Earnings call transcript Q2 2023

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Operator

Good day, and welcome to the Apple’s Q2 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 Suhasini Chandramouli, Director of Investor Relations. Please go ahead.

Suhasini Chandramouli

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

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

SEC risk For discussed filed on XX-K more and factors the annual associated in Apple's the along to please X-K report refer recently filed press release. Form today, information, Form with the the most with

Apple any as assumes or dates. statements update forward-looking to their respective speak of which information, obligation no

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

Tim Cook

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

Luca Maestri

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

over markets line had of exchange on majority with our in we had total basis, currency what revenue year-over-year a in expected. Foreign we results, the negative of constant impact the in percentage five and grew our a track. points On

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expansion First, base future active great foundation of represents for our over of billion a ecosystem. devices installed growing our X

product We continue segment, to category and levels high grow major to and customer geographic of across every loyalty thanks satisfaction. very

all-time the setting each and our accounts Both Second, we saw increased during digits record. accounts customer grew our quarter. with double engagement services paid year-over-year, transacting a new

than Apple finally, current offerings improve the Third, platform, last strong $XXX XXX quality customers We only growth. the nearly new XX great across and we content months Apple years in breadth of Pay believe to available the subscriptions of new on on had showed have TV paid million features the more paid Services And now subscriptions double continue paid services subscriptions we to up love. our number Apple which we from our and Music, the million during ago. three will Plus and our

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supporting Small are proud in the we Business business National the small US, celebrate week we continue community. here to As

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

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

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

we maintain now a of repurchases share, to dividend into our an and We're our forward. net to getting over $X.XX our increases in our confidence $XX Board continued authorized the dividend for also Given time. by neutral goal billion cash annual future, the business additional share has have to we and the today in we continue raising going for X% as plan

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

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

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

quarter For June headwinds year-over-year our gaming. as in similar to revenue March advertising be continuing Services, the expect to mobile growth we to digital macroeconomic while quarter, and areas such face

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

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

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

dividend reflecting cash on today, has May $X.XX Finally a XXXX. on record May increase XX, stock XX, as share the Directors of dividend mentioned XXXX, declared Board I earlier, payable of shareholders of to of per common our

With open to that, call let's questions. the

Operator

[Operator Instructions]

question We will from go ahead first and Erik Morgan Woodring Stanley. take our of

Erik Woodring

X% strong year-over-year a time how versus we us was asking March of I maybe to of shutdowns, around good demand start taking the we Hey, the for should think the iPhone were deferral you. back the shutdowns production Thank quarter destruction we about December the if quite was with and guys. of If question much think quarter the questions. afternoon, you Tim, lot demand? go growth. so the

and seen to that here and as quarter Could should a that weren't iPhone? in buying cadence Thanks. up. And Just we of be maybe how they follow to hopes you new behave? during March the we Meaning, purchase later that seeing deferred have a to customers that able June? deferring of so about and then the are you May, December have I sit purchases purchases they think how

Tim Cook

to we Yes. iPhone relative in of we we see we The Hi, quarter. December for accelerate did them the amount the Erik. quarter quarter to were March whole believe recapture this, where sales It's the to did quantify performance as the but wanted do some levels production hard be.

supply So QX. issue an was not during

Erik Woodring

perfect. it's been important maybe then, mentioned that four market the or you've Thank up, imagine, three Tim, now like country, an opened to clearly for markets you And color. and just follow emerging I stores And having you. in Okay, two new quarters for that others. India

So and and for an you that the why India what of monetization others, market see trends to about to me. much. your such just mix specifically maybe more so material you ensure can a maybe you Thanks that's talk think important the about becomes as business? in do you And India country within have really country how it

Tim Cook

Yes, sure.

