Apple (AAPL) 27 Oct 222022 Q4 Earnings call transcript

Good day, and welcome to the Apple Q4 Fiscal Year 2022 Earnings Conference Call.

For your information, 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.

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

a I over to every Before the December December add periods call our Tim, to six to would realign quarter we calendar. once turning the with approximately to like fiscal the that remind years, week you

consist and than discussion information December forward-looking taxes, So results may differ results or on note XX. gross income of this the other rather risks operations. and that materially December today you'll and expense, limitation, COVID-XX the XX some revenue, span cause actual will from usual quarter and the hear business involve Please expense, our that of during future including business will uncertainties to outlook, company's will weeks of of trends These without allocation regarding including, XX forecast. the end statements, on impact our potential those operating margin, statements capital and

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

afternoon, Good Tejas. everyone, and call thank you, today. joining Thank for you the

the incredible for of range again and facing ways again innovation a world, unparalleled together customers. teams drive deliver despite year, our challenges past the to have our Over come in and

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Tim, you, good Thank everyone. and afternoon,

reached financial We China foreign are for quarter year-over-year results record billion, records to a for September the September September up despite Apple of Asia of with Americas, negative basis the over report capped very challenging record record new We fiscal Greater and impact, $XX.X a Europe, that another quarter Pacific. backdrop. revenue volatile pleased year quarter of points X% XXX rest in exchange and despite macroeconomic

our record year grew over currency, a record constant and and last And for segments, high revenue in major and loyalty the was our we active of to for in Mac. the to growth of number record and for satisfaction Overall, thanks nicely. despite it new Home of Accessories all-time that US. devices an of grow double-digit Wearables, for and segments all-time up X% quarter reached at each nicely base iPhone Products the all the our categories and $XX with and September quarter, billion, Importantly, installed was products. geographic an headwinds customer high extremely are a geographic FX end a strong revenue September customers revenue It outside quarter. to continue strong product

due favorable was offset from mix margin up a partially and ago Services leverage points were due for primarily record with gross exchange. XX and cloud points revenue was basis It impact foreign was unfavorable $XX.X Asia points September share Services all foreign a diluted rest and basis We by and foreign last over reached records. and of cash exchange. September was to improved Services sequentially, set mix, down quarter billion of revenue XX.X%. sequentially, revenue XXX services. quarter of at XXX margin by up quarter a in China Our record X% basis Pacific Products exchange. down a billion, quarter payment points $X.XX including partially also despite categories, of the different September XX.X%, year quarter XX.X%, gross Company to many services leverage. September $XX.X Net Europe, billion, records in Americas, Greater exchange from offset operating income gross $XX.X records basis all-time negative flow margin of XXX over earnings and foreign of per

large switchers a majority Vietnam, of get Indonesia Thanks the an digits. a customer geographic This XXX $XX.X quarter performance, iPhone was base US of to latest year-over-year. of quarter for detail strong emerging foreign of iPhones now customer our than Research consumers key me XX% was along despite to a markets revenue iPhone loyalty, exchange with FX indicates India up of Mac. record and despite our of unmatched installed sales September all-time to $XX.X It all-time more three for set set survey in and revenue with helped revenue Mexico billion, record records satisfaction drove across vast upgraders revenue this iPhone and impressive We more segments. into all significant track, markets, performance our several year-over-year, particularly of billion, all-time XX%. we in headwinds. new grew Let great a from setting quarter for were drive each We a and Thailand, record level we double the high achieved September active lineup, XX% new There categories. significant items doubling record that headwinds. of the grew And year-over-year quarterly performance.

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services including we've our were gaming in where quarter, certain strength long-term areas are the that macroeconomic exchange. category. foreign and seen Digital trends by impacted observe softness. However, ecosystem and headwinds, of the Throughout to continued our opportunity the advertising some we several reflect

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address For powerful to improve systems, enabling help Ford and apps, of Ford And now using game-changing the as its camera iOS impact to and process the have often advanced as Macs real-time trucks. it Manufacturing program to top help inspection customers. visual Cisco quality third-party employees a chosen twice when Macs iPad electric issues are and in further its they iPhone's with and options. instance, to help employees F-XXX iPhone And choice A-series along all automate expanded choice, retain talent. before other chip Lightning employees its given this are Ford is as offering attract to quality

