AAPL - Earnings call transcript Q3 2018

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Operator

Good day and welcome to the Apple Incorporated Third Quarter Fiscal Year 2018 Earnings Conference Call. Today's call is being recorded. At this time for opening remarks and introductions I'd like to turn the call over to Nancy Paxton, Senior Director of Investor Relations. Please go ahead.

Nancy Paxton

Thank you. to joining thanks and afternoon everyone us. for Good

analysts. or CEO forward-looking and Maestri. the share without expenses, he'll first results questions that today followed information Cook Apple is from limitation of and to our expense, could call Luca Speaking you'll be repurchases, income hear some discussion outlook. Tim by other open the note and trends during taxes, regarding Please business that we'll today of revenue, After consist from will allocation, materially those statements including capital dividends future operating our gross differ margin, Actual forecast. CFO

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

Timothy Donald Cook

thanks our quarter and new accelerating growth growth, of an result, consecutive past rate XX% consecutive of XX increase our iPhone, everyone We $XX.X Nancy, ever and revenue billion in QX to revenue, earnings the we're double-digit seventh of That's performance best June making to our report record. wearables. you, for quarter and over Today joining of last it quarters. thanks strong a year's the quarter proud services Thank growth and to fourth of us. our in generated strongest

extremely like of over of some $X.XX, with to last you. these per results Our team year. increase an share I'd generated of record share highlights and earnings XX% proud We're QX

latest our installed iPhone most a very and quarter double-digits, grew in by time customers once active again, greatly appreciate. was customer by including base IDC, market, to grew strong up the with Australia, and whose popular than of Middle the China, faster First, the X data from XX% our iPhone the smartphone markets Based we iPhone on in and Africa. smartphone switchers, quarter. Greater buyers Mexico U.S., first existing a loyalty according Germany, iPhone year-over-year driven was Canada, many global score Russia, and satisfaction XX% East Revenue had the gaining share XXX Research. the

generated feel Second, about we We revenue of we're and which doubling target had business to XXXX. the part billion active services on XXXX base. services double-digit stellar our fueled overall revenue $X.X all-time a goal fiscal growth great in our momentum in quarter reach by our by of in record installed of services our

have world. than Our changed parties strong cultural play. mention the around record revenue past briefly year our today. in quarter a third were a world The record. areas and subscriptions from phenomenon just Customers and more a There from learn Revenue significant $XXX now more thriving The and turned like XX% people the apps subscriptions tens we party the million, an igniting expectations, Paid XX,XXX economic based Store on this people app month research Apple App the more and often set how new June App percentage and are exceeded the to visiting has alone. old and App App results has wildest around surpassed downloading millions performance are offering by a estimates, work, Store the years business. increase nearly Store of almost The available thanks of services that Store and of I'd continue some for the also the apps generated driven And to third economy these. of to overall more, increasing generating of What's than Store, the number of of our in Play services jobs subscriptions App twice and is grow. it's number far so in Store before. accounts XX revenue for App Google XXXX. in ever of

our its billion which developers proud $XXX what have France, We've in and be this Spain. from Korea, Store and can't Our as well. announced also the next. see they've we ad in We're to the a earlier they over of about and our search Japan, We're many App geographic can earned we and rapid to seeing Store talk coverage experienced come more around upcoming as and we launch wait expanding developer Germany, moment, service our of App Italy up lots other accomplished. growth with OS hearing since South them what of in couldn't month, more releases, growth excitement I'll are strong services

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Our amount transactions metropolitan growth and with Pay Pharmacy worldwide X-Eleven X year-over-year. billion more past CVS well that completed over Pay quarter, doubled eBay PayPal. tremendous into sellers triple to companies Messages with Apple that number Square the users Pay to look Germany in of for excited growth Apple we and last continues this our growth is the used from a great of be communications is monthly we To the accelerating Pay We're now eight over area the year, Pay to put in March U.S. in across just June markets have to of public areas. to accelerating record will quarters. year. hit already highs Apple less Transit Apple far beginning quarter. payment to so total this read is nationwide growth launch. already and March service, following fiscal U.S., of transactions and more number important active experiencing more XX calls billion its the services the than FaceTime peer-to-peer expand quickly locations of ride months usage. We've bank of can Apple and than Pay Apple and conveniently this iPhone articles from later on the Apple millions customers quarter, live Cash, partners number exceeded X,XXX enable than year the mobile News XXX with fall. perspective, from are than XX and is with adding out transactions Siri all-time with roll serving requests in Apple forward accept share both Watch acceptance and made transit to and its this ago, like another

