Apple (AAPL) 29 Apr 212021 Q2 Earnings call transcript

Good day, and welcome to the Apple Q2 FY 2021 Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I'd like to turn the call over to Tejas Gala, Director, Investor Relations and Corporate Finance. Please go ahead.

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

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

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

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Thank you, Tim. Good afternoon, everyone.

We more and over in been could pleased our team report March quarter at ways to record execute continued a are despite operating results proud we levels. environment. to not in year, be We've for extremely unprecedented innovate macro for uncertainty the continues and of way our the new

revenue an records billion, over from a quarter iPhone March increase a and for ago. all-time and $XX.X or of reached We billion for records and Accessories. Home quarter product grew digits of and XX% Wearables, each strong record for of in year with Our for double Mac Services March our $XX categories, very

least XX% quarter records ago. a year in them. every $XX.X new up growth with in March over of geographic of set each also record billion, was one at of March revenue quarter a segment Products We XX%

As of of installed base categories. all-time loyalty this performance of a customers, a our our of devices major new unmatched and of record each reached active our product result level sales in the

to basis performance of year provide records Company Products quarter cost business an new mix established gross set details last ago. segment in services was sequentially all all-time geographic service We share leverage. income basis of $X.XX of sequentially and points different mainly by points billion thanks savings and quarter to a earnings due and seasonal Services cost growing up were a Our savings, gross and XXX in was $XX.X mix. margin a $XX.X strong offset of margin basis records I will our XXX billion, billion, a operating most margin XX.X%, the partially gross XX.X%, was Net and XXX wide of XX% FX, favorable cash over driven by services by also about diluted flow loss record March per $XX from categories. each up exchange. XX.X%, more later. foreign margin. points growing of

Performance continue each detail was we the of high digits me indicates consistently of $XX.X active to Let geographic customer of we In the our get of most strength Thanks revenues quarter XX% into March in quarter in U.S. and world demand. and growing a Research be survey segment family. customer exceptional more iPhone XX% strong to March for XX in base the each installed all-time our had family our set our high. categories. revenue for iPhone track. as record markets the reached a base satisfaction strong year-over-year iPhone as latest billion, double grew of records new consumers over XXX of XX ecosystem, the the of loyalty from iPhones across

to music, We video, revenue records all-time Services. all-time services. $XX.X and with services, the Turning payment App an of record reached for advertising Store, billion cloud

all The as content business One drivers continue direction. Our as new and to Fitness+ service TV+, scale to in services right our and Apple contributing growth. offerings, for the Apple well features are continue services Arcade, the Apple Apple users, across move News key bundle, to overall

installed each major high an category. our growth and base accelerated across has all-time product First, reach

Second, a of content on during with March all-time both geographic and high segments. of paid our digits our reached number quarter, double the stores the accounts paid transacting in accounts each new increasing digital

Third, subscriptions continued growth. show paid strong to

on XX are X.X more ago from sequentially, of quarter, added just million than services more twice have subs and paid up March ago. is $XXX only our we During subscriptions across than XXX million million reached number and we now years This year a we platform. the paid subscriptions the paid the

service improve offerings. also think breadth of adding will quality current we we're customers continuing new Finally, our to love, that services and our while the

nearly Wearables, to Arcade Arcade to launching quarter to customers grew biggest Accessories to March its exclusive Mexico continues For extend this positions that very to Store in adding new and its new bringing billion, in expansion category. entirely greats and uniquely experiences hardware, records service timeless in example, catalog, yet XX% We're the with excited and great $X.X of classics. product. categories, expand in games services the including originals, to along continents. fun Watch the the provide incredibly with our continues new geographic software us during to new Watch and payment reach, year-over-year Apple of category two Apple geographically, being South integration launched purchasing every about six and our revenue this Pay segment. quarter Apple future setting Africa, Apple of Home believe XX% the customer App