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cash turn Let our position. me to now

strong debt open business quarter paper dividends of XXX while flow, of which included billion. to in new Apple through quarter. us billion by $X.X maturing commercial and in This billion generate cash the $X.X decreased market with September $XXX during debt, with debt $X.X repurchases $XX.X continues ended enabled of and issuing billion Our $XXX and $X million in to marketable very billion cash leaving the total and equivalents over securities. us We billion We shareholders to return repaid billion $XX billion shares.

at continue as billion make toward net becoming cash of end cash we As over a $XX neutral net time. of progress goal result, quarter to the our the was

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

quarter in the December current do macroeconomic near on to directional the not impacts uncertainty we continued sharing total decelerate our believe for reasons. the term, and providing to Overall, today not but Given based compared that outlook the quarter are as September the the the revenue around insights we revenue COVID-related what are we the business world assumption for projecting guidance a number worsen year-over-year during from performance company are of quarter. will we some

foreign year-over-year nearly First, percentage of we negative XX from points impact exchange. expect

fill in a the year, December Second, to associated redesigned addition of revenue MacBook Therefore, compare headwinds, year-over-year Mac, newly on last decline we with which we our of very challenging expect FX had to during the against Pro launch have benefit the MX. increasing Mac and channel substantially quarter.

to macroeconomic expect by grow advertising be Specifically affecting digital and increasingly on environment Services, exchange, gaming. impacted foreign to we but the

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

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

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

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

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

go We'll from Suisse. ahead. go Shannon Please ahead Cross Credit our from and take question first calling

Thank talk mixing you're wondering, you you the much. talk about iPhone On I'm seems positive bit you've It this how about side, to great just the up. to call raised a very It's on you thinking can prices. be generation? to again.

from pressures higher happen you meant are out to the what are side, negative there. what On versus some just concerned impacted could in Huawei the prices, demand now. about investors There years prior

So initially it demand I'm seeing what can move iPhone you curious to in will talk think through. you you're if how and

are I you. there. things I understand, follow-up. uncertain that Thank pretty caveat the have then out And a With

on of Tim. Welcome iPhone well. and XX%, had of top that XXXX in so fiscal to grow revenue tough the compare was than timeframe year better this would anticipated a in $XX.X a it's mind by it keep as that Customer we that be. it's Shannon, demand XX% And billion. grew strong is back. and QX iPhone

with so happy it. were And we

still and be the and continue and Max constrained constrained XX In the XX But today. -- to the it's very beginning, the XX on early. Pro new Pro been the and the we terms products, XX the of Pro we've since Max, Pro

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how very very QX. while in working little we start for so hard going to we're Pro XX be feel suggest would of And And this good we're performed to about that. XX a Max. on constrained to we Pro try certainly, and the remedy But the that generation

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So how other look the do forward? seem as be But else I should mix about know it but you flowing And we think to we then what -- what components throw very into have we favorable. through? hedges,

negative currency the Well, QX XX.X%, quarter margin and very spite basis basis you as XXX a against QX, a then in is Yeah. -- was me negative with We year-over-year negative significant and to world on for record start I'll around mentioned, basis, and for dollar. QX. sequential was it points FX let the a did for September basis example, points. the gross It was weakened in has FX that on company. get of, Essentially in XX every

fact to on XX.X% Sequentially, basis, basis that exchange. QX guided negative to spite have it's of basis a year-over-year in points have, XXX points we of Now, we the XX.X% unfavorable. XXX

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very Great. Thank much. you

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

Yes, sir.

ahead, is sir. coming from Our with Morgan go question Woodring Erik Please next Stanley.

guys. very I start. from could much quarter. two Both well. in Thanks performance taking if have Mac constrained the as Luca, for iPad perspective. relatively just saw Maybe a this questions. my Hey, and supply we quite were we divergence

maybe have on of to reverse factors important quarter, after impacted you we -- normalize? I elaborate some most can of divergence through the contributed the And So just kind then can that December performance a the follow-up. get in or and whether those

MX. quarter, significant factory remember, the quarter, of quarter. product we had the MacBook was lost Mac, Yeah, if the take by with Erik, quarter it's Air in Tim. was a the of the history of company. the the portion Mac, that you in the the the – I'll ever previous the your we've best question. in On It it was June if you from helped launch helped look It at output for

were our during had a to Mac. the into And backlog so of able we exiting QX QX. that QX the satisfy all headed demand channel and We filled for