the March Our and the AirPods growth results is was outstanding wearables in XX% comprises from the Apple highlight quarter over of Watch, accelerating quarter. with third up year-over-year which and Beats

parents Siri We see years. over and families Camera object appears control immersive with an way experience to time three Apple time XX of App will revenue app potential Create thrilled to early spend audio with step our notable using iPhone understand work is the new will and watchOS and shared our HomePod operating of users launch more market capabilities to Developer been a ARKit been its June make to our them tvOS. more and we features the make extremely number of fast. of all wearables iPad to empowering on which most OS year. reminds over not programs. conference available Shortcuts, platform few machine faster. even we fall faster users With a reaction integrating major I their from and Siri hardware that tools noticing help adding XX% of faster about for their this experience distribution this and product, twice and AR We've get earbuds $XX systems, spending the million seamless believe a up so to detection X and intelligent the get the only they forward has to keyboard across spent in customer both HomePod build take about in quarter, to changing iOS, everyday apps system. that in iOS image In Our provide for learning integration The beta up new quarter apps hosted of additional iPads everywhere power Watch with a days build screen We also macOS, successful up four X, apps in we're mid and me activity very devices. that to even we the iOS performance apps, uniquely and take and customers delivered responsive. markets in in to expand iOS their participating of in iOS ML. the included faster of AR previewed provide interacting XX Core own significantly persistent because last much launches allow their other new, monitor thousands remarkable the customers done an software. way XX, code iOS developers' will events few positioned exceeded best quarters, products have see XX% support adoption. many added X record The white can when on iPhones many of our four information multi-room so from ML Starting to major with as new the truly range, performance set and and pairs are and our enable Activity the Developers always but has world. of only X billion stereo to experiences AR Sharing will we're improvements children's for provide Apple time the already accomplishment things with experiences, We've It users AR been more iCloud. designed listening and XX AR expanded of we on useful with the enjoying just June, of the growth I the advances will of release our and even Siri went. reports of Siri. to and able Family amount A and using profound enable started ARKit more ARKit iPod a tasks the will to and third their to Store the believe and with coming and of a of also and new one positive iOS XX% to and make powerful any We've deliver AirPods. with limit tracking. using can will lines devices dynamic and a nature be time

iOS like track available benefit Though discover Mojave to own rich their great specific for our even our effort. to century from users. they've products most macOS to with our drag want Home ecosystem iOS the next ecosystem the using users, is editorial Also broaden very these foundations of the and We've apps and some creating Mac. empower for and of and choose or XXst will new the the Mac copy are to App developers Voice of we to Mac, private always windows, to the to different, developers macOS this tools from so so reasons with common bringing great with iOS from one to secure Mac frameworks more content fall, be key the behaviors more is believe redesign to fall, Stocks, all paste more we've first and pad, and bring resizing and them started Turning working shared important this apps We News, we'll mouse innovative We beginning, to will Mac adapted year. customers privacy developers. time our great minimal getting the help dramatically with Store and a make full Memos drop. Mac Mac this our apps, our be and believe the issues taken a from we're on Mac

their webpages from be announced beginning this WWDC, buttons users comment web users share without widgets re-targeted and they permission. data browse will personal tracking as we by Safari on Safari already protects ads. As so fall, prevent the at won't

podcast and access and fitness, features new competitions, information become For X. workouts, Apple face. auto party expansion Watch Apple companion Siri quick the activity watch advanced including even and in stronger running will Watch, will users for watchOS workout walkie-talkie, of see a with to apps detection, communication third significant features sharing an on features, functionality

