Apple (AAPL) 4 Aug 232023 Q3 Earnings call transcript

Good day, and welcome to the Apple Q3 Fiscal Year 2023 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 Saori Casey, Vice President of Finance. Please go ahead.

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

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

conditions the of consist outlook, capital revenue, the allocation expense, of will statements, on gross some that operating forward-looking of the note information hear potential other discussion of those during limitation, operations. without and business taxes, expenses, business and including the you'll impact including, margin, future today our regarding macroeconomic company's and Please income results

statements may materially or These involve actual risks forecast. our that and differ cause to uncertainties trends results from

For recently X-K along today, the with the speak to filed any the associated filed Apple's with Apple of assumes press which made. statements, annual update more only report XX-K date to please as most Form no the in on refer are forward-looking the obligation risk SEC factors information, release. Form discussed they and

like to I'd to introductory turn for over now remarks. the call Tim

thanks billion Good Apple of revenue Thank you, quarter, reporting is everyone, $XX.X Today, us. for the than afternoon, our joining better June expectations. for Saori. and

record France, set paid June revenue quarter driven see than Netherlands to robust of Services revenue and the countries including in UAE. the And with records emerging of strong markets, sales Philippines, total Austria. Indonesia, driven set subscriptions. well, number records Arabia, June $X by in quarter Mexico, India, all-time and Turkey in results iPhone in the continued a Saudi by We as Poland, we an We other billion more

a to aggregate of prior in of percentage including environment, we year's quarter track. grew macroeconomic majority foreign compared uneven X the an face basis, to exchange the we On headwinds. currency continued points constant markets and in We nearly

and driven inspire. We we manage the of possibility relentlessly, efforts innovate continue by those sense are deliberately and to

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it over Luca. With to turn that, I'll

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a Our recently the to new for all-time which quarter to measured in This XX U.S. thanks iPhone family our active levels XX% iPhone XXX of extremely a high June switchers. installed record high, at Research base testament in to is a the grew satisfaction, customer

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X nice of over continues a the foundation future establishes ecosystem. our billion devices and solid base First, at of our pace grow active expansion a to for installed

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and billion, leaving now by ended total billion billion return issuing the commercial and paper position $XXX and We of new me with our cash to We in of capital cash program. quarter marketable turn $X.X $XXX in billion $X.X maturing repaid Let debt securities. while over with debt increasing billion. debt $X us

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

in During open XXX to through $XX the quarter, equivalents dividends we billion returned shares. over million and billion $XX repurchases of shareholders, including $X.X Apple market billion and

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

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

for are June September to assuming our quarter projecting from the doesn't we expect worsen today what quarter, similar to the We year-over-year current the be that macroeconomic outlook performance quarter. revenue

revenue to headwind, of expect points. a percentage and continue year-over-year over will a exchange X negative impact we Foreign be

and iPad we Services revenue both on difficult expect year-over-year the June accelerate year-over-year Mac decline the digits by for the Also, to We compares, Mac. performance to double iPhone due from expect and particularly to quarter.

quarter. both quarter experienced able demand in a year the For disruptions year ago fulfill products, September were to June and the factory ago we shutdowns from pent-up significant supply in

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

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

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

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

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

Instructions]. [Operator

take We will go Suisse. ahead question and with Cross our Credit first from Shannon

Tim, -- actually, you and mentioned Luca, too.

in trends environment trending macro on You can on uneven of geographic I'm mentioned wondering if some basis an you're quarter times wondering is the you within... the about seeing the specifically how several talk demand during I'm a iPhone. call.

Sure. the end answer Shannon, of didn't I get your it. I'll question.

dropped. has she think I

Okay. I question the the Well, for follow. let me could that part answer

strong X% June a plus very great digits record basis, with the the to the iPhone East. America, June we improved where emerging board in emerging for Middle China, from many around Indonesia, performance geographic X% had minus general, performance markets emerging from a of where, we've the in grew set there, and double Latin in grew digits. in performance quarter strong our was quarter again, markets. to on double we constant markets. We And set Southeast currency, many quarter Asia, in in other the across records We in June total from performance So areas world India,

it's there. good so really been And

-- we quarters a the of for slight our in see geographic but also, acceleration in United from performance because the the as of market We the States, the in been segments, you there in States. declined smartphone can United decline we couple last primarily Americas, had has a