And an so to Mac incredible quarter. that led

launch ago, If we a October. in opposite iPads iPad iPad, point The happening launched a sort the from from of this launched had of year in view. you We September. year iPads look at comp

launched had the before quarter is in our remember started just the Pro. to so iPad the it point iPad other Pro The was first year-ago quarter that full of quarter

iPad performance. that the ago, really and a quarter an to was year launches it strong So exceptionally key were

contracted iPad the during that's so reason quarter. And this

Tim. versus you on items, bit provide line bit can of or then a Just XX-week different were Thanks. how the talked Tejas little maybe should Okay, just I not that at you, we certain business whether XX-week the that's you Maybe beginning about Services elaborate XX-week tailwind see just And And segments the a if stand-alone? me. quarter. it's an within the quarter to all? the helpful. maybe, more at Thank think call for it a ask that products you, quarter obviously, that's impacts impact have or where product of Luca,

we during holiday. days as peaks in about more of general, days to equal obviously, a our have we every have costs. is the quarter because both adding course cost going affect Black Not of front. or quarter. Christmas going the our in additional sale Friday the certain few we're and few and on Think the OpEx a general, week well In to the revenues that -- we're are But,

So every years fiscal approximately as we that's align what the happens our to to to weekly calendar six calendar. need us

Super. Thanks, guys.

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

Yes, coming calling sir. from question from Ben Cleveland Research. The next is Bollin

price One And and Music, with the I price follow-up. could curious talk kind Good follow-through. pieces portfolio. bit services, within balancing TV+ Thank to respect you how a everyone. I'm I bundle. and there's like your the taking question. of consumer hoping own associated was versus have a think It afternoon, the looks about the then adjustments little the some you about been for late costs Tim, of we as

Yes.

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those And of of value the price is so, the we've price to just One the course, increased Apple two service. the And of consolidation represent changes.

and maybe has any think that constituents thoughts item. relatively Last Can to capital CapEx pieces the another Thank fiscal Any into And to we could the Okay. big then, you CapEx of XXXX? you. couple moving how figure XXXX? and about years, of around preliminary talk been intensity stable.

Ben. Yes,

said, our at think been you good. our very stable, fairly look I we and capital when intensity as really is mean, we've CapEx, So correctly I

major in We company. for have three CapEx buckets the

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Okay. guys. Thanks,

question, Thanks, Ben. we our please have Can next

Yes, sir.

coming Please Our McNealy from go next ahead. from is question Kyle calling Jefferies.

Hi, very thanks much.

for some Wearables maybe to the this the you if Just what more have store strong you to quarter. this the new customers the announced and products the pandemic of quarter, try it drove that give getting attach versus strength wanted from or into still come willing you're now were Was was kind and available result down? sense benefit us a on are the that from shut when things rates maybe there that see could iPhone or that

we were The Tim. we it's grew you Wearables, look Kyle, -- with. Yes. at happy very XX%, which if

you The continues a Watch the in the Series far. at be a during Ultra of this Ultra the was constrained Watch and including to is -- SE. contributor. thus particular, new was the contributor, Apple lineup that, If X and individual and Watch was supply the supply And look pieces constrained Apple Apple quarter

the hard bearing, those products get to working customers. to satisfy we're so demand And

cancellation the launched quality. noise We features just off from and also great, charts in Pro in announced the product been sound the reviews September. great And the there. We're terms the have reviews and getting AirPods the for of

other a Wearables, headwind and rest of the from services. we Home our And way, of the there. and business the affected that obviously, in like was what headwinds, the affected Accessories, effect also terms had FX obviously, products just the played Russia, it or In impact

So sort the and that's the con. of pro

I two-thirds were The other is that about Apple that should we not mention an the Watches to Apple customers of had owned sold previously thing that that Watch.

very, is And still selling here, which future. the much very good new very so for the we're to customers --

for how Mac. great. factors? you a What those orders baseline would Okay, can much give if us not there's much see where could wanted that. at Mac. Thanks. get sense the One period great. if We're all have can on Anything for to quick any for and quantify how from fill is, grown more be the sense it if give to came would you the trying satisfying channel on June from one us I you just back

that Yes. back new channel, key of then previous the the the the contributors. from three that just the reasons filling satisfying all say MX -- and all I orders in product, launch achieving quarter the Air, would the I those were key of were the gave XX%. MacBook of The

Okay, Tim. Thanks.