in record, business year-over-year. quarterly did a very we double India, the grew set strong, at digits Looking

one more launched and a in So unbelievable. taking us, for and they're been three two just a market, an as and we years our is serve weeks mentioned, is step incredibly in focus great Delhi. I It's Mumbai was Over for off quarter customers, Dynamism you time, online, there, to just India back, few and we've in stores then, vibrancy it a expanding launched good just us. one was the the ago, to start, we quite the a the a major market. Apple ago, there exciting Store and operations

and I there. delighted by we're seeing well a country class, with, very with is we overall. Brazil, Indonesia and the in Philippines, the emerging be of of On lot couldn't are markets be I different had as then markets, of more how with stellar coming Saudi middle a mentioned, and that for the happy excited in a great got it's brand UAE, Turkey, going that's in and I'm Mexico, the records quarter a the point, other number Arabia, quarterly India number records at and I in There channel India people enthusiasm we're a and there. places, to into including Malaysia. tipping overall, We've feel Overall, had set and as partners that really emerging partnering

a general, was currency that it so emerging great the in despite Luca for markets of the quarter And headwinds mentioned.

a these us our share given demographics, the we're and dynamics number great and opportunity see, particularly so markets. markets et the of And cetera, for in putting efforts low of a those really in

Operator

question is Ng next of Goldman Our Mike from Sachs.

Mike Ng

you just of think the all encouraging the afternoon. installed over going devices. It across follow base have iPhone specifically, few forward? very how It's by or the whether base just base wondering was first, the last iPhone across active about about provide you installed little growth about think, was you smartphones is I for good the for Hey, around and a I then been, double growth that years quick I could if record a I good up. to there, Thank And was texture devices. much hear the question. across regionally way versus digit growth a installed switchers. to the And bit wondering, then think

Tim Cook

Yes.

of If billion. base active at $X than you more the look devices now, it's overall installed

QX major each and overall categories. despite it's in surpassed in rather we And each satisfaction particular that's of the sales, This records a across current this product customers. testament quarter, us, set loyalty is that the and As you January asset of engagement declines announced our of know, huge customer And a we quarter and geographic new to in iPad. Mac and segments and that. in we our the for

We devices. this of as rates, we it's this major over sorts so And well and $X asset is base base, these billion a a us. upgrade see as the The quarter-to-quarter feel for view active iPhone the macroeconomic. you back the size that But about we up it great change installed of look at if upon depending rate may things and growing. and

Mike Ng

have how about to devices could those, Thanks. of per user of if opportunity encouraging just color that iPhone better Excellent. may ecosystem. number that and wondering to user be monetization it continue I user And super then Great. number iPhone the grow. may to see those of talk per users words, not Apple deep if increase into you to lack you around the for any the per as from versus also the continue differ was devices was

Tim Cook

really products finish watch the We our that's other. hard that a so so to you whether can it device working Mac, together, in work such on try start design and on seamlessly way or the the one they that and

And so there are the a good do deal this to customer of people on think the out that I been there satisfaction teams and that from have get is design loyalty multiple Apple products. we've our devices, and engineering to testament that able incredible our a

Operator

of Our question from Shannon Suisse. Cross next is Credit

Shannon Cross

Thank you AI? about more than of the day. It for bit you you topic talk Tim, It's can topic question. the seems obviously my very like taking the much. Thank year. a of the

have can ways, say you how you it want AI if us generative give what in think I'm and different see Just your don't to sure where but services. thoughts you know know you take. Thank you through you curious really it for products not going, it, also about your and I on use you. on just but any it I

Tim Cook

the Shannon. for question, thanks Yes,

being AI approach you I there's in product a as that be to and think about issues of As deliberate we comment things. is talked do But we as important you how don't machine it's sorted, integrating to know, and we've And thoughtful on number ecosystem be roadmaps. number these probably very need And progress learning places. and enormous into features products interesting. a different obviously certainly made very the many know. and is of throughout it potential you weaved years for in our

these detection only in they're things crash like there. see detection and out people's great can features, things not saving lives You and fall are ECG, that

it's so remarkable. absolutely And

are, thoughtful as we and so on weaving And it we huge our basis. very view products a continue in AI we'll

