Apple (AAPL) 2 May 242024 Q2 Earnings call transcript

Good afternoon, and welcome to the Apple Q2 Fiscal Year 2024 Earnings Conference Call. My name is Suhasini Chandramouli, Director of Investor Relations. Today's call is being recorded.

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

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

and the an revenue Suhasini. afternoon, record These Spain, set of everyone, call. joining Today, Good for East revenue India, We Apple records in more as in than quarter you, Middle a for Thank Canada, dozen as $XX.X $X.XX and thanks countries Turkey. include, billion EPS and others, of Latin regions. well quarter. the the among America reporting is and and records March March

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for year. quarter was X% billion, good $XX.X Thank down afternoon, everyone. from you, Tim, last Revenue and March the

of last savings cost we and to operating gross had Services by exchange offset partially quarter was billion and seasonal iPhone revenue by was on gross due thanks guidance favorable gross by year-over-year, income XX.X%, are the driven devices negative billion, XX.X%, challenging customers sequentially, costs. cash unparalleled flow of products due set that to all developed an number favorable of impact partially high driven record our was margin with Services points on performance points $XX.X installed leverage and Mac. primarily strong mix, the up of midpoint new expenses geographic points from margin a our the $XX.X at year-over-year. satisfaction and billion, and revenue up mix XXX segments. Services all-time loyalty compare year-over-year Tim of strength results. basis a all and Operating was billion, leverage. billion. earlier, $XX.X reached XX% Products Company points basis markets. across XX Foreign and of loss who a Products up XX.X%, was an down was XXX margin X% of were to from March Net our and products, which up favorable both basis $XX.X by $XX.X emerging described customer was XX% to offset and And offset $X.XX basis diluted down by mix. XXX a to base in more partially record, active record sequentially, our at EPS high all-time year-over-year was range provided quarter

flat year. categories. almost now the revenue year-over-year earlier. our provide impact, detail each revenue revenue from Tim described this me onetime for for XX% ago iPhone last due $X be iPhone $XX of roughly would a more down year that to billion, billion Adjusting was impact Let to

top-selling quarter, iPhone installed and around all-time models a base world. high grew in saw as active segment. And new in during the to smartphones the every the geographic total we Our March iPhone many

billion, Japan. reached continues U.K., recently loving MacBook from very Kantar, survey recently family incredible latest Customers iPhone top-selling MX $X.X Mac. Pro compare by driven to Mac was $X.X model grow iPad was China, to France, the customer the revenue, of strength being At a the and of of U.S., the iPad all-time Mac the billion XX% of XX% at new against are be continued the year. the iPads at to has with high models. all-time during XX satisfaction with measured iPhone during launch the reported performance U.S. iPad as the year-over-year, face And customers. satisfaction MacBook the Germany, according fact, half iPad in MX same base buyers MacBook and to last quarter Pro urban purchased Air popular an from XXX generated and the was MacBook in And for new and Australia, at the Research a XX% our to challenging by installed revenue the the Also, is X% the base an of our tenth powered year-over-year. were the down our half installed iPad the the in time, generation Air Air customer high, customers chip. U.S. Mac product. AI up an In quarter continued to were new in who

AirPods a was high. to paid Pro new provides in record the the total I revenue as $X.X with satisfaction devices generation, a Apple of difficult purchasing XX% nice sending a base the strong XX% strong almost Watch was customer continuing the Watch as iPad a of installed we compare. latest from down of double-digit Services, at X/X the In XX% satisfaction SE with new installed customer to Apple and the the Apple the for continued all-time business quarter Last base measured accounts our pace. This to paid of active Home ecosystem. Both U.S. In and engagement mentioned, year-over-year reached to revenue at the we accounts to all-time of grow growing an and customers year, U.S. Wearables, launch during growth all-time XX% accounts launches an billion, services addition, the to customers $XX.X benefit product, year-over-year. Ultra. new report the growing double indicated due growth. reached being year-over-year continue Watch Watch the new of future Accessories billion, had And attract And first second recently transacting in the Research a subscriptions increased with XXX from continues customer paid for see foundation with our showed high, digits Watch

subscriptions services years had billion paid We on X number over than across have only more we the X platform, well ago. the double that our

the and games Apple quality services, shows to our We TV+, from on creating new new current countries Arcade partners continue to Pay. for on improve launching of breadth and great additional and

Turning to enterprise.