as that measured most iPad. and billion We Next, XX% of all-time are customers half satisfaction of revenue geographic U.S. XX% record set Pacific. I'd With of over the China the very records our we example, a Both Openreach best quarter new service products of key in new in iPhone and is to in billion, the all-time with like revenue base rebounds. seconds the many up Pacific by this enterprise of consumers thousands across from and customer time to XX% the last performance air talk possible to record about attendants XX their level chip. grew care rest future of was quarter business. and allowed Research for and from March both records quarter from And grew to customers We patients grow nicely every customers learning iPhone patient also into for Mac. vaccination for iPad in has in very very per and speed working as to powered are provide minutes with Americas, by of stations the and passenger products Japan and by the In Colorado, the of a they started satisfaction, and an highs. recent and in the year, and engineers March in of U.K. accelerating their market, for hands tens all-time the current for environments, $X.X to amazing being adoption new travel This the reduce at Mac the provider of field was XG platform to driven X an was the surveys strongly This scan new able to performance Airlines, around rest each XX connectivity industries purchasing Mac segment customer installed our a continues outstanding enthusiastic Asia vaccination strongly putting their customer so product, all-time of and relevant for flight iPhone with to active iPad iPhones. UCHealth, and only during are Delta Greater segment reached rapidly that largely Europe XG Mac MX incredibly their moving revenue XX%. with deployment in XX Macs iPad can response with country. of in around broadband XX up health to their has $X.X homes delighted PC up increase the and record services vastly and staff Japan. geographic of equipping and capacity. Asia large daily XXX register

turn Let $XXX and billion. debt term new quarter almost leaving the $X.X We with ended our with of me billion to billion over of $XXX cash $XX retired debt cash of total plus issued us in term marketable debt billion We position. now securities.

position our future, $XX end result, shareholders. to our at value confidently returning net of the This to billion also invest a cash allows continue was while to strong As the us quarter. in

to the $XXX States including XX,XXX next our the We investing United accelerating five to with new and and are unprecedented investment years. jobs innovating our commitment over than contribute in country billion at pace, the an more

during return in to dividends we and included open nearly at million March repurchases to execute level, XXX of equivalents were billion continue Apple able through billion and $XX we shares. market high This billion shareholders $XX to quarter. also As the extremely $X.X an

We value cash stock is continue a our reaching to and there target maintain neutral believe position in our great time. net over of

our the today raising $X.XX we into X% to billion annual by dividend future, continue our additional Board has the for our repurchases. and share dividend in forward. an we confidence Given plan share, $XX the also and We're going per have business in for increases authorized to

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

are impacts revenue providing are current are not Given near the the assuming world today what do that business our to term, around COVID-related insights continued worsen we from the the the in uncertainty some not but guidance, directional we for seeing sharing quarter. we

We expect double grow digits our strong June quarter revenue to year-over-year.

we that in the than sequential the June reasons. quarter from quarter believe However, prior revenue two will greater the decline for years be March to

First, the a keep due usual. only sequential quarter. in mind the and to iPhone steeper demand, timing will This that balance launch March supply-demand strong cause decline during later achieved than

$X Second, a of June revenue we in billion believe constraints to $X supply the have will billion quarter. impact

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

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

$XX We XX.X%. expect OI&E around to rate be tax be and million our to around

approved call Directors just dividend of as of cash I Finally, $X.XX the common record increase XXXX. today, that, declared share has reflecting to Board a on questions. let's of of X% open mentioned, per our XXXX, dividend May XX, XX, the shareholders of With May stock to payable

first Instructions] [Operator Operator, we Thank have please? you, question, Luca. may the

We'll Instructions] Shannon Please our Cross [Operator question go Cross ahead. first with take from Research.

thinking put out if How picture there are you things opportunity you're market. and are picture, yourself? that and given different attracting cycle, of terms there are what in iPhone curious, for And can the I refreshing the so lives XG, some carriers big on there about pandemic. about installed out of kind customers? seeing just I'm question had many happening a talk shorten you the big by programs the sort by the iPhone. Tim, new Just seeing base in you in of being are of maybe this

Shannon. the We on increases and on saw upgraders. both Sure, iPhone year-over-year double-digit a to basis new

was in March a actually upgraders in a number record and of the for quarter, March -- there quarter. So fact,

this a early And still so of points. penetration days still point. obviously -- is global on low at level, the different in we see. XG. is countries are we like It's what But Different

And lot us. in be so will front XG upgrades behind of a us, the not of

lot You things see in XG. other in XG. States. They're regions quickly of slower to gain China, a and are to the the United moved quickly coverage to have adopt slower But moving in

maybe than remember costs about then, And Okay. margin? currency obviously you that by talk maybe any at gross were if and kind gross component that logistics the I talk XX% been the this things? from offsets of or I costs were it's about drivers point, and there can if Luca, you overshadowed higher can other higher actually of mean so is margin,

Yes, Shannon. guided XX.X% we levels Yes, did slightly lower we've March, June. for similar, during and to

us and the was obviously by December were across we points. to up sequentially, exchange has mix March, three during on Cost driven mix, a all A really for XXX points good strong really that in but March, savings, factors. product basis strong So was favorable iPhone, foreign again, XX basis cycle. which major general, categories, And sequentially, from been for helpful.

