Apple (AAPL) 28 Jul 212021 Q3 Earnings call transcript

Good day, and welcome to the Apple Q3 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

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

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in afternoon, Tim. Good lives you, services very performance. underlying and record report customers pleased importance strong financial our our results, which operating Thank reflect our June everyone. We're to and the quarter of products

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

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billion of Our by of margin year revenue was all-time an each cost seasonal in last over higher and almost points mix margin sequentially, of flow sequentially, records gross Products all basis seasonal XX a a segment. was mainly $XX.X services set by to due cash share down $XX.X leverage. billion XX% billion, by Services savings entirely were quarter wide XX% records XX a geographic record was ago, XX.X% Company of basis driven up offset June savings. loss by $XX.X services, points XX.X%, up of a quarter basis gross gross partially mix. points offset and with earnings was from diluted of margin. quarter of a cost $X.XX, income Net margin per XX operating loss June leverage down different

very own into as me our family of track. growing across exceeding get year-over-year strong Performance markets geographic detail a set record continued digits world, records for our and the and expectations, XX% the we most Let consistently to revenue more double was setting be XX $XX.X strong we quarter iPhone iPhone billion grew each of high in in June segment, demand. quarter categories. in June very each revenue

ecosystem. iPhone the our In exceptional Our base family. the for strength of of all-time latest from indicates the a research our consumers new satisfaction XXX iPhones XX% loyalty base XX U.S., active of customer installed of of thanks the high, to and reached survey the customer iPhone

$XX.X and Store records Care. records for App with the services, Turning mentioned, of to Apple reach quarter billion services, we services, as June all-time payment record I cloud all-time video, advertising an music, revenue and for and

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

reached First, all-time our devices installed across of geographic each high an base segment.

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

services our year, number XXX million growth. while subscriptions improve And love, and of offerings. current quality years services times more paid Third, subscriptions think We now million more have our last that services to we platform, up will paid and XXX had only the across continue strong four we nearly customers ago. subscriptions the show continuing than to finally, we're also paid breadth than the adding new four on of which is our from

every XX% experience. quarter segment. features, geographic in June, believe grew WWDC secure iCloud+, during in example, accessories which $X.X create year-over-year a to we will records Apple we new our Wallet differentiated previewed more and customer For June new revenue setting home and billion, and Wearables,

product We category. this continue to in improve offerings and expand our

redesign quarter, to the XK shipping been air has remote Apple a began our both customer brand and with Siri strong. tags, and response we products new our This TV new very

to sales Apple addition the Watch being continues XX% extend Apple customers its Watch with globally, to during the outstanding its In to nearly reach, the purchasing product. of new quarter performance

the the quarter June exceptional quarter markets year, For XX% that ever. It its newly we quarters response the Mac, iMac. been redesigned powered of Mac world. brought been of new of customer best up track driven four also set our iPad of for $X.X $X.X was up we by record constraints. billion most revenue a the in remarkable revenue to with billion which supply with strong our over recently most very chip, XX% MX in June four have last last has constraints, to This supply we performance Macs, sales by level quarters despite success significant is enthusiastic records spite around

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of marketable plus $X securities. billion, commercial with me $XXX $XXX position, debt in We the us cash retired we turn of our debt to leaving ended billion. with by increased billion total cash and $X now term billion Let paper quarter

end billion the the was result, quarter. at a $XX net As of cash

continued billion As level, billion shares. dividends our through perform high a business in and $XX also we open of quarter. June included This XXX to to return Apple $XX.X shareholders to very million $X.X were at billion and the during market able repurchases equivalence,

the resulting a share billion began program May, $X retirement XX in initial accelerated of also in We shares. and repurchase million delivery

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

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

We expect very the during September digit growth double strong revenue year-over-year quarter.

We than expect be revenue of growth quarter our growth June lower year-over-year for to three reasons. XX%

three First, be it we the than June on impact expect growth favorable the our was year-over-year to points foreign rate less exchange during quarter.

third, we what And COVID than growth and our The from lockdowns quarter impacted level. expect a return June iPad. rate a a growth during constraints the the September Second, during primarily supply as experienced the to favorable we constraints will to we expect iPhone compare, services quarter impact year to services ago. The greater during rate were benefited be certain more significantly quarter. by the typical June

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

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

to and tax the of around expect market mark minority be impact our investments We to rate potential OI&E from be any excluding zero, around to XX%.

has of Board With August the our record as declared stock share today, $X.XX dividends per call with Directors that, on payable X, to August let's open XXXX. a shareholders XX, common of to of XXXX, of cash Finally, questions.

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

you. Thank

function. Morgan your Chris Raymond take Our next open. We'll go comes from line your Huberty our Caso Katy, question question Please Katy from ahead. is mute Please first James. check with from Stanley.