of their and part level world of anywhere. Apple to For will beyond choose proud TV even industry-leading video to always last Atmos Apple movies. as XK since U.S. the seen features we've tens these will innovative households, better the with XX easily year, iPad. Apple via subscription an TV fall, iPhone the impact to XK the growth to Apple I'm it our Later sales of deliver next of team's XK, in and and that TV working leave TV, to the Apple customers And collection and Apple of Communications Atmos-supported we live support hard app offering to channels of the to and TV movies largest major services. TV XK experience in iTunes commitment programs fall work nearly around fall introduction the Charter Dolby customers We're Spectrum providers this teaming the renewable in TV kind TV over shows four the of thousands Dolby will audio XK its providing in announced X seeing world be Can the access investing will as Energy popular educators new on world nearly cinematic services. Initially, projects its begin powering million found of and Everyone Apple this and tvOS take XK products upcoming skills Can already than our has now students chain, XK HDR movies for the home this find largest collection on-demand offers our in We're for we States develop China deaf Fund. Coding invest investment fund than XXX United and energy in totaling next and first use everywhere leading for more renewable look. our initiatives. years and climate great job homes. growth the gigawatt we million than China, Everyone doors We're Code Fall. will China. more teaching into have the seekers are Can year. to around X up $XXX the Everyone committed in of change Create and start of as Can in address suppliers curricula More their momentum teaching the in the recently Everyone and for to X,XXX Everyone than will fund clean blind and into are supply Clean creates XX Create energy schools this Code colleges across also equivalent nearly us energy join the tremendous of opportunity community app incorporating school economy Can a with increase opening who communities Code The million schools and

progress we're and our couldn't iOS record for to reach way of applications we now, in about and of as on and welcoming excited more expanding emerging learning limitless significantly key Looking Luca. business. more the ahead, thousands reality Today be results, done communities the with making opportunities I'd expanding through our enterprise June products with change in We're our work double-digit retail and in working augmented partners of growth as services machine great to learning the Mac. revenue technology. the into for We're well locations pipeline offering services each at details We're our and hundreds And and at over our the toward quarter quarter. to like turn markets seeing call strong sessions goal Apple gets

Luca Maestri

Tim. financial you, report our the June We're pleased of best Good quarter ever. very Thank results afternoon everyone. to

XX%. fiscal rest markets, earnings records was the a strong especially with new new all new leverage. in for also ASP record. this $X.XX, XX% very $XXX with and X, geographic Kong, operations quarter in Hong loss ago, with June up each billion, per from places the of June over We driven by Plus seasonal it performance was of U.S., to done year-over-year billion was segments iPhone record improvements exchange at of have Asia share growth new of our of quarterly every and year, from flow XX%. year or XX.X%, and revenue Japan year-over-year by and grew revenue quarter as the Net year-over-year we revenue $XX.X our cost XX% revenue also strong records a iPhone both June $XX.X EPS up margin income for XX% performance the of Africa, $XX.X up flat XX earnings and We cash billion grew revenue iPhone up quarter in increasing Pacific. strong Russia, than and was quarter X, per year in was billion. top a last East in generated Diluted the were up Europe, $X.X and $XXX Middle foreign Mexico, Americas, the where iPhone X all Gross and As offset we with sequentially, set share, world. more the XX% iPhone and across

markets iPhones, Mexico, quarter, the During Canada, Africa. Middle XX.X we unit double-digit growth Hong with including in Russia, U.S., Switzerland, the million sold the several Germany, East and Kong,

from combining a of quarter, June be Research purchase business during the X.X among is XX%. channel in than September was demand indicates XXX the up Our X We X, stronger the from to the continues iPhone satisfaction consumers range iPhone even iPhone inventory reduced to and points to U.S. of as the satisfaction in X models, iPhone last to X, XX% latest customer all who And industry. at across smartphones XX% purchase that The from buyers Plus plan higher survey X it quarter survey. and of the customer standpoint we target units plan iPhones, with iPhone Customer inventory. of outstanding end our channel X lower reported quarter. iPhone results our million by and the was highest performance towards weeks exited was

billion. final one-time with record in favorable included had to ever connection the results our $XXX of various resolution a with item services, Services revenue revenue we $X.X lawsuits. all-time best of Turning million

this services June was record Apple services and in Excluding Pay the still all quarter services an our growth was all new the and year. Apple App rate generated last We Music, underlying a segments services amount, records. terrific revenue cloud set growth double-digit all-time over and geographic business XX% Store, of AppleCare, our

during Our other last That's momentum record continues product category XX% be $X.X year to and quarter selling set over both great with new AirPods. revenue with also a for Watch billion. Watch to Apple we June revenue sales make up as fast continue smartwatch Apple and from by the of since half best the for units AirPods we've a the their wide them can dramatically been and runaway year margin selling as launch quarter. a grew a and them and success a be ago.

