MacDailyNews Presents Live Notes from Apple’s Q322 Conference Call – MacDailyNews | Hot Mobile Press

MacDailyNews presents live notes from Apple’s Q322 conference call with analysts, which begins today, July 28, 2022 at 5:00 p.m. EDT / 2:00 p.m. PDT.

Apple will provide live audio streaming of its Q322 results conference call today. This stream is best experienced on an iPhone 7 or later, iPad (5th generation or later) or iPod touch (7th generation) running Safari on iOS 12 or later; or a Mac running Safari running macOS Mojave 10.14 or later. Streaming to your TV requires an AirPlay 2-enabled device or AirPlay to an Apple TV (2nd generation or later) running the latest Apple TV software or tvOS. Other platforms may also be able to access the stream using newer versions of Chrome, Firefox or Microsoft Edge (requires MSE, H.264 and AAC).

Apple’s live webcast conference call begins today at 5:00 p.m. EDT / 2:00 p.m. PDT here.

Apple today reported an all-time record quarterly revenue of $82.959 billion (vs. $81.434 billion year-over-year), up 2 percent year-over-year, and quarterly earnings per diluted share of $1.20 (vs $1.30 YoY).

For the quarter, analyst consensus estimates expected Apple to post sales of $82.8 billion with earnings per share of $1.16.

Live notes from Apple’s Q322 Conference Call in reverse chronological order:

• After hours AAPL: $162.12, +$4.77 (+3.03%) at 6:00 pm EDT

• End of conference call.

• Cook: China grew strongly at double-digit rates, setting a new sales record in the June quarter
• App Store revenue impacted in China due to lockdowns?
• Cook: We incorporated all of that into our color. Also in the current quarter we see a continuation of the digital advertising cloud
• Q: Digital advertising impacted by the macro economy?

• Commodities behave “okay”
• Luca: There are always a few elements to consider when looking at gross margin: FX (a strong dollar is a challenge) and product mix/services
• Q: Impact on gross margin?

• Cook: It’s difficult to measure the replacement cycle at all times, but our main mission is to make a product that everyone loves so they want to move to the next generation.
• Q: Has COVID changed the iPhone replacement cycle?

• Cook: We believe in investing during the downturn but are cautious about investing
• Q: Running costs?

• Apple thinks the lockdown web was negative in the June quarter
• Apple saw lower demand in COVID-lockdown cities and a rebound as those cities’ lockdowns ended
• Q: Impact of COVID lockdowns in China?

• Cook: We believe there has been a macro hit to wearables, home and accessories
• Cook: We saw a cocktail of headwinds in wearables, home and accessories: Russia, inflation, supply, but we also have different launch dates affecting comparisons
• Q: What impact does Apple expect inflation will have on high ASP products?
• Luca: For reasons of uncertainty, we are not providing any guidance, but around 600 basis points of foreign currency headwinds are at play
• Q: BofA: seasonality normal?

• Cook: Over 14,000 ARKit apps in the App Store already use iPhone and iPad; We are always exploring new technologies
• Q: AR/VR?

• Cook: The silicon shortage – no forecast when it will end; The supply problem will be less in this quarter than in the June quarter
• Cook: Apple dipped slightly below the $4 billion figure in the June quarter, which the company said was a hit to Apple due to supply chain issues
• Q: Delivery headwinds? When will supply/demand balance?

• Cook: Apple believes the Mac has a very strong history and the company will see how they fare in the quarter
• Cook: Difficult to test demand without supply
• Apple recovered somewhat on Mac at the end of the quarter; still delivery bottlenecks
• Cook: We don’t think so, but last quarter when the COVID lockdowns began in Shanghai, Apple lost the main source of Macs
• Q: Mac shipping restrictions?

• Cook: The data does not show a negative effect of inflation on the iPhone
• Q: Do you see any problems with inflation over carriers?

• Apple products retain their value far longer than the competition’s products
• Luca: Installment plans and trade-in programs are areas of focus for Apple
• Buy now, pay later (Apple Pay Later)?

• Cook speaks App Store commercials
• Q: Apple’s advertising business?

• Luca: We expect some deceleration in the quarter from 12% growth (on FX; exit from Russia; macro headwinds)
• Q: Continued growth rate for services?

• Cook has reason to be optimistic about the iPhone
• Cook: The most important thing for Apple is to maintain sky-high customer satisfaction
• room for growth in emerging markets; plenty of headroom in these areas
• Cook: product quality. The installed base continues to grow
• Q: Morgan Stanley: Reasons for continued iPhone strength?