have Thanks, Kyle. please next we question, Can our

Mr. Yes, calling next Suva coming sir. is The from Jim Citigroup. from question

and you -- Services. carbon-neutral, the to be FX to then iPad, meaning heart. go suppliers adjusted see it's Watches My the store possibly typically pay and Apple more you I the by your more it product, annual, family that is took you. that, has impacted Thank about really One a talked buy great all Thank when Could than Suva question new quickly. small on going TV+ the statement Jim and on we into and but is and we to price something

growth could more the different bit reading that or be a and Services see just much you. could from impacted we Thank that impact down reaccelerate, too FX So growth FX little am could into product? road, Services it be was the by versus I

depends of Jim, the it's our do. that Obviously, sales Luca. right. the mix you're FX impact No, on business the geographic on we

slightly can Services it yes, so different exchange. can on products and have be -- effects foreign And

business double And in Services grown digits. look we at we have so, currency, constant if our would

we're very pleased so that. And with

softness As I mentioned, in could advertising. digital areas we there see some that some were

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paid paid and transacting of faster double increasing. penetration they're growing than seeing are accounts, accounts more more both accounts accounts, We is digits. growing so Paid the transacting are accounts

X business, and in very subscription great years. platform the a We fast. million have XXX subs doubled on paid now growing We

look foreign that's because growth we exchange us interesting really temporary really when very for believe are the fundamentals all dynamics, thing Services So those engine to and is is that at good. the and we is that but – part there a the

Thank you. Congratulations for your team.

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

from question go Evercore. coming Daryanani Amit ahead. The from next is Please

my well. for I Thanks taking X have question. as

There's channel channel to amount The really terms the optimal where fair it to for demand, the would It to of from a perspective? given more think by in Because data, first iPhone end is do what's have lead strength an you today the trajectory. seeing, worries. be around to the happen given getting going of like you is historical quarter? December demand. And of your the inventory it X now looks is evenly macro revenue iPhone iPhones versus a by time understand be you're do the see supply level helpful in right driven trajectory given versus really focus you been iPhones would where though,

helpful. any on inventory color So would the channel be

Yes.

iPhone September too robust look on so -- where of the and demand start We that at exited that's in is quarter. quarter, itself not you ramp the is and Amit, our the below If target ended, and inventory range unusual in we we forth. in and

call And past. abnormal it that from I so wouldn't the

you I give a sacrificing can those talking or really, Apple privacy? sense Is an advertising you about you kind can the Got any folks there And what big if you you of build think do about, business could vectors scale at focused how are businesses it. then on? a us And talk consumer to about without digital over fair last I advertising any of been talk have guess, metrics, bit think. few Tim, vectors quarters,

first foremost, of a away from anything do under. and not look that that that that's would human we we privacy so at so on focus basic lens we sort -- stepped fundamental feel our So privacy is it and right, We that. and the

large we it, clearly so don't release Our advertising not not business exact the to numbers but and specific it's relative on and others large. is But forth.

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

calling move Sandler. Yes, now sir. to Mr. from on Kumar Please We'll go ahead. Harsh Piper

stellar performance. I of all, maybe First here. ripped if can lot be anything that a talk mitigate what we the companies congratulations on US in Yeah. around, ask so of to fellows Luca, There's cadence curious -- what globally. a are to and And you can inflation end, those? the steps was all, about and is appreciate maybe on pressures about problems guys, if labor Hey, there's Apple I wanted that And mitigate that take thanks headwind. FX large-cap steady here Tim, significant that. at done to becoming pretty getting

I'll let FX. Luca talk about

them lives. people taking best best the of teams our terms care best the focused on to work of we're compensation In do the and so can them offering piece, that their benefits and of we empower

And teams. so of we're in our on terms that's what focused

of terms inflation. inflation In as inflation, There's to there's well. wage clearly logistics related

have inflationary has kind any returned are pressure means. And that components to -- pandemic silicon it levels, pre certain compare of levels as pre-pandemic If not you there's by that to well.