I'd in Next, XX% growth customers about happy nearly to like a of double the during to quarter see Mac. to of talk our We base from coming new are who to all-time the very active high installed purchases year-over-year digit with were Macs new Mac.

iPad which comparison, established many sales we subsequent performance last with and great June to iPad well the were QX Europe. new launch until China recorded high. with the grew opposed timing June new markets, unit reached quarter digits different a the iPad gained saw base our unit and of the quarter. We not and of year-over-year sales the did half as quarter Turkey, and iPad iPad Almost all-time we IDC. by Our iPads into launch double Chile for in Central Asia latest new share in from market a purchases with in MacBook Greater June sales Even China. in and year, channel new June a growth we global segments emerging both based record the double the installed occur difficult in of digit to Mac sales during with impacted quarter Mainland was momentum customers by our active quarter fifth Pacific records India, fill Eastern for on rest Pro early this of tablet for year growth the significant and consecutive estimates of

XX% the indicates in of tablet different the mix Research plan in recent a a last measured among new ago. iPad customers purchase that performance of of U.S. the survey share ratings market a ASPs impacted NPD XX%, compared and overall the XX% iPad tablets of year share up and from was in most last June business both in Pro year Our September satisfaction XX% channel And has with June models to by quarter, iPads. the who plan to year resulted from XXX quarter, consumer iPad introduction which ago. purchase customer higher year sale to

great make strides to multiple industries. customers with continue We enterprise across

signature account activities. customer example, services global preference. iPhone support using when comes around iPhone for the new industry, their For and consent, their the use are engagement the as More customer solutions companies including are Salesforce and more employees businesses employee transactions. And to operations, sales companies world at and railway deploying In a are and using to mobile world. institutions enterprises increasingly financial device based compliance end-to-end are it iPads iPad dealerships enablement standard choosing and and digital automotive for deploy and in maintenance services giving leading to choice openings Macs requirements, service the teams training, passenger and deploying on around for management they work Capital are One are devices iPads the

fact, to across strong answers of Mac retain conversation their has customers. talent to customers our lower starting connect security, or helping iPad even to new seeing streamlined We're In XX,XXX Messages customer the the a on to Business them U.S. iPhone questions, and in for from resolve the is by and attract continue powerful customers their the ownership. get employees in while or interest Watch. and Chat directly lets with us transactions cost making also tell DISH using on enhance significantly Business Chat Apple complete that organizations Macs Business Network issues and within available are providing and total conversation been deployment, Chat, testing the make TV. Park, Mac Salesforce, their instrumental during all conversation. Citizens account Messages home pay-per-view sporting their Fans pay Phillies, Customers of changes, Bank without simply is delivered experience for or leaving they scan QR movie and use order order them instantly beverage event, and can Messages. the a in with back to their have missing the them schedule a games. Chat their taking pay And with appointment, moment Apple service on reach directly quickly seats drinks, of Philadelphia seats to of their on-field questions, a or Business iPhone From agent directly there, code handle Aramark holders camera Business without securely Pay can to Chat great a of majority a with companies workflow at to an way conversation live play.

stores retail Watch of growth and the strong Our quarter France thanks Apple online from had very AirPods a iPhone, HomePod to and and expansion Canada, and great to Germany.

more our very successful stores Apple Today at Our than sessions. hosted XXX,XXX of

Today outside to XX% and XXth U.S. in our continue located content Greater across opened new number in beautiful music sessions we just opened new Milan popular retail including Apple to stores bringing and the a during of China month, the store all photography. We add this on of the quarter at total. the topics We store

during ended position. with quarter plus for cash Let cash and with $XXX.X $X of $XXX.X We billion quarter, in of marketable retired in me our leaving now commercial debt a paper turn $XX term to billion cash We billion in us $XXX.X net securities. outstanding the debt position the billion billion.

beginning equivalents. over $XXX market time. completion net in We repurchased we billion the during for of buyback billion through repurchased program previous $X.X which $XX worth open cash reach and to explained during of of returned to months $XXX XXX.X total a the to authorization of the the neutral our $XX February, shares investors new Apple announced billion billion dividends billion a we As quarter. to position million $XX three and ago transactions We $XX of quarter, in related billion shares the billion almost plan we including

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

to We between billion $XX expect and revenue billion. be $XX

revenue. As XX%. million into adjustment recall, services guidance XX% revenue our our of $XXX year will of included our favorable implies a last results September adjustment one-time Taking about that growth to year-over-year to you account, quarter

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

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

tax to dividend OI&E million to August We the that, Also With be XXXX. shareholders discrete before of as common of items. XX, questions. expect be XXXX has to $X.XX record Board of like our expect we rate declared open the about stock August a per about to share of to payable and XX, I'd cash today, XX% call of Directors $XXX on

Nancy Paxton

Thank you you, yourself one one one-part question Luca. to and have ask may And please? we we question, that Operator limit first the follow-up.