Good morning. you. Thank

on commentary the into guidance little dig a bit. Just

and other year, what products, year? last with typically some us launch starting later be perhaps as the last of that, Could that a iPhone, through seeing was we're in Just and years. talk obviously there you different of the fact may compared to other

Well, digits, of starting expecting grow point that's double think the I we all, Chris as very first I explained to are that, here. strong

below the experienced We We expect the into factors. September during going three XX%. that said is growth that to be rate we've continue to level And of I've course quarter. the year, this very growth listed strong the of

factor year-over-year points the in But dollar on during on first against The be quarter, in against that a year-over-year to because September three the most continues June to is we've it's basis the quarter the weakened in less most basis. dollar recent be about currencies going strengthened experienced than favorable sense the that benefit is a weeks. what currencies that

XX%, Second, I that's experienced And categories, COVID And what mentioned than the in June higher that in the recent advertising our ago, business services of history. namely, in relatively quarter. were compared that quarter services lock because rate they're that growth there that was fact we've we've to and the couple impacted had due easy that Apple the were June a therefore, significantly a downs. of Care, year the significantly

expect that continue September we don't into the quarter. So to

September $X at the expect constraints the higher the that here growth to we've so quarter. And quarter. we months that the when of a we for will the mentioned I June we be number talked accorded significant the that September so said seen that in level the billion supply We June between and quarter. beginning in quarter, we be we range in But the of during that services, number in we've quarter expect ago, at came constraints three but expecting slightly to for of to we quarter that see able below mitigate and primarily seen some June in to the during low-end that then we those iPad and higher constraints were Back were And billion, not supply June. that Mac. was $X the

caveat, this so And I very you put that for digit again, September, when growth all mentioned. that just double strong with together,

pay I that What If December through persist do selling to holiday quarter margins you on general, that little the will or constraints, in costs could costs effect those supply? And follow-up and in having supply more additional are regard the on expect conjunction because you with to the effect absorbing season? well? as constraints? a just get with gross perhaps more the you as you. supply an have Is what to supply then, constraints of product that, Thank

Chris, it's Tim.

freight the of more cost, we're would to continue in costs decline. the terms component I In pay. than to like aggregate for But paying

and of they time. I last, at sort to In take quarter it And terms as dealt. guess a can long want to one were to constraints, you how will everything we'll whatever of circumstances that We're predict we supply set mitigate today. don't would do of going

And gross we Chris, on the we September, side, during quarter. you've our my saw which for for for think And really comments, margins mentioned with. for are seen that provided I results the during a cost some as very cost pleased level the obviously XX.X%, is savings June XX.X% quarter nice that XX.X% I really we to guidance

Right. Thank you.

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

question go our Citigroup ahead. Jim We'll you. take from Research. with Please next Suva Thank Investment

question you great floods, it. you But have and to a look or I you one figure whether China a challenging just your best of of and the chain you very Thank variant, either it pretty much, Tim COVID, congratulations world components. Luca, and both operations could global and at time. team answer be Delta for out we unprecedented who's supply to of during

past? still that during a is your, and typical where have innovations had happening to for able historically R&D by of is remotely, the and materially year and of it it the in cadence a kind you've you're wondering being normal impacted like unfair? empower launches is that people to product slow time where innovation, Or, work Just such

that double has more Jim, incredibly not resilient. employees really been with coming could new cadence the be And I The duty. we're the doing pleased with things. are company out

we launches the out software and and made from WWDC, As on XX-months, we XX that to that last you all the to see fall, in amazing. we've products can the able announcements then of that the of over it's the software at corresponding the plan been bring

So with it. pleased I'm very

Thanks, the Jim. we next Can please please? question

Congratulations you. again. Thank

you. Thank

take next Cross question from Shannon We'll our Cross you. with Research. Thank

maybe Thank geographic preferences And cycle much, and difference, basis. on a Tim, there's regarding customer you very talk learned pricing iPhone if from have what I'm Thanks. that? this subscriptions about and could a you and you if curious,

double look in QX, we switchers fact, you it Shannon, for results our And, at for If was for growth QX upgraders. digit our had quarter largest in upgrade ever. strong and

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a very low. penetration strong very, -- it's so very cycle. still yet we're XG very, And on the obviously is been And

we so about good of And feel future really the iPhone. the

maybe a And about What XX% where Obviously is you from up Thank customers if you Okay. XX%, how sustainable, the but bit not China, talk seeing is are sustainable can growth? the there? you hearing are strength? you.

