tim, coronavirus, has two the company the one at I I'll Thank for Luca. a and them much. it's And Tim at hurdles. overcoming done and

So congratulations to you.

iPhone me product commentary, virus, looking cycles give it As world may let's showing like much, quite late seems a didn't and few we'll it's you I economic but more quick quick that look Apple than is maybe maybe this you gentlemen. upon product iPhone, shopping little was the your a Christmas things expand weeks Can go I then a commentary forward, around you about difficult, of lot to made And forward, think comments, but like maybe of you past have a Apple for it like a say you're past in bit strength into years. really that more blood. something be I about are a chips some and your few little the this or challenges Because or Christmas? Luca, different, Christmas Luca, later, just say, mentioned some given just holiday Thank comment, how was that. that. and coronavirus to you prepared launches the Christmas of season, the things weeks launches know keep the coming so

time. a Yes, we take it one quarter at

timeframe. and need optimism there so, we'll quarter that particular and or therapeutic see on October. both. And in I some is give we Generally the speaking, vaccine or And around think December that a you to color

boost would that consumer it from available any a see, style would so, think to I if that company I I don't But have that. information And publicly bit of is that we'll begins think benefit there. happen any consumer quite kind and confidence

that on the the iPhone in said ago, year launched new my Jim, we September. remarks launched we And a iPhone, late I in

So later new be product I said was year, this I of few weeks will the the a And supply that. referring that new than product. the to

you entire and Great. organization Thank much. and Congratulations teams. to your you so

much. so Thanks

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

come America. from of with Bank will That Wamsi Mohan

change follow-on. Apple of have Hi. the you penetration any can maybe accelerating you. Apple And in spend and in if Card have was of Then Yes, users Apple the on services? you the Card in on behavior users wondering base? buying thank iOS products seen terms a I of more installed comment I

we're Card. and Card. It good the But We out saw pull in the the history categories of in occurred lens about the on We affected the what shutdowns like Card, very have that we most et it's that. cetera. store travel that Apple closures rollout believe very spending credit of guess feel the number we've see would heard of the happy cards the could overall on with that we consumer the changes and Apple that you and based fastest if people you as so across entertainment the occurred, sort

merchant for now Apple vendor has this forever follow-up, is as And this for that a you be silicon Tim. use? to consider a going as Thanks, Apple Macs. or Silicon Okay. ever Apple Would monetizing

a reason if forever -- achieve doing a otherwise. and way can there but company are that can the And on we we to of whole the want is we user achieve making we that couldn't comment, thing. Well, envision experience we're And and that's make in Silicon with -- that because we I user. we Silicon the because some can the the delighting with the love goal Apple that products don't product are Apple

look it. And how so we at that's

Tim. Thanks,

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

today's will conference. again, And that conclude