• Cook: We’re always looking and will buy when it’s strategic for Apple; wouldn’t rule anything out
• Q: Acquisitions, especially for services?

• Apple sees the future of the service business as “very good”.
• Services growth rates have been very good over time
• The scope and quality of services will increase over time
• Customer loyalty in the service area is increasing
• Luca: There are a number of service levers: installed base in the engine and it keeps growing
• Q: Piper Sandler: How do you model the service business?

• Cook: We feel really good about the growth we have lined up for the quarter
• Services: Digital advertising business impacted by macro headwinds
• Mac and iPad are also forced to say something
• No obvious evidence on the iPhone other than foreign exchange
• Cook: We think we’ve seen macro headwinds like FX
• Q: Do you see inflation, consumer softening?

• Exchange rates affect Apple, but the company navigates it “pretty well.”
• Luca: Guiding 41.5-42.5 – due to mix, FX (50bps impact)
• Q: Evercore: Reason for Ross margin decline

• Apple’s board of directors has declared a cash dividend of $0.23 per share of the company’s common stock. The dividend is payable on August 11, 2022 to shareholders of record at the close of business on August 8, 2022

• Expects supply constraints to ease over the quarter
• Apple believes year-over-year revenue growth will accelerate despite macro headwinds
• Apple anticipates macro/COVID impact not worsening

• Total debt of $122 billion
• $178 billion in cash and marketable securities at the end of the quarter
• Businesses are investing in Apple devices to attract and retain talent

• Paid subscriptions over 860 million, up from over 160 million in the last 12 months
• The installed base of wearables, home and accessories reaches a new all-time high
• Installed iPad base at new all-time high; More than half of iPad buyers are new to the product
• Almost half of Mac buyers were new to the product
• Record number of switches to iPhone in the June quarter
• $22.9 billion in operating cash flow (June quarterly record)
• $19.4 billion net income
• 71.5% gross margin for services
• 34.5% Product Gross Margin
• Records in every major service category
• The installed base of active devices continued to grow, reaching all-time highs across all segments
• Luca: Our results for the June quarter continue to demonstrate our ability to run our business effectively despite the challenging operating environment. We achieved record sales in the June quarter and our installed base of active devices reached an all-time high across all geographic segments and product categories

• Apple will continue to focus on excellence
• Cook: We are aware of the uncertainty in the macroeconomic environment
• Lockdown mode to protect journalists and politicians from sophisticated smartphone attacks
• PassKey, led by Apple, aims to replace passwords

• Cook speaks about diversity and inclusion efforts
• Cook thanks the members of the Apple Retail Store and the AppleCare team
• Retail: Opened the doors of a new store in China in the June quarter and today opened the Appel Brompton Road in the UK

• Apple TV+ signed a 10-year deal with MLS to broadcast games worldwide
• Friday Night Baseball delights baseball fans
• Apple TV+ received 52 Emmy Award nominations
• Apple TV+ proud of “Severance” and “Black Bird”
• Services revenue hit a record for the June quarter, up 12% year over year

• After hours AAPL: $163.80, +$6.45 (+4.10%) at 5:09 pm EDT

• Q322 Revenue Breakdown:
– iPhone: $40.665 billion (vs. $39.570 billion YoY)
– Mac: $7.382 billion (vs. $8.235 billion YoY)
– iPad: $7.224 billion (vs. $7.368 billion YoY)
– Wearables, Home & Accessories: $8.084 billion (vs. $8.775 billion YoY)
– Services: $19.604B (vs. $17.486B YoY)

• Cook discusses WWDC announcements
• Apple continues to experience supply bottlenecks and strong demand for Macs and iPads
• Cook praises M2 Apple Silicon’s capabilities
• Apple celebrated the 15th anniversary of the iPhone in the quarter
• The iPhone set a record for upgrader and switcher sales in the June quarter
• Supply shortages came in at less than a low $4 billion estimate given during the last conference call
• All time records in installed based on active devices
• Apple posted record growth in emerging markets
• Apple CEO Tim Cook: Apple reported record sales of $83.0 billion for the June quarter, up 2 percent year-on-year, better than we expected.

• Audio stuck – conference call begins
• Possible audio SNAFU to start the call…
• Q322 Conference Call begins

• After hours AAPL: $163.46, +$6.11 (+3.88%) at 4:58 pm EDT
• After hours AAPL: $162.65, +$5.30 (+3.37%) at 4:52 pm EDT
• AAPL after hours: $161.60, +$4.25 (+2.70%) at 4:50 pm EDT

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