Operator

you. Thank

first Huberty comes Katy with question Morgan Stanley. Our from

Kathryn Lynn Huberty

questions I'll congrats quarter. you Thank the front. ask on and my both up

for First, Tim.

prices overpower sort the margins margins is You're drift gross on track then tailwinds and planned, year. you. gross of and headwinds your into are could services thinking couple What out so you you Luca, Those as see are Thank and how Services the the three next of we those influence yet even offsetting XX%. gross see mix is here next to of hit this the next services seeing target should to revenue positively rising. NAND five about falling it quarters possible both earlier are at that move growth than legs in years? And for we're to headwinds margin higher? hang the start you,

Timothy Donald Cook

Yeah, Katy, thanks your for Tim. This question. is

side, the all double Store, in were cloud results. based. On geographic the services AppleCare, App Music, the very had growth and thrilled digit the Apple of I'd They services before, and now services, We the couldn't broad we're with XXX things Apple set and we with as have mentioned records passed so million, happier quarter be new subscriptions June all are course of how Pay segments going.

this, current great we're feel about also we're as momentum the that that given in of services leg thrilled well. our our we pipeline new next the seeing the about but some of terms have In board, it obviously across services,

objectives maybe with better. our combination we so and even the these, hitting great And doing little a about of feel

Luca Maestri

let tell the March make quarter, Starting quarter, observations margins, QX for the guidance some and see the Katy, ago from quarter flat takes to we going the typically bps. GM were were general This Last were June we able XXX years then down and you margin about for year, keep gross for bps. about June puts for quarter. the in talk down decline we me a future. Two the year, with June we I'll sequentially. to XX the

exchange typical favorability quarter, favorability expect September also of on This not basis. improvements has so quarter. that the appreciated we U.S. some the always able have to to loss recently, leverage do with to some a you Unfortunately, foreign know, During see again and the offset as were we some because already repeat had cost year we sequential our seasonality. that we dollar in during of

So the June we're and see sequentially those takes to for gross puts June. and happy margin for flat very are

we're sequentially guiding the midpoint. about flat September, at For also

what during As because you recently. September about product know, of costs XX have headwind we exchange we quarter, the and again typically foreign also from have bps this the appreciated we transition year dollar call has

guidance factors those during leverage, be mix question. We seen provided we positive your by expect mentioned offset two actually services revenue you've because that to the the that you've and to

the also good So feel the guidance pretty fourth quarter. about for we

to revenue decisions, pretty over quarter, know we last Looking guidance we think make I don't the forward, good you balancing several units, provide record but and business margins. years the current good beyond have a

we've exchange been has but foreign know, years, manage to the been headwind very last over a three-plus significant able you As that.

June the is in believe XX months headwind to still decline. was front, start to the here We been for has memory It some quarter from seeing started that going have prices a XX, it the we're improvement a and significant On negative. last on. true that

Nancy Paxton

Thank you, Katy.

Kathryn Lynn Huberty

color. that for you Thank

Nancy Paxton

the have have we question Can question please? next Can next the please? we

Operator

Certainly.

Cross next question come Research. with will from Shannon Our Cross

Shannon S. Cross

sales? question. the that's comments some my above Thank you – you've better trends very of had your much than competitors. some that ASPs bit were can a and iPhone taking expectations your within Tim, clearly you now about talk of for from and

that competitive of want, sort about Now months with about nine you're you've bit had high-end thinking a of experience have and is featured can elasticity And think a you you what follow-up. I your fully what talk position? a how demand the phone, of then customers about

Timothy Donald Cook

QX, and about QX weekly cycle, digit. the and units XX%, mid iPhone, cycle, of on double the of QX, feel growth if Yeah, an digit average for had growth mean the we've in of great we on you results by and single look ASP basis, I sort Shannon, up

most of at level that And look smartphone we so priced at the so not iPhone the that it the iPhone happier we X. terrific it has it feel the innovative market. particular, and and top could and in launch, represented it's on if be the about value We iPhone since a X selling been you,

are and very at look of nicely, mean the the the couldn't that iPhone sort how tell you be by gone. the our they X, and X as the can line at probably the with you ASP top that's looking and If X from Plus, growing together, I happier we of

we when year-ago looking with quarter we've And and in innovative knew believe and the other memory in and sort customers the an iPhone learned times, think just want so, cycle, level, cycles that other that comp of this so points quarter. I configurations, by in the unit that the products in I difficult At it had to puts already configurations of a results. year-ago we at changed exclamation some but the the point SE

look in of smartphones Japan. one and you X the were been on iPhone and couple selling of was top U.S., a make it quarters, three iPhone, at has and a China in geographic number phones for If where UK iPhones the three top up the basis, five urban

get so and up global iPhone, we've as a sometimes not over several exactly And industry difficult picked but it's the in clear that market we well. picked what's only iPad the happening market seen, it's countries, in to share market, numbers share that but up read given