Sorry I off. sure cut I'm why about that. not

terms gross higher end you is, In you. high years covering of were at which [Technical of XX% high end, you I I guided range the than the Difficulty] margin, the and of at in remember think, to XX

there's And should about we things. how seems like a of of like and takes gross storm perfect good margin? think So puts it

just maybe talk it about about holistically. thinking how can if -- you're more you So I

by the XX.X% gross shift us up in I for obviously of think record the towards cost It June. leverage. and which savings Services, mix Shannon, you sequentially. all-time remember offset basis by points correctly, driven company loss is were June margins, partially We seasonal an XX a the because quarter for was helps

commodity have to is that a favorable environment We us.

at is Our this quite product point. mix strong

drag, right of basis, year-over-year yes, a foreign be significant we drag was exchange, which a good are and exception a the now. a in it position with And so on to continues

quarter. the good I similar same for mentioned, as position frankly, a June And the level for margins in are for the quarter. of gross September we expect reasons, We

America. Mohan Our next from of Wamsi Bank question comes of

little us absorbed And around Luca, give color revenue you higher this Your just Services performance, can your more quarter you impact FX Obviously, overall also a guide. you a you the called acceleration. out guidance? similar. versus noted

just revenue iPhone changing of So a that there basis? that that have basis? you for not terms think typical basis? on Is I perhaps on step-up wondering, sequential on in about much reported is something product And constant that follow-up. that's seasonality a when currency in acceleration, as is as And comment causing is you a

Yes.

comments all for you're reported relation in not where referring in constant the acceleration issues. we're are currency, currency I seasonality Wamsi, some to out sequentially think, we And in Services. and pointing So our But this to also is -- and said outlook. for iPhone

We iPad, compare also Mac the last have said that that decline and And versus digits. to very a for that expect we for double difficult year. is we reason

Mac You and remember had for shutdowns ago, in that a June iPad. we both the quarter, year factory

so were quarter. pent-up September to demand And the able we the during shutdowns from fill those

unusual So an of ago. that year a activity level we had

And obviously, difficult. so the now, compare is

iPad digits, Services. So iPhone I double to down offset Mac acceleration we and both which be the and that for mentioned expect

the that activity on year. wondering seem you from now of similar if flow to And And you a could this issues on some lot I us Tim, payment particular sold if versus update maybe Okay. promotional cash with upfront iPhones of basis was installment percent type thoughts global a on basis. full are some U.S., on especially what of be grappling carriers, expect in

products. the XX%, mix installments, the which really is it world. that kind and reduce good directly markets. around a this of last we've of last it reasons done similar it's sold cycles. is -- why Wamsi, couple because the a think And and at direct world job partners very the We has kind we our that also financing. emerging it our want around well we point, our with product some during affordability percentage, few program, very across iPhones, of the of I'll our channel the more for some again, using one programs over majority over The to with are of of do take affordability in developed strong think been helps years really threshold trade-ins, And from

on we continue push So front. to will that

next with UBS. Our Vogt from question is David

I Luca just wanted both that to growth Tim, and commodities. about maybe points made follow up and X you, on

you're but So be I FX. acceleration about an about iPhone, the talking points just to comp X clear, easier in know is from

understand, quarter that points is a X So the quarter? June to I on of improvement about currency from basis, just want like-for-like excluding to the the September

you a last of And at from smart dynamic? the timing perspective, and a duration think inventory backlog I of And that favorable this or quarter, How sit that incredibly get the the which strategy. prices, the about buying future commodity sort quarters? that about from what's quarter you lot Where today? know as does far of commodity you favorable next have of subsequent do you into we cost an sort was talked out

Let I the We're reported me again. just to the referring entirely to about provided. guidance outlook guidance, want start clear numbers. be that we

into have the fact take that account they we exchange. foreign a improvement So slight in

reported when Mac our performance I iPad refer reported quarter. to digits. to September similar I expect, performance, a reported Services quarter and June on then decline again, in the our to And So performance and performance the iPhone we double accelerate, and basis, accelerate, the to about in performance talk

