Apple (AAPL) 28 Jan 222022 Q1 Earnings call transcript

Good day, and welcome to the Apple Q1 FY 2022 Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Tejas Gala, Director of Investor Relations and Corporate Finance. Please go ahead.

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

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everyone. and you, Thank good Tim, afternoon,

quarter. rest pleased We to and all-time report also results December the it We for reached XX% year a China of an We set record are Americas, revenue financial all-time products Europe, and records all-time an record both Asia very And record new billion, services. quarter in increase was an the Pacific. from for $XXX.X ago. of Greater the

new of strength base ecosystem X.X our segment. of Wearables, was as set the $XXX.X Accessories. geographic of installed billion side, The base records all-time current the iPad, The of ago, product each customers supply a X% category grew devices significant all-time except a pronounced, sales despite of in and On each where performance, all-time set and of to our product loyalty revenue growth We the in up Home constraints and iPhone, broad-based particularly major categories, were we in have driven for our year devices. billion, records our constraints. in over were and and active product level record unmatched installed strong Mac each supply the

was all-time margin revenue records. $XX.X leverage than up gross Products was grew mainly favorable gross by points driven XXX were $X.XX Our XXX more a billion, and record mix. last due sequentially, XX.X%, quarter was a up due $XX $XX.X points XX.X%, leverage both Services structures. to ago, basis record. up Operating cost XXX an and of XX% year-over-year to with geographic basis partially earnings different billion by Net diluted from an per mix, of offset records was over in billion quarter margin mix. income all-time XX.X%, all-time cash volume margin points and higher of year December Services set share and up also basis sequentially, of flow gross every segment. XX% Company

categories. XX remarkable customer new get me all-time X% iPhone Research of an record both iPhone detail into grew of of records each family. latest emerging supply the customer constraints, for all-time more in despite to to a U.S. billion year-over-year We consumers indicates iPhone set iPhone and active $XX.X and from Let response installed our reached revenue to of XX%. our developed survey thanks all-time the in XXX high markets, satisfaction revenue base

strong Pro revenue an all-time of driven powered $XX.X Mac, For newly constraints. MX of supply year-over-year for record was growth by despite XX% by MacBook billion redesigned with demand our

sales already, vast from Apple a number record silicon to Mac We majority December devices, drive MX-powered are during helped quarter. which X the our transition year of are into and of our the upgraders

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up around and And of iPad XX% quarter purchasing a new of the billion, we revenue half all-time to during In year-over-year. set in customers segment. fact, set the record product. geographic an Wearables, $XX.X new records all-time the Home Accessories each were

to services. continue integration this and to deep in category also expand product improve and our unique showcasing experiences hardware, offerings We our create software of

during of X/X to performance to with extend Apple sales Watch customers an new being to the the an over level Apple purchasing of quarter In Watch product. its addition globally, outstanding continues reach,

services. to Turning

reached results advertising reflect cloud services, Store. for positive all-time App revenue services we on fronts. mentioned, billion, video, the with XX%, we record many record $XX.X an I quarter As music, are impressive up of for payment and December a records for all-time These the seeing and momentum

category. mentioned our an geographic has I each and and has all-time as to high base before, installed reached across grow continued product First, segment major

more digits all-time Also, very every in we Next, December customer engagement reached our on which increased continue paid current than the XXX across service during digital a and the love, now continue and XXX million to months subscriptions growth. will customers and XX have our think continue with adding we're last up during subscriptions is quality services grew paid We number of the The platform, new accounts And breadth new strong we the on services. see stores high show double offerings. segment. to million our paid improve we finally, quarter content alone. to that our our of geographic services

listen brand-new incredible added content TV+, we way Arcade Just last a Apple to and Apple Music Apple Voice. quarter, in and Fitness+ music to have on this new on with

new Essentials, to and cycle also the manage devices. offering businesses, end-to-end management in November support life beta our Business Apple iCloud Apple together that announced service XX/X their storage of device small a brings for program employees' We the

customers. excited support We business and business is thousands customers beta of already our actively many for announcement are are very we small that ways participating program. are expanding many This enterprise in just of one the

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our marketable performance decreased $XXX leaving plus and cash, strong quarter turn $XXX Due $X the position. debt me We with seasonality, in securities. to us quarter to now paper our total by with we commercial cash operating billion, billion of Let ended holiday billion.