So that helped as well.

the are three major factors there. those So

know, you expect by be as June, but into will transition that we level some deleverage of savings. that we offset As cost will

doesn't as have an go to we June. of exchange much March Foreign from impact

our from take next Evercore. now with Daryanani Please go ahead. Amit We'll question

two I well. have as

decelerate norm the days sort that I'd as March actually that of services, understand to drove quarter. line a It item you Services? for specifically? the for XX acceleration think mid-XX% And what we into was growth one, on just accelerated the expectation would just bit go do First out like I forward it little ago, is think us. turned

It did than So -- had January. Services stronger last we in the board. expecting across the when our Amit, was were better the we business call what

economic very COVID. done because points like affected of of categories reduced stores had the during One And throughout many advertising things and negatively of and that noticed a digital that sale closed that services couple the Apple Care the obviously we've we've because well. were then was that COVID of have is activity of were

And lot the Care is course obviously, return during During advertising and the consumer reopened we've a the the quarter, March Apple we've advertising, of has growth quarter. coming improved to of on obviously, back. a sentiment stores and seen

And this quarter. these really during strong so the of combination performance delivered very very, factors the March

we ahead, at specific there subscriptions that new do mean, above is around don't how continuing we installed of we to a the get that guidance all, Are of business, in quality are we our our of existing improving very new Services paid many our accounts all we we I what general, services? prepared provide we talked the you we new good. I of But do -- know, As the product it. things base our number vectors Are Services for when look look during look remarks, categories. fundamental adding have, number We grow. business, we at services? feel always obviously, these good And very so about feel as

or much changed, at up imagine I'm see, iPhones more more on to don't changed of then, it something if has because seems a follow That's usage, like in helpful. I'm that that And multiyear combination replacement Apple haven't cycles last And cycles, it the Got replace basis over if end think have shrunk in I gone the at could XX with iPhones you, I of would the data and replacement using Tim, engagement I it. with months. the increased materially I up up has we does least potentially devices day. growing often. wondering, generally end

I'd So perspective your love it. on

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we've X.X we But for see been or now so. months like clearly, so right only what And operating a lot. we

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sort important. was the in of days early XG frankly. some key board of And we're across the is And so that it do really think I we it, did countries, a well. cycle in really, the really

from We'll Please Katy take question our ahead. Huberty Morgan from Stanley. next go

the unbelievable trends, of pretty investors you about This like of and as ask in the demand quarter, to was lap and benefits later services current sustainability year. are going COVID especially a Mac some from areas this

guide I high the a you beyond the you segments beyond So can But next level year, or provide an you from quarter. the next talk know over outlook which don't do see opportunity strong priorities? to reasonable to is spending consumers assume as it some I be revenue their versus where maintain digestion have And growth for then shift will there a follow-up Luca.

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I channel we we've you past, and a to March can model a numbers our what during From we your gauge done at try look obviously the think you standpoint, quarter. that you can as at that. look do So did inventory normally in

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more it on this pretty the was given inventory that for all So the demand straightforward wish Obviously, Mac, of inventory our Mac. But supply the products. on function on and of and iPad I iPad all the we had is we are that constraints would side, high a say

of We'll America. from Bank Mohan Wamsi question take our with next

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than driving we've sequential subcomponent sequential of guide, included As impact the of my in sort on the is billion level? that when Are the supply to billion, being bit addition that any average on in talk or historically. referring constraints $X to? percent you the you're follow-up, June And XX% about seen what color perhaps specifically $X decline quarter about little the supply a Luca, more of the low-teens the decline that that? Or constraints is the

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our Wells from with Fargo. take question Aaron We'll next Rakers

to quarter. great the iPhone. back go on Congratulations to wanted I

you cycle, As would appreciating shipment iPhone think don't give that mix XX though has actual that numbers, been it quite we healthy. appear the the about guys

give could terms if you're And gross of Is iPhones the of past I that I of mix driving, in cycle the a how trying kind that's relative sustainable? of cycles? what seeing So in within understand I'm any I'm just guess, to the context wondering particularly margin. follow-up. and -- mix us mix this you to have

XX Aaron, as you all on iPhone that. let strong most sales or The of very the we XX affect the portion the plus broadly -- give color Max. iPhone of Pro the see Pro iPhone family popular. of are did little But iPhones. me The family the well, is more the Pro XX a the