Shannon Cross

you. and you about you Okay. tight curious. diversification talk bit manufacturing have very a of in China. network your can of Thank then Obviously, manufacturing And footprint? a I'm shift

have other or and you've of actual shift to Are growth to it's any of going thoughts a more is as it's outside or Whether seeing you it regions? seen how some you. to from you what just these more started you margin So any impact perspective Thank production? China? move on

Tim Cook

chain global investing We're supply the US. the other as countries investing we're all We're truly of Our is in over world. in investing a well. and number

So what and for to optimize invest on best we to products our we'll we everywhere, to deliver and ways make customers. and for can chain the week products learn day that services forth, ensure each based so the everywhere. continue and we We'll supply every continue and look to

are. If we and back despite supply three pandemic we what years our plans will, we've macroeconomic chain has and supply and last of what been about at chip over and performed are factors, how the step parade you the sort the between of look the chain, kind the on horribles, this incredibly of if you shortages resilient, and feel good

Operator

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

Wamsi Mohan

well on in called And Yes. you the specifically were significantly model earnings you. had Do models the December quarter? that Thank see you Pro quarter? than channel maybe Tim, And you levels a inventory Pro follow the see mix in the out And typical? iPhones, do up catch that as quarter March on was I up. on can comment the June for a have constrained. better mix here renormalizing you and

Tim Cook

Sure. on basis. that we and inventory sales at quarter, have we forward And a do some quantify had we the very the channel the levels. the did of comfortable channel March set hard with in to we're right we obviously believe Wamsi, amount recapture It's but to

but think do were it's some, quantify we difficult there it. to So

Wamsi Mohan

do inseparable do more the most Or more ecosystem at around look a Okay. mentioned payments us? Thanks, Tim. standalone expansion high follow ecosystem Where a even as about many the Tim, you you Buy and making payments savings devices yield Apple account. recently, And Now so is revenue see time? from services the Pay Pay up, you launched Later And you. as it Thank over opportunity? the you

Tim Cook

have our we're live helping What financial products. we've day watch, where like like very fact our financial no so is on which health the and focused that you better has, yield. Card people a that the sort payments attractive on we're fees, Apple it of savings like with the people has a mentioned, do it's account, work to things helping the on and done We're as trying healthier

Now them their focused, to stand very points we're the account obviously. gotten and them our we're roadmaps things what But it. incredible. trying Buy Pay but these response have users, savings shoot. is at to we've to on our So It's initial user and specifically, just But one so the of around that we're help the orchestrate that. Later provide pleased we on with listening very own, another on out things pinch been are

Operator

next question is of from UBS. David Our Vogt

David Vogt

Great. Tim, kind in go I to what softer my carriers. dig a weak to a we're in from quarter That the from larger inventory demand maybe exhibited be of appears back the wanted the of that versus perspective into hearing taking Thanks restocking little March of some your for channel relatively just question. rates. upgrade to bit

seeing get month And thinking with of how want sort of up. us that an ago. signals for to today you're or even you a just I So kind about of it ago demand a months is or vis-à-vis follow sense I were want where maybe you at might signals point? acceleration then to have any in this a sort And share there demand three

Tim Cook

that carriers. a for into which was promotional primarily primarily part quarter. performance, of year our think more you're activity in believe macroeconomic. the there given. United the other part referencing than if And ago I go at is that predominantly But Americas, guidance what A it the And the QX I it's geographic that is, of in lower seeing Luca I to in our is US was distribution you States. probably has don't look QX, want we're

think that's the so our couldn't you're in there. results seeing results had stellar really where we there, quarter, I during the that what was this prouder we of markets, And were really and be emerging