Systems, more largest PCs provider, health In drive and enterprise clinical Our apps for productivity and product customers organizations recently care launched transition of We continue like and to thousands last the life. native the the products to since customers customers investing health of the the spatial world's Pro to in enterprise Apple electronic Mac record app computing amazing many to been innovation. leading for have its invest embracing to in use. And more Emory MAC. see this new quarter, Mac, Health launch to medical care, easier Epic for making it experiences Vision bring

emerging portion cases. enterprise. Taking we special use compelling raising opportunity We many the team a at computing step couldn't back, aircraft immersive a be about real-time to so at to seeing for are Airlines collaboration From design KLM excited in Lowe's. quick more look was markets. when during our maintenance engine We company headwinds. training year, kitchen at having performance to particularly fiscal less spite some the prior and of in strong X flat first our Total roughly the week were momentum year exchange with half foreign of our period in during pleased sales We the of revenue

record and in Latin in As America, Middle up first $X.XX, several and growth results, half gross India, Indonesia, last EPS countries with year. the including a of double-digit from we margin, East, of half the diluted X% These coupled records Turkey. said, strong revenue first and levels drove Philippines Services regions,

and leaving the in with cash and program. debt, $X.X billion. in position quarter our sequentially, securities. capital billion debt $XXX with and ended $XXX return to total commercial was We paper turn now cash We me repaid marketable Let billion us of maturing unchanged

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

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

has we billion continued additional goal now an business today neutral future, we have to maintain our cash over our of in and the into the Board getting repurchases authorized Given confidence share time. as for $XXX our

record to the our May plan continue X% for XX, done XXXX. in shareholders annual dividend raising per by share also the forward are we to for we've will years. stock, of as and dividend XX, $X.XX on as last XX We dividend increases common cash going of to be payable of This XXXX, May

the into information referred we today quarter, outlook today from macroeconomic call. I'd to like color the we of doesn't are types the that worsen to which what the projecting assumes at ahead review move the we forward-looking The Suhasini As for our the June outlook, that of providing beginning current includes quarter. are

single about total exchange grow year-over-year low We of foreign expect X.X a in spite points. June our revenue to company quarter of digits headwind percentage

business rate of double our Services expect digits And grow we at expect reported half iPad the We year. first digits. similar growth revenue the fiscal the grow we for to to a double to

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

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

to XX%. million, tax impact investments open our to OI&E around that, questions. excluding the call of $XX minority let's be to the any and expect We potential mark-to-market around With be rate from

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

Sachs. ahead take go question will first We Goldman and from our Ng Mike with

I have X.

a have the I'll confidence kind First, wondering then digits Services single outlook was And momentum, of better in quick product quarter? the the expected through guidance, iPhone, on was what what I the assumptions, around than about run I ask could you of quarter follow-up. you gives the growth. June if like just low then revenue And that? for some

Mike, it's Luca.

single for the company. is to what outlook, we said grow digits the total low expect we in On

June what is in rate digits. double our mentioned similar Services to is across geographic very Services, broad-based. done This had grow very It's strong records to the fiscal the performance color segments. quarter. seen first board. double the half year. the expect we've also iPad that we've grow at digits in we're And providing we In mentioned several We categories, we've several in of that should that for We've a

is subscription both and are a growing. are strong and well. developed And going accounts markets. we've growing also, accounts digits. Transacting Our really emerging performance accounts in double seen Paid paid business

Services pleased very the way with the is So going. business

and we've AI center, expect billion year? more few historical to Great. cadence as and we $XX about data last may wanted split AI, the in changes seen facilities? about have changes that Apple years And I of per how CapEx ask to between to should about into leans the the generative billion historically tooling, thought to any we Or $XX any

Yes.