I the always the going sure available we as that make opportunities We mentioned, forward. commodity the market, in front, of and that that do continue environment to is favorable. take the On will are advantage we

what sense you run you on have? a the currently of at gives a sense today least any Luca, rate how based us long for tailwind? that give you Can short-term

is historically speculate guidance. September XX%, to horizon quarter XX% I've And because that provide said that's know very past the the for which the guidance high. to we September want you where is don't I

environment that favorable us. obviously, a reflects so for And

with Erik question Stanley. next from is Morgan Our Woodring

consumer Tim that of Meaning, or are consumer incremental could as consumer differs just think ago signs by behaving that of region. some we share there kind any in more Are where Maybe And if could then Or have regions XX like to a Luca. some spend things wondering days maybe do incrementally I strength have the follow-up. big how some or consumer? X market? I willing is on KPIs weakness more track? the be if based today any still is was I the you on there think versus of is in of relative sustainable the you there on strength electronics? well. And how kind start and caution color you you're you that just seeing how picture,

Yes. Tim. David, it's

sort If even well the around last you of and on did markets better step in quarter emerging we exceptionally world, basis. a constant currency

markets strength. emerging was were so And -- a

If went you in X% a look at to China, in from X% QX a in plus negative China, we QX.

in so we an had China, And acceleration.

If at of is in year-over-year, majority primary you currently. reason in Americas that the the can the it's on for was declining as a a although the sheet. the The U.S. somewhat there you still it that the smartphone Americas is -- market segment, which see data challenging look in U.S., vast acceleration there, is in slight the also sequentially, is what's obviously

Europe quarter, Europe, quarter record. a record for in June then And -- a the saw and

And really world. signs good some so places the in in most

Awesome. And maybe, question you. Luca, for a then

below now think either seen where been your about seasonality or below X OpEx I expectations. in it's we've grow quarters come historical

than I think we've year-over-year XX% R&D grow seen first is XQ XXXX. fiscal since time this the less

returning normal what new is a to back cadence So you That's cost just me. would more that And that some about we seasonal taking? OpEx a just actions indicators of forward, spending? that this look evaluating it for you're can talk you in really the perhaps expecting? as maybe be should Or give of you're greater you are confidence the

has quarters. at look uncertain the and we for we know that been an Obviously, last period this few environment, the

many deliberate expense controlling we we're we hiring the be quite the spend. the our that effective also the several in been the macro ability to decelerate on in the with terms We And down growth taking areas. across we've spend, to of our overall very account some pleased company we're situation. and into within slowed of in there's down do company And what slowing working and so decided areas at

to will We continue deliberately. manage

You to SG&A we growing grow can much because that product actually innovation focus a in faster slower to our company. rest and and the R&D continues do see of that. continue development, the than our pace costs to is obviously, at we'll continue be

Our with from next Goldman Ng Michael Sachs. question is

have X questions I well. just as

about to reported if more talk up quarter basis. it see double the outperformance I was you the Services a encouraging next Services as drivers bit the things Search next that call the But a on wondering little underlying relates in key out more FX-neutral could helping. and confidence little that's Apple for Ads digits just an First, quarter, in to Services was a just in acceleration bit. to FX it acceleration understanding on anything quarter, basis,

obviously a and between of Apple lot You're MLS investments TV+ deal. in making the Canal+

would there thoughts any So be great.

had we App Tim June June, cloud, correct. in we in mentioned and in was We across records payments the set clearly, the you're an across quarter, mean video, Music. I the advertising quarter in records really Store, In all-time improvement Michael, improvement we've and board. in the seen Yes, quarter. June board. and I AppleCare, expect further and in performance in September the records

improvement Services all we So our saw categories. in

in the And in almost fact the remarks. prepared things of which installed very It from the had to as X go goes more just the million years that through And of us. we that's situation course, are obviously, with subscriptions but grow, And continues we improve users. larger paid to content ecosystem, the for is sum the more providing my financial of XXX high it shows accounts positive engaged very the of a good to customers, a because customers not it's double level of fact really in We paid got and I healthy our growth engagement mentioned to will And think subscriptions we XX for only we that ecosystem. base It's continue more and what September. ago. the of as business have are last results, that our our the we've so is pool our months. accounts to on important customers all more very the transacting