And help? of function revenue so you're seeing that unit that per the a growth is unit and growth. Does revenue

change the cycles? category the have Can relative a how of to Yes. of sustained might to you this going higher kind forward? changed of context prior be cycle product the give we can band any structural you Have seen that believe that

with than results. for But our predict really forward internal we're happy We other the don't use. going

hard forward when Okay. just dynamics? any general, this to views of it's supply industry what's maybe to supply as of And overcoming quick I beyond in looking of your Do see then the kind have quarter. some ease? you the back supply guess assessment of a the best constraint could constraints. again, But constraints follow-up the

our nodes. is on issue Most of legacy

different are legacy industries the not in that nodes, there people, on many only so using And same other legacy industry, nodes. are across but

we answer that's of to to that in order how months. to need going would and so players these -- And from few demand the true the over change know on really question next each accurately,

difficult very, very so give you to good answer. it's And

doing, handle I I don't But think know. demand. we everybody is have our on good a what else

what best. can And so our we do tell I That's will you.

take Kumar next Piper from Sandler. with our Harsh We'll question

on Congratulations a well. semis very nice quarter. supply Question on as

substantial by of by, in or secure quarter. went top supply just to I'm had that beat favor on it were a think to your be able that in March million then kind was And you to You the a the beat I curious so? follow-up. margin able what line $XX I

not have did We a in shortage material supply QX.

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enables And when the what so higher than were went we XX days quarter to bit a into you to we go ago. that sell expecting

this color-wise, of curious then helpful. Tim, for lot your for in was very can get those constraints but sort know I thoughts, economy the maybe supply year. just mentioned iPad. here of on about on and iPads parts, if moving there's That's categories, half follow-up, you would the I second And I reopening you U.S., a expect the the the and the and with Macs my Mac of two in possibly what

to point guiding the predict to top We're a because at this level rev guide of don't we even Well, product-level COVID. not detail.

shortages would And earlier shortages point Mac. sidestep Luca's about and affect so the I'll that primarily those iPad and question. I point to But

not expect to we gated. supply be gated, demand So,

Company. take & Sankar our go We'll ahead. Cowen with from Krish question Please next

a on fantastic quarter. Congrats

what And a Tim hardware Greater give or Luca. China then very First strength. China. Can were the products question enabled solid or quarter. outperformance in The you follow-up. strong services this March sales had the for some Which color drove on in I

quarter our in across set pleased We March product China. were grew very categories. with digits a strong record and the revenue double of We each performance

And to broad. shutdown pleased than QX family. to as that entered you phase in China other We've of mentioned earlier, growth especially in was so revenue by And customer XX I year been iPhone countries. earlier China the last remember have response the the the had

that they so into and taken results. that you more account to affected in as has And relatively quarter, were look at the be

urban the A the iPad, Mac two a just iPad to top quarters we had lot well great mentioned the had very both Pro we're as announced. the buying earlier, Mac iPad buying strong X/X I new a comments and selling China, of time. people positive that were first for smartphones of across in we're board. about reception of we them And so that. the and great strength seeing enormously As And with proud

is really And so to some in China, we're which customers us. attracting new important

maybe very extent and picture question, was as And then That you right. a to have answer kind big I of All follow-up, Tim. this. philosophical the can helpful, a like

One of it's is more of your to that. I the concerns handicap on hard about have many think of the kind investors understand overhang giving you risk. But very curious regulatory do disclosure I'm public on think Or those revealing a competitive know Services But services business of help think what lot that's of Store you kind like details. alleviate to some curious App do concerns? of disclosure. would you

why concrete. that direction. other doing we're we would I we parts very feel more help, we focused make that and and that. story we're to would that with in what sure and do telling scrutiny, move and Store we have obviously we not cast App of think regulatory Apple the our questions on do, disclosure The are in If

move with And we can and flexible are the times. so

example, rate the the App For you in a quarters Store, ago, developers of lowered know, just as we couple to small XX%. for commission

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order continue privacy think the Store that in we our we what customers very a very get to that why curating and we the convey so it's that do. do want, important have about we're App think and is and to very I manner. security And idea clear in The we very to I learn, behind straightforward important,

McNealy from question take our Kyle with Jefferies. next We'll

things been as through But the AirPods and about environment, the is that along pull store whole been sales better we've hard of mentioned due can Watch as One store. customers you in iPhone sales well shop positive a obviously. shutdowns, much the COVID accessories do to physical how and growing that's

to rate for can attach in environment the gets lot and you AirPods get with Watch here iPhone? any a as it question improvement have the from normalization? is, closer So better my And seen