David Vogt

get they're I'm time behavior and COVID, Apple China changed disparate that are change an last gaming? Thanks. it and using quickly user three mobile almost and consumer mentioned seeing six reopened, in how you that behavior has just And comps for Great. then fully we're on fully Now sort you with That's to they're trying you the services than other users of how terms with sense seeing technically, digital spent helpful. consumers macro hopefully of past over Service? anything Are and of and all advertising what on tough a months. using just Services, the or the to

Luca Maestri

Luca. it’s David,

As be advertising course and in in of areas the continues of macroeconomic the customers you particularly the said, but issue mobile of those we got outside pretty to gaming, environment, behavior consistent. around

very very like Pay continues some growth our strongly. subscriptions and grow to mentioned, to continues had have payments Store on well, strong they the platform general doing services is we've the continues photos as than are videos more adoption much in the services and only recently, on subscriptions of that's that what ago. new mentioned in three to to more the paid We services want rates obviously cloud and we Apple that as where that twice Cloud paid and increase. XXX of more Users App launched adoption content our Apple consistently. devices now now adopt grow very model Tim particularly more an are I almost around the and million their and so Card area store the we and the years in

the is growth very subscriptions So obviously, in strong.

Operator

Chatterjee of question JPMorgan. from Samik is Our next

Samik Chatterjee

mid-teens. FX guess today, digit. questions. the of can low And taking in I David's Hi, up where on more services. thanks out double about maybe The there for here if the more was stand, even impact sort past, growth on rate back about is rates follow question pre-pandemic growth you I I my

So this rollout more that point the a levels. please. seems monetization do your on a see have you installed to as from back the need more those are returning that even these you to get to cyclical base level have get growth on at get or do want are from to follow thoughts to to one of I that that and often is growth we up, growth accelerated, the and have of investors depressing questions drivers

Luca Maestri

seeing mentioned, as digital the are macroenvironment, areas the advertising. that where I the impact Samik, we is on

usage due continue rates. elevated macroenvironment where see years. a due the As we partly partly on of know, to we gaming, of macroenvironment, very very the to that bit those healthy And you a obviously COVID outside to not we've areas, front. helping is during slowdown, had fact growth that mobile seen the the But

Samik Chatterjee

Okay. and But products can not your in a sort point. is don't pretty you're what macro of I follow obviously your or terms but at Tim question. of you implying helpful guide Luca, up for the momentum sort just is this of maybe And more if take I remains stable. is this of know if want macro to this,

business. of And versus uptick products the to of sort terms of to we continue here patterns? actually are spending you of You're mean, just guiding what sort spending customer doing trends? what function momentum where about are independent for overall seeing of the your a sort that? think And share in sort your overall, deteriorate in FX consumer does of of of a modest is How gains? consumer should is terms I the

Luca Maestri

great is is Samik that having and monetize emerging share low, tend places because of our to in install great improves about. on Apple where obviously new grow add the time. is as people that low, to imagine growth with a services talking of share it base, the opportunity over those in where the lot markets, gives It are ability increases we to term, of longer helps our you That are Tim a over what our momentum can Part the And us was market to the markets well. us installed ecosystem. also base. We're switchers

Operator

Daryanani from Our Amit Evercore. next is of question

Amit Daryanani

quarter. that first going well, seem guess, margins sequential holding fact the basis. off I the well. are a on given on fairly for down sales June as up to to They have especially gross I be

can the of if So, strength entail? What it's Luca, also basis is of And gross does driving XXX. typically I margin the may. touch offsetting your just that mean? if XX that leverage, you wondering what's the noticed guide on then I'm points, you range in margin sequentially. It's gross lack What that does

Luca Maestri

this very I having level guiding right. margins fairly gross happy you're So we're a of to we the cycle. level. with stable We're are at mean high very that gross margins a

flat foreign at to sequential For factor. in time Unfortunately, basis be we level. foreign the revenue be expect quarters, we still on at headwind several but margin a gross exchange, at the exchange exchange sequentially, the foreign expect a level, margin level, gross first a it's not to

we seasonal loss that the you're to, offset so by of And expect be referring cost savings. to leverage