September. so things us the And good for of combination confidence gives these all

internally Great. a And base. basis you Services hardware those have you curious you I Said opportunity really big X per-device the user ARPU. you for billion-plus think ARPU, you you about or you just where Services an about the it a differently, it's just talked about When that opportunity think Services about incremental and do think the per-active-iPhone multiple a curious talked installed respect? increase whether base was see there's the installed on devices. related I'm Services on users really strength, when a think follow-up, -- in as about that the to Do ARPU basis? uplift about

that customers in more ecosystem. that typically than more engaged Well, know one our own device we are

they would so obviously, They are very I that the they're there's are portion on ecosystem. engaged of using tend that today, a the customers front. free. only have And more biggest that our we we ecosystem know that in opportunity Services lot the say is spend But ecosystem. is still that the familiar to the of also with

time, that content content of paid over to we're them as be able more think and we so to going offering more And better attract by customers.

Daryanani from Our Amit next Evercore. question with is

how you how ones, you into bunch constant other a over can I then And in you we heading Wearables as plus the guess, the know The bit. X touch well. at was into think do there, about September well? Wearables have segment maybe September I about think, Can currency Luca, that? but fairly on as think what's talk growth if impressive quarter? driving X%. a about talked about Wearables I of I maybe do just we

get what Sorry, to? the -- Amit, are you I didn't referring

Yes.

about growth do you fairly there into then how the you segment hoping as was could the And was September I Sorry. Wearables because it impressive. think about bit well? a over talk

Yes.

means more with important It more a And really there's important the us. that China to because, Very a it China. Greater Wearables It that and iPhone. engagement performance owning was the continues that's, like shows in than for China. us quarter the us that good had customers the that is we front, so On again, in market grow. ecosystem June for for very again, more for Greater important are record

of Watch category the every of the the quarter because, of base very the during June new to was continue Apple as buyer we product. mentioned, quickly Also, installed I the to course X/X grow of

is base. the installed that all so And additive to

just it's us. to great a the success for see AirPods that continue great the to be marketplace So in

in direction a are us nearly is large last Fortune a there. in we've Home The size which and Wearables, done moving the become And the for right Accessories. of XXX so business, billion It's months, company. business of $XX things very XX

revenues very become to allowed our and it's and diversify both important, us So our earnings. it's

in could X% up Europe then as helpful. Europe really I growth just That's up, is if the well. at the growth, notable And totally follow

world a think think But developed or you have Europe you sort there's emerging Europe Western in would to what's put a that few if to and understand markets way I in over I markets versus Europe love emerging of as happening well. about there.

at the But been we as we the It's We the well, and the the a good, emerging Netherlands, and did that Europe Austria. of East very side markets into like Italy, segment. number on and India Yes. call, very mentioned beginning had Europe like include France, of Europe. primarily Middle market the of Central Eastern

good for was Europe. So a it quarter

next Our is Piper Sandler. with question from Kumar Harsh

for I Luca later one Tim. for on one have and then

quarters, now, a for take you've down, exchange Luca, or conceivable time you that the had some start your to mechanism next how that many currency us year that foreign revenues Could currency for It's for the through work on dollar your and weakens. headwind. as of will rates So come headwind costs? hopefully

foreign hedge because because of cannot other it terms possible. effectively the to not tend happens try exposures we prohibitively is for necessarily is payers cases, minimizing it's some to We we world that approach have. tend hedge -- expensive. But from cases, the cover volatility that So right we we in In exposure the we it company movements major currencies. around of in the exchange single our the the think every all currency

business States. About XX% of our the is United outside

So say, it's program. very very very, effective a I large and, would hedging

rate. they and over hedges, replace at And new roll regularly. And new with so up to the them very we then tend set these spot we hedges

time. So the tends be the will as and depend to foreign because different points on of that in way to have a rates the program directions the revenue bit are going impact both a in works, spot on moves the exchange time. And we're at therefore, of cost lag where over

the carriers for that. to your you many least have largest last phone, years, programs or whether is at for in Tim, historically, I had U.S., Very for iPhone, Tim, they old your in something rebate helpful. the think Understood. which upgrade, like bring And folks market help a give cash