where consideration see And gave not gross taken margin that earlier pressure. that ingredients guidance we we've in you obviously of the so but inflation that's see it, gives list we it call. in where of all-inclusive an some into And Luca the

we I we it's the you're our very possible our both foreign affecting this, Of around mean, factor right. gross hedge one We in significant that try a as Yes. world. about And revenue a dollar? on is have very situation course, exchange, obviously do like strong where results, do as exposures. margin. many to and them What places hedge we

roll over we we we've the not hedges currency, of ones, primary that's our or the the to ago. hedge don't years Obviously, China company few we because time, stability. hedging that But prohibitive For and started tend market in exposure we example, gives small first cost FX there. that general, tool that But significant use been margin is several probably be where to There may I is think the it because us offset a the some over to reduces pressure. contracts. the hedge of protection new level need because buy in

have increases the customers they example, that when we example, strong customers not cases, And which we're unfortunately in now products, price new launched with the situation for something at situation. the products, in markets dollar. for that, And seen. particular, right is some -- FX in saw international new had course, Of that's US launch the to some we we in look when

So emerging I the strength And US have very we're good things these we lot one strong the seeing done dollars, Indonesia, our we've and of appreciated where places incredibly markets a that. good fact have markets, most Mexico, during are it in products, local performance how deal world. spite in the of the particularly that of large perform in Vietnam, with higher. many in sense places that the very well. strong progress international that some for in say currency of say, many we've It's dollar that respect, try that's look our And local that engagement to those making us the in rates have reported India, way strong was where we're markets to with to difficult I really FX currencies, the to quarter ecosystem feel brand. even obviously, to very and environment, for we the this very, markets at very growth customer a seen growth currency, about the in in because important general, like us really double-digit we in in around response very the the so the even gives

in Tim prepared relative to for the quarter, that decelerate Luca. you follow-up. guidance, had you performance December September. the I Luca, and expect Thanks, a the your to remarks for mentioned

think positive that the looking or on basis And year-over-year -- growth still year-over-year call we basis? you we color rate a are negative on thinking. number, So we at a December? thinking maybe are will be what will Maybe are looking you're go look September a on X% we down could some I was that, it, a year-over-year provide at X%. Should that about, as number

September we're uncertainty the reasons X%. What providing we so percentage a we've lot decelerating We're explained. X%, for than that going guidance going from a said There's September, of so there. not be is to that to lower be was it's

but the will Keep And normal in the quarter see we progresses. that's how about right mind where now. in so are Certainly, very XX talking be we exchange. different times, we numbers, points of

Thank you guys.

Thanks, have next Harsh. please. Can we question the

sir. Yes,

Next question go calling is Sankar from & Krish Cowen ahead. Please Company. from coming

Yeah. Hi. had my of Thanks them. two question. for taking I

for either allocation. Luca, capital and or on Tim First cash one,

versus to Given public other line correction there's it be you your does you prior to had more attractive interest income to more some aggressive a then with words, and acquisitions, or follow-up. cash-neutral? time due holding of private goals? In valuation some companies, thought cash think to becomes on would and for quick more get change your process investment the on I And the

Tim. is This

terms acquisitions, believe, I per year about averaged month, one we across In XXXX. in of fiscal

constantly And preferably so out market. there. talent would And we intellectual that property looking things what's we're in provide And need. things the or or would what be either would both which And synergistic.

we're acquisitions all constantly of sizes. at so looking And

arc we price we obviously, an cash over the capital repurchase we've like billion deployment, to done the look of In at beginning program of And since have average of done, of buyback of program terms long the over at time. $XXX return $XX. the

the So incredibly has successful. program been

all we get to said at point. cash-neutral We we position we have want are along, to cash. where a some And still in net

very, has year. over generation the cash last been Our very strong years, particularly

think, flow. I billion mentioned $XXX of That's remarks, free cash XX% I prepared up we the in did year-over-year.

And to for so capital we use that will put investors.

a other and that. color Tim or that's negative in helpful, for very offset be words, for guidance, of impact helping Got will some curious, FX it, kind quarter? week the then it, quarter, just thanks if quick the higher is the got on XX-week on of FX, from point December a that percentage the XX extra I'm much in follow-up Luca the the Luca. And not

say percentages. I No, that wouldn't those because are

same. weeks no, XX the wouldn't different. XX be the points or yeah, So XX would be

it. Got of Q&A lot Got it. Luca. End Thanks a

at XXX-XXX-XXXX. the available The by pound weeks and you, enter XXXXXXX, Please for telephone confirmation a the Thank today. replay of press A for at additional with replay Thank of apple.com/investor the questions approximately via joining available replays contact telephone. be can Josh is analysts by for X:XX will XXX-XXX-XXXX. XXX-XXX-XXXX. on questions Podcasts, Apple us. again These on be as two will number me followed sign. additional p.m. today's Rosenstock can code with Webcast Pacific Krish. contact call Members Time you Financial

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