And level us margins. should give that that of so

you know, points. basis asking about the XX you As were

this XX before of in to we're in quarter, points because of the late right. guided range have the during We well, year bit as calendar a week particular, December basis the XXth a year,

bit June around And the so quarter. we for visibility more margins have a

Amit Daryanani

what Got seen discussion it. versus back in you're you just have, I a then maybe go or helpful. decade ramp guess, That's the what a contrast reasonable so India think lessons you China Tim, perhaps just seeing bit, India to to I India a if in ago. could be saw from it would or could at in that the different Is China? you've today And

Tim Cook

people to buy hopeful own see works iPhone convince that the India has too is country much. is class, now, how middle right an journey, hesitate what do can lot in entering well. and so I see to of working I'm that some out. them a compare number I we think their different each But and it's of we'll and I But out

Operator

Krish of TD Our Sankar from next Cowen. question is

Krish Sankar

question. my taking for thanks Hi,

a for the iPhone, used The is applications. blurring Tim. centric for iPad, it corporate question company, like seems first consumer being Tim, but hardware is products the the with had primarily I line you're been

I today up. So versus does way cetera, of have much your is et follow impact segment there enterprise slower for revenues corporate a a IT And from Mac, spend coming outlook iPad, iPhone, consumer? to how the are your and then

Tim Cook

enterprise for Internally, consumer. estimates is our versus enterprise the growing. business And much have is we how

focusing been lot companies and leaning or want which are have and more at select people We and there's an plays to at the I lot into benefit, think a because is work. given BYOD those that work a Mac iPad believe, use programs employees I our on to a to more ability of

consumer certainly revenues, a we're our And obviously. terms so in company but primarily of

Krish Sankar

lot a curious. a Got Thanks on as the for obviously Tim. I'm follow up, it, And questions retail opening. then of that. kind just of India just

term mentioned that think the iPad in of do Where also primarily business do service hope opportunity? Thank wearables, et too? you you is longer the folks you a cetera? like lot you You it convert a there Is hardware very iPhone a into think biggest iPhone, like to Or opportunity much. there. India

Tim Cook

about the ARPUs over in arc if board, Obviously, movie board. TV think the opportunity look including But I at music, much there's across are lower opportunity streaming of the across ARPUs you the in than for whether are lower long India there's a I talking a think and you're regions. services. an time, good it or other

Operator

next Aaron is from Our of question Rakers Fargo. Wells

Aaron Rakers

over next taking of for course that you all of you're this through of the would Yes, reopening is out about saw of quarter of back the I'm reopening curious, dynamics. first China, to as the about the go playing thinking shaping couple geographical my the demand think of the of how impact that I how question I thanks the quarters. you characterize last questions. guess kind want and we attributes kind just to

Tim Cook

the came a on our for at December we you to negative seven and compared look year-over-year, actually the you and currency accelerate a quarter which, revenue a weeks it basis, in basis. China, quarter, grew was know, XX on reported rated three we constant also as but had in If negative at as

QX. smartphone believe the we we we you Kantar, four we if we all of urban China, at third acceleration But this see from the data in quarter. five. based do the during reopening, in look top top survey so seen smartphones the And think a itself, party in on I've how the pleased did market with share And space, how I we and that out saw we of were have gained with on with selling and we'll the the

about terms So it. buyers. has very good new lot of metrics in a good we Also, feel of China

For Same iPad. example, on for out about customers ten buying of thing on Mac the the first Mac, are six time. the

watch the are than buying it's over for first out the If more of time. the three you customers look four at watch,

during metrics, quarter. will, good. And the And so an the business are in you hit very record very, services all-time buyer China our if

Aaron Rakers

Very helpful, Tim.