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

cash December able shares. Our repurchases we $XX strong and to the very return shareholders quarter. equivalents business Apple XX This billion open were generate in and nearly million $X.X through flow, $XX.X billion continues during billion to of to included market dividends and

open also XX This cash and billion business in the December to Our of strong continues we're return $XX very $XX.X and and nearly flow, shares. quarter. Apple $X.X through generate billion billion to shareholders equivalents market included dividends to able million during repurchases

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

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

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

We which despite growth solid be March revenue supply quarter. the less set quarter December year-over-year revenue what and during we we than record estimate to experienced expect constraints, significant to a achieve

due to revenue expect We our decelerate from factors. primarily growth to December rate the X quarter,

last First, our by quarter. revenue launched ago, March XX%. new we quarter during December a iPhones the that Remember year the grew year, we during

While of channel inventory a Due during launched occurred to last March September quarter the some associated them year this the year. fill quarter. later we the the launch year, during ago,

compare. year-over-year of result face more launch will timing, a the different challenging a As we

to X it while in quarter a We the to the quarter. to currently exchange have FX impact when a on December growth quarter, March X be the growth during represented compared points a foreign rate. expect point benefit of negative December expect we Second, headwind X-point

the Specifically related content is strong This a world due higher Services, a more to digits increased services. expect led year of December usage grow and quarter we to double level decelerate from lockdowns digital the performance. to around to last because of but compare challenging

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

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

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

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

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

Absolutely. with take question with from first our next we'll Wamsi response, Huberty Morgan Mohan Bank our question Katie We'll take of America. Hearing Stanley. no from

Yes. you. Thank

have margins Your very clearly been impressive.

have and strong a product I that's from on gross margins, clearly mix. product benefiting So services one on one gross question very each margins. On

I'm been And an thoughts these Tim, of there, should example? some from mix that, impressive. particularly of how gross think trends? making look sustainable these of curious for about areas favorable Pro you're TV+ that's margins the you Can So could seeing the data investments I side, how see? and given services, Max really Pro sizable When successful prior some that can how trajectory margins to where investors you drive content at as very think you're too. trends within the like give us do sense And if cycles? services you the just the the mix share on compared mix And you are you ask any across to

it's Tim. Wamsi,

tell that markets, the Australia, the I had top in And terms In models top of X mix. in the UK, the iPhone saw it U.S. the in as the we would the and share seen, Urban France and we the comment China, fact, XX certainly, in in directly based various X top gaining family. the on in that across data including X does top don't several demand mix, well. in strong But we on top-selling X is X of that you the we and Japan. X are what Germany X seem And external I've of some to X of say of top

we the good quite And were feel iPhone. during add So we I of momentum that quarter. constrained the about should

the there. Wamsi, about side, were you services margin gross on asking

services in As services you The in accretive in cases, nature to very some net know, in difference on profile you way to broad, we a gross company is portfolio opposed part it basis those to different margin our our part for with and is due as the to And is we as margin the in account aggregate and profiles. of that a businesses contains account business businesses very know, overall margin. them, basis.

will the the not a influenced of result, the very and company March portfolio. so to services by the quarter different percentage product level, you've guide the but history. gross And do over margin recent services I for XX.X% the to we within think seen be level, strong relative guidance total the time at provided growth XX.X%, compared that at as We businesses the our obviously

And so we're very pleased with that.

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

may be Congrats assume That's and iPhone similar on if for used components year? are as may in or months we past move And prioritized see very the is, should iPhone to me season access iPad. extent that case? level result. that better next it good. on the may and move just you few Can recovery solid iPad iPhone supply that's better of iPhone through your set you prime as there I have components to not that you a if selling the the you have the we

will better view, as recall, the we less do you December Tim. From that in quarter. of constraints we X. than the that constraints Yes. have clearly than constraint more On or we quarter, and had point did we have than a in X, said would have March, Kyle, will saying constraints QX, -- have supply more where that we're we it's December

there nodes legacy some. commonality at If challenge And different is But you the on these legacy products, generally, between is the by nodes. are look supplier.

to it. to supplier some than none that, there There's of finding us focused And But of but anything the else so place largely, we curtain much is that. take not where versus it's have a behind more take the on shortages it the are. -- and

other you of kind and give what's this Great. June the might any and quarter? it and color impacting of where quarter Okay. March on iPad go the Can in us the trajectory

and I a all constraint significant about. that December Yes. legacy talked nodes of The the in Virtually was the these had iPad, problem it very that issue was much quarter, with very in was area. on

And the constraint down guiding we're product see quarter. the they by overall, But we March so in -- what in terms an product overall, -- quarter December improvement not level. by do at but of the going in versus the were constraints

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

you the about about Tim, business? it's revenue. bit Mac could back, talk XXXX a the from calendar Looking XX% up

through $XX You working this billion the transition. still and did quarter, MX almost you're

can a And go talk I the gain you months? after think $XX target where the XX you billion in this sort about of about that What to have order So to see markets share? then in opportunity really think grow are follow-up. can last it you the you was beyond

a And what's we in set is X Greater good quarters Asia of out, records Yes. in all-time you set for record question. $XX.X top Shannon, the XX%. up billion last as thank have an at That X we December set Pacific. point for about been and you in And Americas, Europe was revenue further very quarter quarter. Mac revenue rest the all this quarters record of And the China. the the revenue the all-time Mac for time.