We on pushing about many, every innovation very hard are front, gen excited AI. with are that been and obviously very obviously opportunity doing for we've the years. many We on

during years, billion and research Just we the last more $XXX development. spent than X in

have model investments we front, a share the CapEx and the partners. where suppliers them other of of our bit ourselves. on with a we some know, you In make As we hybrid cases,

some and equipment. investment, suppliers On side, tools cases, do we some make purchase the the of manufacturing on our we the manufacturing In center of the data the and something side. similar

we along for data We same use we and continue then model capacity the going has worked and plan to well third have a from parties. us It's our that lines own forward. historically, center capacity

Our is next Mohan Bank of from Wamsi America. with question

from app choose Apple. but experience some DMA? early by to Apple on you changes You've days the EU follow-up. the the also hand, and dilute talk this Clearly, driven developers open And these can in in app I security of are to choose can third-party from to implications about you risks a third-party terms these one poses stores? stores. which seeing consumers Tim, up developers had lower have the What payments

as probably really just question. European March, know, alternate It's to et you cetera. early and the answer implemented We in the alternate stores billing, Union, the too in app

to we're security So mentioned. while focused user the that on and complying impacts mitigating you privacy

that's our And so focus.

on you gross product margins, comment if I the a bit Luca, wondering step the And could sequential Okay. was down.

more more down pressures. behavior Any on all Or starting Just trying broader and could some mix to mix you across color lines? customers inflationary mix some across lines? at a leverage. noted product get the if mix, product the to are of share color You this is customer on if given

of basis, role into yes, Obviously, holiday a had It's sequential typical a move fact mix the more we as different down. quarter. quarter were we one. that leverage On we a products the than slightly big previous -- from the plays the primarily into a

we within haven't So say, mix in -- primarily in I particular. of we anything haven't seen mean, leverage a anything different product and different would categories, the products. terms seen I

question Woodring Stanley. is Erik from Morgan next with Our

first Tim. one, Maybe my

because in obviously your different times. the around multiple a driving mentioned you this AI ways upgrades about You've cycles. haven't which just is been I'm how monetize technology can excitement Apple big generative curious in software product thinking factor historically,

you replacement different? And so could on that, be angle Is there AI have be color please. could any share I How services impact Any that potentially can thinking. follow-up, cycles? then that a you'd and

a want announcements, there. I generative the very products, set we believe advantages our across ahead. have that that talking weeks as we and it front about in of we us as more to opportunity we get our that go be through apart say obviously. key And would don't AI I we'll see just

question. gross headwind have Wondering we follow Luca, go collectively, kind products into your seeing a There's all rising? at help these a rising on on you that falling? components about to us, tools the commodities costs, take costs, mitigate and Wamsi's margins. you try just have they comments some the broad do you to of to Are product Okay, if if all, very costs maybe at could all? are that What then, input rising or back at look your of fair. if just if commodity and clarify for concern costs up And rising step

component us. behaved quarter, and mean, to costs costs favorably Yes. I commodity during the general last

and several this for think slightly period, starting seen the quarter, there's during memory have general, are mind which so that quarters where XX.X%, last well of I that us. Commodities gone up. to obviously a in They've are haven't the been front, in up it's cycles, from we decades. prices margins. always the reported only March possibility. behaved company not go in we Keep gross starting commodities our but that But very On high a go quarter. level We in in something is

And from good so we're starting a point.

buy us. favorable As ahead the to when are to cycles you know, we try

we mitigate would cycle, try but are for to this feel, shape. there are general, if So headwinds, we in in good we particularly

with next question Ben Reitzes Our is from Melius.

And was Is could wondering ask and -- the the that know Tim, I confidence long more to if China I it's you any gives in again. you've you've from color there question there that I the your visit term. bottom that there there reached been be turning? you've confident continued

when Just any to wondering there. turns have And you the as a there follow-up. if tide think I was color

Ben, highly within China, any a then supply if at in warm visit, if QX energetic. and iPhone. ] and That's an previous the store we you the Shanghai down top of was in we was a And in And was Greater the acceleration the are top-selling our iPhone reported kind look [ for on quarter we the normalization acceleration you there, look was driver that's new if the smartphones, it the a X at opened very while disruption iPhones. that you mentioned urban in I grew of results China earlier. And reception look basis, great and China, Mainland at were from And X QX. we primary before for

enjoyed left there. And fantastic trip being having there I so a and

every long I maintain China long view don't viewpoint. every the of how have great in over each a I goes I and term. quarter positive so haul, very a know the each and But and week. And

that want think there's then this I if you lose a traffic mean, a you investors how to wondering And maybe mobile And it it's have big estate, picture, an may was -- fear a -- a to big from for acquisition out though, is there from a continue just you that carefully, some follow-up, ask and long-term AI your can big monetize picture, doesn't AI if revenue. I my Okay. picture. you to to real basis," on be I how about opportunity from thought,

there's if us you overhang, of continue that's a news estate. concerns makes potentially to to in given big better the that's monetize lot your one and could around the ability that that wondering Just color due of it picture media of legal to course, I give cases. of of just kind think been been the some was about the real of sort And an a