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that number Watch Apple the was XX%. For

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And with world the Watch XX%. then Shannon, for the

you Right. Great. so much. Thank

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

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

you maybe Luca, think September, Perfect. off as hoping more the a I points I out Thanks bit two, I laid about question, a have and so. sequentially was my could or first taking implies talk maybe gross you for well. down margins little lot I basis guess for XXX expectations the

just puts number helpful, margin you tends can bit because up be be historically, flattish So to touch little people? would a the even I and takes what gross a on think are maybe September that

to particularly I good Yeah, And QX services to advertising high the also getting I addition a cost on think really the the saw with in savings had we go important really COVID ago. sequential that really, a results, one And of mix back of year it's basis, to that the very from XX.X%. well, we that of it's as is lockdowns because things a total. part of rebound doing mentioned

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just important it's to think I so, account, take a that mix. into And different

margins XX Got you it. No, gross this absolutely. of expected north be anyone quickly folks. to I don't for think

impressive. is that So

growth? then is able As on quarter, you've is up Or, installed choose enabling you have services, base you bit time, quarters, growing growth a what more you for of the that rate out let's do you're stack as those you? monetization ARPU over look Is growth this base? a follow-up which and if the XX% And your the higher last one's do think components But an know I and two to called easier. it at four of just the over bigger? say, installed compares aberration a this think how services

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during know, we've the you years, As a of of Apple Apple from lot last Arcade, new few the Apple launched services Card. Fitness+, News+, course, TV+,

during these that rates, helps. the now, we growth right it through are are all into last businesses quarters that four mid-XXs. flows think so are so And I scaling said, well And as revenue additional our the we and you

So to very obviously I for think it's nice see. us

Perfect. Thank you.

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

Please Stanley. Morgan from Katy next hear go with ahead. We’ll you. Thank Huberty

hear Thank Can afternoon. you. Good me okay? you

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closures So business in pandemic, Store. there are course, debate store much less Mac out past foot it the first the by you several the App that and mentioned all traffic. increased were When and pandemic, how other puts benefited Apple takes was was in around your and of the the pandemic? by quarters that the market limited over given net question, like hindered a from you've areas areas But spend Or, and there's helped?

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a We're few and next we it's point Katy, out have things. But Tim. installed is cycle. One not large the predicting a growing very base. I would

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That's you. Thank great color.

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

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

Yeah. results. timing actually Tim, Hey, perfect resulted of your consistency guys, this all, for is first this question. execution in fantastic congratulations, that for

us seeing grow to question phones. the be family of most of of help the force continue was case for to people understand this is how the your reason units. base asking installed I'm you all about base if talked billion a clearly You installed is? that that curious could I And odd we're migrate a people that other could revenues upgrade phones. to larger that forces as XG XG to continues, your than That's and

if So are then old the I on you base how how that happening light can curious, and was is? upgrades shed also,

Yeah, upgraders, we were But tell extremely and iPhone well. would year-over-year what up of would did switchers is looks Both is of first precisely. in to digit, all, difficult you representation both you QX. what the extremely and geographic strong well your I question double I tell comps answer on it's

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for taking thanks and Hi, results. congrats on question, my strong the

services you few quarter. normalize September strong, mentioned one driven et was cetera. from services the home, First growth understand should by I for quarters' work business the Luca, last in And

in for So services the as normalized business this office growth And I a to the what then post-COVID folks the have is rate world? return back follow-up.

go back to we were average a that's quarters try and what of can and about. I several Well, do bit an talking you think,

so certainly, Of it's done explained always couple in quarter. around that during a And of and But of course, we of a again, June bit the there's results, variability XX% right. a years the had easy relatively businesses I a haven't anomaly. was bit that compare an around

strong services our growth that in been confident has So digits feel around many, for we many quarters and double level.

Got it. follow-up then Luca. a Tim just And for or

comments going in be quarter, constraints iPad. and supply greater your iPhone think, you the in September on there's mentioned to prepared I on that impact Tim,

first more point the of it exactly kind this specific? the heard choke impacting drivers? curious, be what shortages time Or, the display iPhone. Can the is supply? I'm on So you I Is about you talk is component

are that The it's the I to own that those. that majority are We would of of where that are has to times do demand the I shortage. industry to constraints so as expectation variety that think we're the some we get seeing that, great in addition saying shortages, have are entire parts so classify set try difficult within been and the our beyond of get others lead

So that well. bit it's little a as of

much before, The have have been nodes, where use we the basis an of your latest products silicon. said issue. I the are in which supply of the question, not with legacy been probably on maybe nodes As of of as several sort I constraints think our the

Thanks, Tim.

Yeah.

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

David the with from Vogt hear We’ll next question you. Thank UBS.