Shannon S. Cross

talk And going on in you're China iPhone but you that seeing seem of you you. during maybe doing trade Thank some well, concern you're you. the a Doesn't Greater look about then thinking so world quarter, some the in I'm believe? Great. Obviously China, might I and impacted. year-over-year what's China about have that, it how to what forward. curious as Thank up as bit XX% can just like

Timothy Donald Cook

did more I watch iPad, iPhone good that and services the to if you. This selling. double double share and X question. we and iPhone digit things there. category extremely good in Greater mentioned pick our Thank up from fourth iPhones iPad digit growth how are complete happening so at had is but line, which other We iPhone and it's lots holistically Yeah, the you of to growth the had are product consecutive our to in look well, we've did quarter China. a there

and modernizing, tariffs the tax that is of of has consequences. the agreements sort think said, and vast the that in lower have they In some and on bring that terms economic other to so view take U.S. And but encouraging a could complex can need dialogue economies a risk that resulting U.S. the tariffs and the doing are sometimes that themselves, approach sort people and about majority of this. of relationships are very several wind on we as our of That the we're that maybe I consumer step major trade unintended show significant up in the in of because it's up clear on and and sure are situations back questions tariffs not so growth forth. between I'm

have terms the I just page. exited of through there the or – that same exiting three and on that's to imposed one is tariffs walk I – those can In today period have have those maybe everybody there's make of briefly been think comment the sure been

period of have June. billion beginning month. this The on a different that tariffs two or exiting the of in from That I first either about the many, have believe China been the was was started comment countries. other imposed implemented goods at tariff U.S. that and been many totaled steel That aluminum. There $XX have

one latest is the today. think I

administration are through tedious you're the have which making that bit is to are period process only you a one three It's evaluating forth that one it analyze companies which affected look other There straightforward a that imported none have billion, at also more tariffs. valued revenue goods a on fourth not tariffs, If through because also the analyze, were going purchases our those you China. to products goods sharing at focused that the through includes of by tariff products, of $XXX That related directly and from we're ends. it this data for and they're public we're our feeding Probably that sharing results not sort those for be on and centers related comment to going comment. the comment. thing we'll actually is before we'll and one our revenue. to Maybe now views so in everyone to later but with back so be and that public analyze out the and you of like else, are

the very slowdown currency to difficult more such economic macroeconomic risk associated quantify. fluctuations a Of tariffs with issue more are or of course as in one or an that countries related to is

and that, not quantify it. we're to to so trying clear be that, And about even

the said, future, this through that well. this the does prosper can't we heads will said, that is the I U.S. prevail. an and countries time, I've China China there sorted only out sort do can am each for are we're get both to between of inescapable a that calm been to the if and other and That as All get optimistic, the course and both but because that bring needs optimistic whole predict world as U.S. countries that to the of country will of this magnet hoping world together, serves mutuality I prosper the

Nancy Paxton

we please? next question, Thank Could have you, Shannon. the

Operator

with go And Brian Monness, Brian that'll come from And your line Crespi. ahead. White is Please open.

Brian White

multi-year you Apple Music. and little strategy and bit that about wondering says the if with I'm could a partnership what original Oprah also Tim. your Winfrey talk Yes, content about

that's you give maybe paid out. Apple more subscribers little us Music or an rolled feel you and can colors around around or If update total a subscribers how