AI, we I and for products. are it us, in we'll our are more coming talk great there generative think I that about for AI both think numerous opportunities AI are that there big But ways we're positioned. And weeks. think across us the and well

Our next question Cowen. is TD from Krish Sankar with

Again, enterprise. sorry is to of know I be I then And but it have would going you half kind But lot. beat traction reveal last for Any Tim, helpful. be or the to be follow-up to both AI just to horse, consumer a or curious quarter, in the about the because Is X I'm want enterprise don't you Luca. spoke getting going how and AI color you're a other? strategy

recently it, enterprise the it. that can the they And there to selling we're on thrilled and preceded what been Our use big focus in, terms in Vision Macs. we on buying to and explore iPads through with added and that, quarters ways quarter of some we and see companies iPhones interest has from Pro

the see want I to so cabin AI-only. in to that enormous enterprise. opportunity And wouldn't I

I enterprise. think in there's around us world great for a the opportunity

environment, I'm of on on The business is standard spending bias hardware is are yet towards and macro has side, margins. question given that I'm Pro helpful. Luca, reason iPhone Got the consumer you asking it, there's environment, growing the amazing kind like for model? weaker And the very a then seeing a your curious still services growth versus the

square So circle there. trying the to I'm just over like

tend make seeing continue we trade-in affordability we threshold understand the see to but the is a what developed we categories and us our sure emerging programs want product range, markets of time. We've in purchases that of for in at -- products. to that those customers And But ability to particularly the interest buy valuable buy I'm at markets in plans where lot of very therefore, reduce best different is a the over financing and the purchase the to trend, to which offer margins, But is over it's product this top in our side, several pronounced. pretty general, are more consumers think not years, and I installment last in solutions years, from we've of general, to affordability the over the gross of issues reflected combination several on also several the that in we last fully the range affordable are I introduced think sustainable. that wanting top question. the the more our seen

question next is Amit from Daryanani Evercore. Our with

X on you of about billion allocation, I guess cash now. well. off as folks net have $XX have right first capital I

cash think and about be would you to do leverage Or of over on? do target, be you going taking the I'm shareholders? think comfortable And position, what balance about just think you do you'd cash you net get eventually it once leverage to open be As time? continuing sort neutral this your how Apple to leverage about on returning on it's sheet neutral flow to back at to the sheet program? like free you point, this wondering, more getting on think balance some is buyback taking

working to would and neutral several of time, ago, we hard Amit, I there. out getting put say have very a at step this cash Luca. we're to years target this get net is X

very the flow few years. years, particularly has over the last strong cash been free Our generation

amount seen that allocating you've year, this as so to increased we're the And buyback. the we've

years, For we couple $XX billion. doing the last were of

billion. Now we're $XXX doing

to take time. get Obviously, going see going there there. of in going that we let's there, structure to reassess optimal when company So a will when considerations get number and we the then is are at while the point be to what need for first. we're at capital And a look that to we still. there's It's

-- China are at I declining growth more Tim, Fair notable. step in back least driven talk your from That we're macro China. on still think Could declines discussion year-over-year enough. bit, basis you in macro Maybe there? basis more I really around I the aggregate. these are seeing, you would Macs a be Greater in numbers And If and it's do a annual China over China a at go to competitive think this that then is year-over-year about iPhones in what anyway. helpful. or you figure just it's I back? trying least seeing mean, more or comments driven and decline

I Yes, tell what seeing. can we're you only

don't myself $X billion this about did driven an before in iPhone, QX, well, that. adjust present acceleration other to fare work was that we China didn't to as so clearly impact That means there earlier, saw want iPhone was as for I talked I'll steer so do. from the What and by of so grow. products an Mainland economist we it clear have and we And we and

is has last think through competitive been world. most and I the quarter it the market in