Great. Thank guys question. you the for

clarification. of point a just maybe So

the about lower the of I of strength switchers comments on the were that year, relatively emerging my for markets the specific point I well really in to upgraders quarter. points last about being is, and price markets data as set based data you and And SEX switchers emerging think price markets. the So some address What maybe as strong portfolio? mean question around the iPhone think does guess you points, the launched that when like strong, and

product about portfolio in that there's cycle forward high-end thinking need be I going And a forward, does for as less have current follow-up. new and lower more currently going have would and portfolio then mean we the nature, a the of today? So priced forward, the going a

Czech could David, India. and an Mexico, in Republic, in and UAE, about the Cambodia, very in on Brazil, more, QX. a emerging quarter long and name few a quarter Vietnam, markets I've the in Obviously, Poland before, and I Malaysia, list. as we Indonesia, it's incredible go and talked We June had Thailand, records Chile, for set China, Turkey, in

the And it's line have. SE price And so are keep for the but still still we entire today. in it’s of those results line, And entry a do year ago, point. line the mind, of we in launched products have our that we in it sort

sort of doing. are I price And range so, think I'm we of pleased points want how need And all the accommodate. of that them to of with accommodate to to people we that types

true iPhone, and in really something can then States or something who the very best that buyer to developed who I get So as other in entry emerging United wants think we've it's for And the into that's buy. as markets. they iPhone pro for the true buyer markets put wants the the an good

appreciate I Tim. No, that, helpful. that's

of or preference the those in that available think of intermediate if So perspective? the wants terms that lot Obviously, markets, a to we buyer capability an the does that from for get we're consumer markets, over device iPhone well? a XG emerging XG innings looking is mean into how has about of market sort to longer-term early for do in that in as infrastructure

on markets they their two longer because phone the think early XG, it future top the really as really end buying I well, for for may But I hold some years really, really, read, of most cases. is buyer in early. In is or the

an important of So, their becomes XG part buying decision.

Thank very Great. much. you

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

Company. Bollin Thank question from next you. Research with take Ben our We'll Cleveland

bit services, how developing bundles of how Thanks curious everyone. within you IDFA to services a start little influencing I I'm are taking the a through Tim, wanted trajectory and evening, Luca and part influencing second or services? for walk advertising trajectory think you is business And economics? you the One the could of question. on about the then Good us the Apple think

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question, Thank a please? Can have we you.

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

you flat, roughly cost you To gross revenue you your vertical growth, very in margins that noted Luca, I about was Can these you, flat. were nature, the but will two product continue that gross sequential whether or which product contributor, thank the noted margin in to with Yes, obviously are well. begin ad strength is about you high trajectory like have side, significant as drive structural more services times several margins? but yet tactical on benefits And savings. talk maybe product on deleverage services integration margins to know

of Tim. some the follow-up offsets were a So what for I’ve And there?

Yeah.

mentioned Tim the at maybe out the level side, we're on seeing freight On of side, that bit in norm, savings. this the point a about some cycle. of pressure cost I the product talked is cost that,

sequential we typical good to where getting else, we for continue on and For are components, basis. commodities all cost major cycle the a everything savings see a very

the we're than And good on margins, up can product you so the because more absolute year-over-year far, of level side, points XXX as basis from a tell it's been gross basis. very on

So during to able feels one-off pretty it the and that were we nature. accomplish, was abnormal a in nothing at in that been or able was quarter near-term, least something the to structural. maintain, we've It

services the year-over-year side, again, a lot basis. On a up on

a very, decline, And it was have has past, services. The baseline sequential profiles very the different small. lot. our said, times as very large in gone I up mentioned portfolio margin as the services So, several we in very with a you

can for just this sequential a mix. so even that I differences, example, different Care drive quarter, slight case and has change mix some mentioned was And in a the rebounded. this Apple

services where changes our margins. can XX.X% some with And step margin slight second, in in so margin the gross gross with of marketplace we back for the relative Again, drive a are happy we're very, success very the services trajectory.

are And seeing? your also, you how Tim, the is -- regulatory to impact large of other direct a China interacting given of there is And contributors focus devices, particular these? impact, but Luca. in Store how Thanks, the at people either should companies usage that indirect investors the you're of impact with increasing of App are Thank limiting or from any Apple's And on Apple, influencing these ancillary revenues? all Okay. of there companies. any pretty not is some the some seeing there Chinese is these handicap of some impact in are apps It's you.

for For grew Store a includes And the which a that in so quarter, was quarterly quarter. the it App was we can strong services, you embedded see XX% as record world.

really China. strength economy fairly from we're quickly there COVID. So, seeing has in The back bounced

the we of users that we’re to and different And and they're to of what focusing serve we a focus, companies angle that. on regulatory with sure there work make products the ensure from very lot terms that satisfied is services In with are our showing.

So that's our focus.

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does conclude your Thank for That you. participation. today's Thank conference. you