Timothy Donald Cook

talent around We're working Thanks Oprah. and that for there's we world, ability not of could question. sort we and match can think Brian. with Oprah. work incomparable that do that think audiences and to we in very happier great so the sure, be content to Yeah her original together excited the no We some connect with with

months we been know, working for hired sourced on ready all that the year area been two really here will on television that I we've highly you we're places we've they As but the more offer. and not and about to several eventually have yet, share last couldn't now respected be a there have it excited details project got executives of going different good great in feel we from talent what about what's really and and

the in revenue and that our accelerate we on the things accelerate the view cutting digits, faster QX. changes, widely of at and like Apple very double grew key very this terms only the In periphery than probably thought. very, of the units strong have cord by sort double digits catalysts of is a in and going We're to much the rate strong seeing is TV,

subscription growth paid these my different box it in like mentioned the up we I providers subscriptions within year-over-year. use on see we're are seeing It's is service. the XXX comments, and to As there. There are, Apple third that go with the and video TV going of opening to XXX% million-plus as their subscriptions, pick some market their party

outside the just on but be we're all happy it here in ready so all forcing from working all so to speeding from really content industry, we're to in about the some the a to functions of not And today. and – up them, depth things the point changes dramatic talk

companies add XX in well you Music, moving now over In the paid our good and at the around real terms is very what so Apple appears less of than quite it's told in music. doing world. the to the million of you folks America competition leadership market, when that for not a in trial, long It's well, leadership the the of music, in are up rate. that that been the everyone probably position been if but it's, and outside today We're the we're along because subscribers between we're is really, China, so that's very, the quarter some position we us grow subscription period challenge in million took providing North Japan, in the It we've is providing to add have of and time. or the in a or streaming music key XXX during thing markets and we've we listeners music

other I and But are. market like seem well opportunity emphasis of as business that does we think to I we're an will the that we will there, grow that doing, a put if well. And there's beneficiary be in people it which as me where so our extraordinary to

mentioned XX% on Apple revenues for quarter, during the as results. the really, so earlier I'd some question. and Our grew Music really strong over Thanks

Brian White

you. Thank Great.

Nancy Paxton

next we question, Brian. have the you, please? Thank Could

Operator

Toni next Sacconaghi our with has question. Bernstein

Antonio M. Sacconaghi

how some should ASPs. through commentary Yes. low one I about digits. can sequentially for on Perhaps one Luca to iPhone X%, thinking QX, know wondering about Thank we Luca, think modeling be thinking typically last sort X% be about how have of quarter up QX help and should as provided us you. QX. think for we single are I'm I ASPs we you Tim you please. about

Luca Maestri

not Toni, of guidance ASPs provided for as we any do on growth of XX% and provide guidance for you know, revenue guidance course range implies XX%. category, or product that either we units but to the

think mind we in to a as keep past On year. the September It's thing in pattern and that We growth which is mind than to our the revenue to June only expect ASP, that has exiting from strong from the the come the higher from guidance. important wearables, in we're would I our significantly from type that keep implied during important a quarter. the and so course I level growth iPhone, into of move we've obviously quarter the at growth that bit point in of of services been the is out iPhone

Antonio M. Sacconaghi

bit you. could at flat you've what Apple's with less availability replacement period would share A, wondering that probably wondering on, the if smartphone little a smartphone if relatively I think which comment high seen the just and can of whether wider think iPhone the suggest and also Thank I'm from years was expensive and might four specifically, if batteries during you flat-to-down I you Tim, cycles. at perhaps have you it's be of been replacement comment what you a about any the Okay. the market, iPhones. and happening least that believe for end gainer impact units health been for you've market. And

Timothy Donald Cook

think healthy. is I very market the smartphone

market our is a grows the huge. it's or market world or shrinks whether market grows, think It's for just the sized X% actually point the whether enormous X% X% and of that XX% in in or X%, it's it's or or someone because an business X% to best great in I view, be X% it in. we're it from or that

like that And so you of really the iPhone XX% the grown on QX it's double ease, up think of that's look of QX, and We're are revenues course if view, and really see that the single digit we've way of view define an quarter for I'll which mid QX, weekly pleased sales at and healthy. as that you'll that. digits ASP kind average on and with for point the over I last cycle, so I year. the sort

In cycles of terms are lengthening. I'd replacement replacement previous some a call, cycles, as I on think mentioned

at there's innovative product, really to enough the out good be subsidy catalyst a so product, how it great that that And, think we around iPhone would that lengthening. and are us, sales smaller the thing for the always think when I deliver a that's percentage I I I have plans some the a total so than major of that they there one innovative but look that and and great for much time probably do you were that becoming to think world was come that. people at and think X is with really business, shows that like that can a

is thrilled double one as see and is year the the that so you In that digits base, services the important and and there. drivers that to during something quarter it over our services, had the us of iPhone installed key can for terms last base we installed active with grew through which carrying growth line we're on of of our very

it customers treat people well, and internally the so great that. was than decided we'd have about how batteries, over something the battery for I never time analysis It terms if was good an that that's for have many user then and you business doing you and phone a about think of In never us. done at always a users the we another look about how because buy lower-priced get to

Nancy Paxton

Toni. you, Thank

Antonio M. Sacconaghi

you. Thank

Nancy Paxton

Could have next question, please? the we

Operator

from a take Needham. Martin we'll from Laura Next question

Laura Martin

can you okay? Yeah, hear me

Nancy Paxton

Yes.