I in and parts so for limited they're better QX today Michigan we're in with some And stores think and stores were our model benefit France and operational like in closed of still when operating are from fully we a operational. lot and we many than but are a of shape get we're there's stores in open forth. still stores stores previously, that

be the to And so will accessory we able to amount it should sales. view the speed, as get speed, think some of would increase up stores to I my up but be time, of fully some take back

doing we're think moment. fairly the I at well Although

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UBS. take Vogt We'll from from question our David next

might what early great on Congratulations -- initial but a the I with it's like on the just commentary could from of know feedback on that ATT I if track and maybe Maybe could and color developer data kind days, question. quarter. any share App you a us? ask community look

be ATT's tracked to user Our want or make the a the they whether giving decision about and really not. focus user ability the is on to

putting the another Not in the it but control. should it's the company, be. user of user so where Apple, And not

when after, it has focus And so was gotten it. the stages both feedback before And really that live planning that's so in the forth users, been tremendous. went and of and we've the it from

up And the really consumer so here. behalf on of we're standing

kind sort point. from it's the just discuss whether by this you opt-in view week can have metrics with just an or I share Any downloads earlier a what Can -- acceptance follow-up, know rolled like. and consumer of of quick of you perspective? us, as consumer at this of it Maybe the the Tim. opt-out looked of out any of sort sort sort the sort that

very be even of know doing people make to frankly, -- to of up, people even tracked, would would should that. not it's those like to they don't that that answer own mind the low not. the should worth And whether something because don't tracked we -- be or beforehand. it's have have if I want their the predicted It's

Chatterjee question next from JPMorgan. from our take Samik We'll

category. year. particularly this I the of performance of iPhone a have here really are But upgrades maybe are Europe not a even some assume us? of on and service I we consumers in like double-click geography much Europe, bit, curious driving are couple by phones I would kind and and can Or just is exceptional wanted you the if results, rolled of expecting in are Tim, to the XG that for exceptional mentioned growth time to be XG plans moving hear the some or in of and front what's provider you, you more that here know into though out? get in of to the front Europe to still

Samik, I'll take that one.

But us. learning which And broad Middle are that version where Eastern it working today our India And that average. part well. our Western is have markets mean every had better own stores we that very Europe. even mind home, example. all results grew favor. Europe would was I have Even world, it Mac, very done expectations. have there More Europe Tim of the right. Europe, into geos we product across a incredibly in closed. places iPad our board, was has Keep one of it home, has XX% the great We You're has was performance those still by very, then that quarter. better business obviously, we emerging fortunately, really double where our for the saw and strong done very in played And Europe very, helped East. United than We than has of limited were segment online well, they Europe digits probably actually grew is Europe mentioning company the lockdowns in in affected includes very the strong Particularly, of strong. options, in entertainment from than lockdowns. goes most very been really than category. States, a Europe. lasted say, are significantly the longer And because from the and here Again, parts I during

So example, Middle very, in East very pleased with some of general. the Russia, results in India, for

countries across been very product it's and in broad, both So categories across Europe.

Okay. follow-up quick Luca. just Got for a it. you, And

to just recently on for the announced that overall, the how the of the think $XXX the the over you U.S., multiyear think for implication from operating some understand Company. rate a to the plans I wanted billion run of questions investors of expenses investment implication about getting period,

time time of And $XXX a If billion during commitment commitments, since the made remember, felt we span we States. they announced Apple. following type And that you on years, to those from, the we investments. at United -- and these sizable overachieved back we that investment three investment were obviously, these the over the in directly right XXXX very we We it five of years. then, at update the announced making to was we've

the the creation years of course, Apple the new business over next about jobs five our example, For United of States. at talked in XX,XXX And has grown. we

grows the in that And TV+, content lot we developed time, States. the suppliers Apple that new into so shows got our for is example, United over commitment, our for here the we've produced for example, to U.S. a numbers. and higher in TV businesses, the of In meantime, service

opposite United This leverage. that's the there OpEx an times, here in is lot some than we're of and of as cycles happens. so additional sometimes one a other From our I grows OpEx States. seen said getting revenue, think And you've this standpoint, those where we year, faster the are years investment many

than investments growing business. to But all into the increase. are faster our make year much OpEx We to revenue necessary the want this continue we

never will We our invest business. under in

you operating continue our will grow of the -- continues will R&D continue to see expenses, the we be which side, that we Company. particularly the to fact to so core And on the

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

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