both also in QX across a the because frame. the board. number almost -- got in. it's very Pro but Mac. well about The sales upgraders like of out to the new for -- And markets record even people had we we upgraders, doing launched narrowed And in It's that XX a quarter, almost we're particular time the response that The the much area we so the response MX. -- which during geographic X MacBook of the with to December more China, not are is of

And the so it's and satisfaction by upgraders Customer is charts. switchers. powered both off

that industry product in the of will from all and is will that -- ourselves. number so to see And business, a be limiting We're as markets. this successful in a education, I very -- to different not geographic what creative a markets

obviously services? Luca, can your Great. trends what more as And that expectations as really the outperformed? well extra are guidance on we you seeing Where things driving bit the were that where -- then, And revenue? Just outperformed were a is or maybe were certainly you your at. talk the what

Yes, App it record really in Shannon. great I mentioned advertising, services. fronts. was record then earlier, was cloud, records December video, segment. for on said music, in as quarter quarter payment an every December mean all We all-time geographic I for for for Store. -- It And for the

in that services to fact we've better were combination quarter. is So our the and said, has spread on done, the combined are we and we've the as -- the And growing, the all And categories. around things Very, overperformance the right? customers have -- right? been a We powering the these you just months services We million our base pleased now increased business. the beginning million XXX This continue the than of XX is alone, subs. that paid so paid the fact last reality engagement with the of story, subscriptions installed we more more have expecting around very world at spread is all really phenomenal this of performance. XXX factors,

next from Morgan with hear Huberty We'll Stanley. Katy

disruption? with geographic the the back footprint you on of logistics over of the or of you Are chain chain supply exposure to So broader strategy happy side, you are your the disruption as relates that seen years, today? starting first manufacturing past couple it see overall on the rethink manufacturing some the and the you've to question significant in supply just component the

look and considering sort I The going being of being very packaged are does a distance a chain fabricated the it's supply nodes, little issue think largest has cycle been And back factory. is and very and at chip I chain. because supply and industry-wide mentioned you the as very earlier. on good out between fast-moving by step our There's if a we've shortages shortage. far product of actually these legacy -- Katy, times how That chip had our done, short.

I makes no, see chain. change so, in that the fundamental And it a supply don't

how market? Apple's the and And Okay. about metaverse are you role thinking in opportunity that

a company business But a in of big question. the that's we're Well, innovation.

Store, So emerging millions is us. at we're provide this -- always kit exploring length in the to interesting now, about new technologies. apps how AR we experiences today. Right very incredible for area spoken I and AR have App over you've people of XX,XXX And which

space And potential this accordingly. a so see in and are investing we lot of

from question next Amit with our take We'll Daryani Evercore.

maybe supply both side, be the love are you I alleviate up perspective, continue I get to to I'd think you still issues? if on they number tell the this, remain December have could X fairly well. table on because March? I supply And I us issues And things how or supply or shake up these chain if your starting chain challenging? to the left chain in of then guess in feel, much perhaps that was as but revenue how volatile. missed does

quarter, be was great December the more they and constraints. we've to we're estimate Amit, terms QX Yes. be more difficult precision that the than with and the March But September in very we would it's that less December what than March of will or quarter. the said that saying said than

that's verbiage that the it. placed around kind so And we’ve of

it a try them still that products to is is us, of do and basis. who terms in really getting fast pride In we it challenging. for to on Yes, ourselves customers want challenging? And

always can't we that that that like. the frustrating we it's do so speed at would And

is December. than better However, March

prediction. overall, We're obviously there's the not so we variables go do encouraging such of know] there. number into [which because of that predicting, sign some And a not

just the peers enough. tend be understand really can initiative. tech topics of Tim, Apple map, of sort product think one about a their of bit I fair around with some Fair your your vocal visibility and investors is road a I more struggle to think

of Some them their an go attractive that’s change they when I feel. find name initiative

You think, in R&D spending, billion I are on folks $XX 'XX.