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to to on provided phone in speaking, it different upgrading get at you're don't carriers. hooking a generally the same to be up want services, carriers phone, But specifics a switching service or would I quite and revealing easy promotion think your carrier. either would a that into I find the

out I those in you expect can think able December there, frame that well. and do I of that time promotions you'd be today the both find as to that cases would

question next Our Fargo. from Aaron Rakers Wells with is

I have well. as two

strategically I'm forward. driver growth all, Major of think about Tim. we Strategically, could going thinking just to the key behind as first you've expansion maybe kind the the how what MLS, seen from help want as I a appreciate terms Baseball, and if the a sporting expansion content and ask perspective you're with Services of Services sports engagement of that, in with in League of of us curious you about kind growth So engagement

original know, TV+. as on with focused you content, We're

all not the little great expectation us great of to bit. Inter is ultimate to the think part about fact of days, going. to how sport helped clearly and sport all is went Miami It's because beating hopefully a we're we're happier giving and in the that so MLS, the are partnership the Messi but -- storytellers with story. And in a And is terms that we deeper. for stories subscribers, get early tell our be a And we could venue us out there original

about we're it. And so very excited

an opportunity that how you've mentioned seen continued looking just accelerate -- large there Yes. And in the growth follow-up, you remarks in think evolving anything in iPhone on I'm your curious, that update that as see forward. we could you that India. I'm a quick mobile about for market curious that Is prepared market? the opportunity

a We we June record digits. India, in quarter did double grew hit and strong revenue

but beating -- course, it's first terms expectation going of opened the currently also our our And doing. stores during in of currently, early it's retail they're quarter. We they're X how

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well be very at largest if it, we second look in it's in very, smartphone to so the so you the still And really -- And we're our pleased with smartphone where really -- I'm we share world. And it's I market. low market doing and think have ought the growth still modest a there. there,

And us. so a huge the think making that energies And that it's I all of in our for putting opportunity -- occur. we're

Bank. Ho Sidney Deutsche Our with next from comes question

AI about wanted just side of Your -- the to I ask things.

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fundamental If virtually are back, every integral product and we we that you that learning step AI take to as view core a technologies machine build.

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tend what that. that's MO, it's to to to come for announce so And and I'd as to us. And about things they like stick you all know, as and our that's market, we

about will That's inflection product? catalysts -- revenue related that Clearly, we Pro an about Vision the Maybe there Is related WWDC, follow-up you very big there. think that Vision should to is there. ramp that talked where Pro? a announcement be a Okay. any should How to you fair. of about thinking as the drive introduced actually we

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We take TD last our from Krish Cowen. will with Sankar question

one, I'm and Number of curious given I as kind spending, Tim, macro number to them quarter. about, record on think weak how switchers in of well. two consumer have the iPhone, of about years? can it how you mentioned Is longer, the replacement demand a is the you quarter? linearity talk the a about have shorter bit cycle then versus for iPhone similar, And the June And I during of iPhone? follow-up. little prior the

-- we our a for very can key of -- and our results to to at a we it our experience to the in and the a switch ecosystem results and And the more there. that them. quarter. record. and continue more Greater in Switchers people part set offer of because convince try did We the set particular, China, of heart were record iPhone We was

so think switching us. for huge And opportunity is I a

so the announcement In about year in ago I results is cycle. iPhone SE quarter. upgrade announcement would upgrade terms the year-over-year, in year the quarter, difficult iPhone SE on going to think very with the about the you what forth, of think the have you if real ago it's and cycle estimate the say, to time

And about QX. viewing a see we we're said, so that a the But quarter, provides how in iPhone headwind accelerating Luca as comp. he QX, on September the of bit talked as

in foot been for on is is do of year basis? retail you year have for sales footprint open question final a the retail about June my then large the of your or a And you your implications half seem to quarter Tim. retail helpful, seasonality stores, And on the there? stores How and many obviously very and a Very over the it. have traffic think now. trends how back this Got

I'm our sorry, you talking are retail stores? about

yes, your stores. retail Yes,

part demo competitive -- you be approach, opportunity launch will new The in our it Yes. and with us the a stores. if retail, of advantage a the key and people so to many and product to such Vision it's key a at look It go-to-market will Pro. give

so in many it. advantages has And it

more stores. we to out roll continue And

stores As last know, a quarter. lot we we go just of into. opened that India in X We're have out don't like Apple you still that countries would -- there's there to

it continue to we so And provide see we can how and there. market of a that as to go experience part we love key customers the

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

today's Once do again, your participation. conclude We this conference. appreciate does