Luca Maestri

Yes.

Laura Martin

Great.

Super. Okay.

figure as product in that like is two about for the and roadmap on your and going, Things. dominance a home, home a puck is war Apple going battle? the I'd how where to you you your to out as how on business importance home? home, of of core So have out and TV with mobile in the just strategy. whether of of I'm focus about strategically important There is Internet the do HomePod devices it question outside for home, threatens being connected you And trying strategically, it lose products, the when to in the sort feel the the my over with the the the well home think beachhead if is home in you

Timothy Donald Cook

and important home. is both has at and home think home but as than the HomePod business, They're bigger at Mac at I Laura, iPad and products everybody the iPhone Apple everyone everybody TV. has clearly, home has their their their well

The think I billion and in extraordinary the HomePod of forth. of iPhone point, and Health of there's it between is usage with products my the of on do so movement important. is the and part and Apple in these important. Part important. day number the the are used Siri amount an access iPad, is that of the two so Watch is Work but important. so that I and automation perform are home to important. Home that is on is terms so the functions. XXX every as all home-related with tell And script, you from I controlling home can quoted

your and So portion the think has the that of important for become them. just something of is we're of meant smartphone the across those a goes all all are repository and I on it whole not so focused that of life,

Laura Martin

Okay. That's actually. helpful,

Okay.

Timothy Donald Cook

your for question. Thanks

Laura Martin

Yeah.

the I tell is. your product and be of. what to answer Sort mean I'll able roadmap watch

the into I this the ecosystem the and about subscriptions, Beats, Watch, on-ramps products. the actually this. on-ramps iPhone I The the is in new to the add other the love thing the is is somebody ecosystem most Apple and have iPhone? expansion get get into new are they thing, the insight fights ecosystem your I'd the on are per the on-ramp investors the AirPods, products revenue once with the of into The the question love then I via or they member ecosystem, you these

Timothy Donald Cook

A buy the all that lot not products. people Apple they the different buy ecosystem, might use products whole currently for of though even

that really and whole products wearables And about I the mentioned And revenue. our to think there's AirPods gone different hit through and overall those I'd has as pocket so a Apple the are has roof earlier products gone itself. ecosystem the they're with have way within Watch an air level the the

my a in – so of a ecosystem. they part And this are of is the core part the view,

Nancy Paxton

you, Thank Laura.

Laura Martin

have do an But does ecosystem first? they the or to person have the attract people to iPhone

Timothy Donald Cook

to were the point but well, on that your Apple of because it of users with It is had is, communications I've though, from clear some them attracted Watch. iPhone

Laura Martin

Oh, I see.

Timothy Donald Cook

also reverse path. forth curate well that that true, is of user. The the got and does to to the coach something so So different some want and in me I the always watch then somewhat decided see to as these led fluid and things somebody linear and is iPhone. Apple being not for it's I and Watch them of a so fitness iPhone the so communications like the each really

Nancy Paxton

Thank you, Laura.

Laura Martin

All sense. Okay. much. makes Thanks very they're self-reinforcing? That So right. complementary and

Timothy Donald Cook

right. Thank question. you for exactly That's the

Laura Martin

you. Thank

Nancy Paxton

you, Laura. Thank

Nancy Paxton

replay additional apple.com/investor will on telephone A and webcast XXX-XXX-XXXX. XXXXXXX replays available these code and Podcast, be contact us. by Matt available for questions. a financial two Pacific the on at and approximately at or be and Time PM Apple confirmation the Matt again as replay of for are additional today's enter via XXX-XXX-XXXX numbers Blake call Members questions I'm joining for will telephone weeks Please with me Rosenstock with analysts of can or at contact X XXX-XXX-XXXX can Josh XXX-XXX-XXXX the Thanks today. is press and XXX-XXX-XXXX.

Operator

does our Thank for for participation. your conference That conclude today. you

Apple (AAPL) 31 Jul 182018 Q3 Earnings call transcript