think are are more fair evolutionary offerings? some without done of to to that where that in really really the is you spending it your in And potential about versus seen to R&D think So maybe on just spend, we about talk are road way how that the telling things resources could products haven't yet how out us you map, this extent, And about on? much you're the focus on is a amount. new do marketplace things R&D

when We and an close We ready ready to of there. have they're try to model. surprise announce a or maintain in to try element little different things

explains hopefully us do with other our so And that's to course, that good pretty road what been but us, And we and do successful proven people differently, of that. do for it for over can I map. it's time think

to do going we're So continue that. to

And best look at that's the deciding of of the it terms we and In we are Apple. in brings that we areas of hardware, at in, where really out because invest and sort software intersection magic services. happens where think the that,

so investing you we that And before. interest, our there spend even and can are in are more areas through peaked we've more those. our were we than time that And have than tell ramped R&D

as point the And so there at there's quite market are. into always are not that on bit things this a going investment of

with UBS. We'll hear Vogt David next from

your in a wanted the perspective heard current market China vendors little we've that Chinese bit into reason just and New is smartphone we the sort Maybe more local elevated to could to how as pause it And be why on think this I in that macro the business might policies of inventory. some going and I'm of Year. about pertains sort and going there forward. climate caused have asking a specifically concerns dive

sort then then want development seeing market. just sell-in what versus So maybe the to follow-up. on in your in of And sell-through a around, and I thoughts that we you're have on get market potential this touch

can I on, comment us. for only Well,

that. revenue switchers double-digit is all-time iPhone, in the China. people which And the what phones strong selling and grew us. other and mentioned sales to macro we the records record with we're very as quarter, be determinations. away number let economist proud on and I've of upgraders stay and in before, in But a was we're growth X and I'll top make last impressive of urban had there there Our important the very XX% super seeing

there. was that in remind good you a And the so lot quarter. iPhone there's I And of constrained would

answer And can't whether not, don't where or the about people so the I know that. I for other inventory, are have coming to statements comment the I'm around more question. Thanks not and on sure

issues to to on just services. or then to Obviously, mix we maybe sort well, get next might impact And supply of months. been the term, chain of benefit the bit incredibly gross or about bit between XX and you're but word And may I think you chain months over past that a sort maybe that transitory, actually margins that costs expect and XX driven the helpful, use little the so? over sort XX Can as products the That's the want last supply abate us the of -- of you've be these well Tim. we'd you'll chain. some it performed over longer have don't managing relatively a a the carrying be due quantifiable little get both supply help of

earlier. the in I've it's very into portion factored changed, we'll hope margin would that at that of -- is mentioned We're a the terms has world seeing see. with but gross Luca of inflation, previous of our as call, and is Logistics, I and that cost OpEx you elevated so and is around. the least moving reviewed transitory, a things world on

Samik from question Chatterjee JPMorgan. with the take We'll

I had couple. a

question have first and pandemic. really had that The the TV+, I the market other know subscriber exit of Apple slowing this we as in growth about I was players on some talked

content dissimilar a your follow-up. in you're trends TV+ curious how is what I helping and and they And Apple share and if or maybe you seeing on similar can you that TV have are So Apple aspect? how

number numbers And total we give do, is subscriptions think had. quarter we at Luca ended of a number subscriber our earlier I subscriber TV+. give for don't out do What for for out Apple the we mentioned the number that subscription million. We XXX

so and with And incredibly basis Apple XXX that. both it million. party. growth you That's recall, a on we And as counts, third year-over-year branded of were pleased huge a

wins we're honored terms doing XXX We're with of XXX been and wanted we've doing to. how nominations. with TV+, In exactly had like we

storytellers really tell giving are and about we and feel competitively place good original position the We’re to strategic product. a stories of where

can of follow opportunities, think about you I like us few not where an either next and Pay, the when are just up, on may And that segments currently be you years, about have help similarly if -- can segments geographies either customer just think the Apple you opportunity it into terms biggest in or and in. be tapping

Pay any would talk we runway call, that customer about the Well, that set road credit think in was has kind I in that rated second on sits of putting carding which Card is great a growth us. getting I more of J.D. obviously many map Apple aside -- many, lot people's area, main Apple and lot by fast obviously card environment. credit the to stunning. been still just absolutely cash people. It's go stunning. been a there become and the still in has of for a And say wouldn't ahead the to midsized our for thing a It of Power And there's has because there's #X

have great ahead. we might And both that of future think so do a and else whatever I these

Caso Chris from with question next our take We'll James. Raymond

Yes.

easing we supply interpret better that into and quarter, of phone because a March we seasonal way quarter in as the constraints and later some was March So guidance. And terms some if of perhaps would little performance? the you the somewhat to year, as in than that quarter, something interpret you into of seasonal March performance because see the Should question Is the get came quarter similar bit better mentioned the guidance? just should that the that that in first performance. help March. is are the your Luca, could you that the interpreting correct speak March last seasonality go than seasonal And of to launch of

about how year-over-year it. people at look and most because a on that's it basis talked Well, we probably

to just what recap said. so we And

all, of expect March quarter. for the record we First a

We significant expect but year-over-year expect what still solid in less December. -- basis. as a And than Tim but saying, we've growth constraints we was on supply seen

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Okay.

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