to As Amit’s want back follow a gross margin. go on up, I to quick question

But this current at you to margin, on drive curious what you're about would when obviously I'm the how higher. You and gross kind quarter's curious FX, talked you attributes, impact potentially environment, pricing your mixed current component dynamics in about look that of there. I'm continuing just the lessening the Guidance. characterize thinking got

Luca Maestri

the quarter. quarter, on is prices same favorable. the March decline we during seen during and June component We've the environment The the component side expect

Operator

is from Ho next Bank. of Deutsche Sydney Our

Sydney Ho

half third quarter. taking for can quarter down I implied March linearity Thanks. first It the quite a and your than helpful. bit guidance lower basis, my a hoping quarter little the a fiscal four be elsewhere, perhaps bit slowing Thanks things you the seasonal but the Great. are of revenue a be sequential product is average on any right, current looks of talk weeks math about if color will my and would was question. like

Luca Maestri

in disruptions. performance mind, the of just a have in the that be quarter. March the supply we for expect and we differences we during products, that one reported similar certain also the timing across that revenue especially said quarter over last few our always June We our we've the to years, amount level launch the to at Keep seen

was it sometimes related, specific shortages. was related to component Sometimes COVID it

quarter both impact and year which compare. launch leads difficult of remind SE a the more of the ago, full June a quarter the you, the for Air, to in iPhone Just to the at iPad

those I keep So to important think it's in mind. things

Sydney Ho

that's a Okay, quick up. follow Maybe helpful.

so you. far? You do talk been few of how has the quarters? Pay feedback that service expect the about adoption next the How you Thank Apple Later. And over

Tim Cook

Later help good. both or them for have savings of healthier financial products both better live a And we the been really Apple customers and think both feedback The life. Pay

And first of very excited so the we're of about them. both days

Operator

Kumar of Harsh from is Piper question Sandler. next Our

Harsh Kumar

largest squeezing you're Thanks Tim, in. guys. for me Hey, one companies. of Yes. the chip

component You're not a maker.

a products. a just for beneficiary You use money you I follow proposed. those. that's was tax Apple the I've of Chip almost never But if being R&D got then up. own we either context the or curious of beneficiary, eligible being any in a credit any guys for your And actually Act hear are being you

Tim Cook

Act therefore we additional because I hopefully would a in partners in be Chips put indirectly recipients participating our beneficiary be it and capacity. Apple of don't some directly, see of the would but

indirect on of we basis, so sort have a benefit. that And would

Harsh Kumar

my You're better. one where question surely think to in be a another services offering? do Understood. percent. And I think about year-on-year comments June you Is March, job, similar your then I doing will thanks for was June. ask, down a opportunity clarify odd can set to wanted wanted two a But to assume do maybe is a When you're saying for And record. on be you I Tim clarification. that you be great there which just Luca, performance be about should your fair you the largest June basis, something would areas way? must where that

Luca Maestri

Yes.

question the June on on year-over-year the basis. your March basis, to year-over-year to performance comparable So quarter so around yes, a

Tim Cook

do think I on can we everything. better Harsh,

so wouldn't point them. to one just And I of

look are If think, of different and I the devices active a in services our number active at ways. you the number of of growth underpenetrated devices,

opportunity is it And of at them. so look there's that in the many way I

Suhasini Chandramouli

time by code questions additional The These Thank Please press XXX-⁠XXXX, Thanks and Harsh. additional XXX-⁠XXX-⁠XXXX. be us. Apple right. pound questions webcast will call of via contact replays Rosenstock P.M. the the with at and XXX-⁠XX-⁠XXXX for number sign. can All two a me as the analysts podcasts, Josh is telephone. for XX:XX of confirmation again for replay approximately you, can XXX-⁠XXX-⁠XXXX. on be on available today's apple.com/investor replay financial joining with A available weeks enter telephone followed Members contact at today. Pacific by will

Operator

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

Apple (AAPL) 4 May 232023 Q2 Earnings call transcript