And people middle cycle, We a a store XX-day So from back there. of and than kind latest I to is moving believe other customers. I have can wouldn't that it the opening -- class. of lot the what the very customers and you see quarter if you well. serve step say that I've last try was over of before see anything but that. happy I as lot in And that there said the well into

very And I continue so to feel optimistic.

question Vogt is with David Our next from UBS.

together so have to you the them X roll both. I'm guys going

you replacement math, iPhone is what trying said, I'm all into based just the a if some year that's changes tooth, cycle obviously, upgrade cycle point while. sort next in the a AI be parse things for do the or Tim, of again this outlook and through devices of to just context digits this like to just of And malaise June Is little later for that in business mid-single the Luca, it looks down of changes And really the this said, going this are long that terms it given timing maybe more outside being on in new a what is demand of year? maybe the the pursuing? at case, of bit to going you sort And of quarter. So Or quick a in the drivers demand the is about how for we we've are competitive it and because in what been of you China? And maybe obviously, the bit issue you really the receptivity landscape thinking forward? think the an lot is a see consumer quarter. June initiative companies equal,

our do of see or I generative AI, a the devices. with vast key our I've opportunity, majority devices with as before, of all mentioned

the extremely but look product if and or think that's guide level, I so, don't quarter next at so within out, optimistic. And we the not that I'm you

And kind it. of how so that's view I

comment I'll of portion Luca -- on terms it. In the of outlook let

results think and iPhone, back I flattish on from this QX previous though, make year, you our on the if would be adjustment step iPhone. you

how that's performed so QX. in And we

the expect on expect total for We the outlook, single what expect said grow to iPad to I'll David, that before, grow only and digits. color double in the We and low digits. we're repeat do we this we is services providing do double Yes, digits, grow quarter. to

report I'll For and then let X months from the assumptions, will make rest, we you now.

question next JPMorgan. Chatterjee Our from with is Samik

a as growth for well. accelerated first Services have to the XX% I XX%. growth your one, Maybe from couple

first year why think guiding If of you Because or where you into that for you're can is of as the see next really which to sort sustainable the drivers bit of quarter? acceleration? did the out of of dig more I it services about the next averaging we half sort And quarter. believe a parts the more

quick not sort I So the what have improve the sustainably of drivers? a a And why more were as follow-up. just go year? the of have we remainder it curious through bit

of on number a Services. things So

strong. was all, the very performance of overall First

Services the I our the those relatively Services earlier, well smaller set cloud, there payment of our records. do because markets, that in and business all-time across developed our also in we all revenue fast As all-time very video, categories in some like said Services scheme see are records many Records world. are they services, emerging so categories, of growing both are

we're about very that feel we the good progress So making in Services.

As they the if look you of ago, we a last the year. go growth year improved rates forward, I'll just year during course our point fiscal that at out

business rate we in go I for become that So still half. to similar we more mentioned, in grow bit challenging as first year. in to June the expect But the the comps what through done is the we've the as double Services general, quarter a digits at very a

of Got it, market. you're got would thoughts market, of in India maybe change in taken it. would the And changes you undergone manufacturing some to Any seeing that for my continue expansion you've the follow-up, retail in of supply helpful. that make market. if more momentum retail to associate much with sort market strategy that about your you around Obviously, records I new or can strategy ask relative itself? revenue or How the the terms of that be you or specifically in

did digit, pleased It so revenue was We double strong new March us. record a grow and were Sure. very with that. quarter we very, for

said I've as it incredibly and it's an before, As major for focus exciting market I a see us.

competitive. produce the In operational to be side, there a point side there. From producing view, terms chain of to of are or pragmatic supply need you we

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call China, rapid I'm other regularly out growth in you about emerging not to the ask going but many markets. all

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variables value of of But there. so work price for we're a in that the And all products we delivering. number and we our there's those,

And so that's how we look it. at

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commodity that June about I the cetera, Luca, March for you're mentioned for believe environment for Can the quarter then the on pricing was year? you assuming the talk et maybe commodity what for and favorable. quarter, pricing you And Great. memory, full

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Foreign exchange will about have of points. a negative basis XX impact sequentially

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