Apple is set to reveal its first quarterly earnings report of 2017 and, if Wall Street’s estimates are any indicator, it could be Apple’s biggest quarter ever.
After multiple quarters of declining revenues, today’s call could see the company return to growth, lifted by strong iPhone sales over the holidays and a burgeoning services business that has quickly become Apple’s second-biggest moneymaker.
Tim Cook and Luca Maestri are scheduled to hold an open call with investors today at 2 p.m. Pacific. As usual, Cult of Mac will be here liveblogging and analyzing all the action. Get prepped for the call with our guide on what to expect, and join the fun in the liveblog below.
And that’s all the earnings call excitement for today. Thanks for joining us — check back soon for our key takeaways.
“I think the smartphone is still in the early innings of the game. I think there is lots more to do. Every year it becomes more important to people’s lives,” explained Tim Cook talking about future iPhone features. “We’ve got some exciting things in the pipeline. I feel really really good about it.”
iPad sales were below Wall Street’s expectations. Tim Cook explained that there were some supply issues and other problems.
“We have some exciting things coming on iPad. I still feel very optimistic about where we can take the product,” said Tim Cook. “The customer satisfaction numbers are through the roof at 99%. I see a lot of good things and hope for better results. We are still currently in a shortage issue now and we’re not projecting to get out of that totally during the next quarter. Beyond the 90-period, I’m very bullish on iPad.”
Commenting on Apple’s lawsuit with Qualcomm, Tim Cook told investors that he still doesn’t like litigation and views it as a last resort
“You should take from our filing that we didn’t see another way forward. They were insisting on charging royalties on technologies they had nothing to do with,” Cook said, “It’s like buying a sofa and you charge someone a different price depending on the size of house it goes to. From our point of view this doesn’t make sense and won’t pass muster in the courts.”
Annual upgrade programs are proving to be a positive factor for Apple, according to Luca. But that pesky strong dollar is hurting Apple’s upgrade cycle a little. Still, the percentage of people who upgraded to the iPhone 7 was very similar to the iPhone 6s cycle, he says.
How was Apple’s business in India last quarter? “Despite the demonetization move in India that created lots of economic pressure there last quarter, despite that we had all-time record revenue results,” Tim said. “So we were very happy about that.” Long-term, Tim says everything looks great. “I feel really good about how we’re doing there,” he said, citing ongoing discussions about retail stores. Apple fully intends to invest significantly in India. “It’s a great place to be,” he said.
So much enthusiasm!
Asked how Apple will double its services business in four years, Luca Maestri highlighted that the App Store is driving most of the growth.
“We know there are parts of the world where we can do better,” said Luca. “We think that the App Store will be a significant driver of growth.”
Luca also highlighted iTunes, Apple Music, AppleCare and iCloud storage as areas where Apple expects to continue growing revenue.
iPhone 7 was best-selling smartphone in China last quarter, Tim says (citing Kantar research). And iPad sales actually grew there — up double digits in mainland China — which is really unexpected given anemic performance everywhere else.
Greater China revenue is down 12%. About 4% of that was because of currency changes. iPhone 7 was the best selling iPhone in China. Apple was the most popular US brand during China’s popular Singles Day.
A question about the “Trump effect” and how changes to tax laws might encourage Apple to bring its overseas billions back home to the United States. “I am optimistic given what I’m hearing that there would likely be some sort of tax reform this year,” Tim says. “And it does seem like there’s people in both parties that would favor repatriation as a part of that. I think that is very good for the country, and good for Apple. ”
If it happens, what will Apple do with the money it brings back to the U.S.? Wait and see, Tim says. Acquisitions are always possible. And original content.
“We have put our toes in the water doing some original content with Apple Music. That will rollout through the year and we’re learning from that,” said Tim Cook. “We are thinking about ways that we can play it.”
Asked about potential areas of interest for mergers and acquisitions, Tim Cook said he’s optimistic that there will be some tax reform this year that will allow Apple to bring back its $200 billion in cash from overseas.
“What we’re gonna do with it, let’s wait and see what it is. We’re always looking for acquisitions,” said Tim. “We look for companies of all sizes. There’s not a size that we would not do based on the size of it.”
The strong dollar is going to take a bite out of Q2 but there’s really nothing Apple can do about that. Luca says “cost efficiencies” and Apple’s winning mix of products and services will help. If the dollar drops a bit, it will help gross margins, but it’s basically unknowable.
finally entering the Q&A segment of the call, first up is from Morgan Stanley asking about gross margins and other financial details.
iPad had 85% share of the US tablet market priced above $200. Sales are down overall but that’s not that surprising considering there were no new iPads during the last half of 2016.
Mac experienced double digit growth in the US education market and other countries like Japan last quarter.
iPhone sales were up 5% over last year. Not killer growth, but its better than no growth.
Luca Maestri: “We made so much god damn monies it’s unbelievable*.”
* – not a direct quote.
Too bad i can’t afford to buy all new HomeKit appliances and garage doors like Tim Cook.
I’m glad to hear Tim talking up HomeKit. That’s a surprisingly personal account of how he uses Siri and HomeKit accessories to improve his life. And it’s been a while since Apple has touted HomeKit. It’s a superior product and it deserves the spotlight.
“We are unmatched when it comes to securing your home with HomeKit,” says Tim Cook, touting Apple’s integration with Siri and third-party devices.
There are 1 million people using CarPlay now. Making it Apple’s smallest platform.
It was the best quarter ever for Apple Watch. Demand was so strong Tim Cook says Apple couldn’t make enough. Apple still won’t say how many units it sold though…
Revenue from services will be big enough to be its own Fortune 100 company by the end of the year. Apple plans to double the size of its services business in the next four years.
Apple Pay is doing strong. Users have tripled in the last year and transaction value has increased 500%.
7.2 billion in revenue from Service. $3 billion in App Store purchases came in December alone, making it the biggest month ever. Developers have earned $20 billion in 2016.
Exceptional demand for iPhone 7 and iPhone 7 Plus beat Apple’s own expectation. Demand for iPhone 7 Plus exceeded supply for the quarter, but Apple finally has supply/demand balanced.
Tim here with introductory remarks: Says he’s very happy with Apple’s outstanding results. Highest quarterly revenue in company history. All-time revenue records for 4 out of 5 geographic segments.
And … AAPL surges in after-hours trading. That Apple short guy must be going from woozy to suicidal. Here’s Leander’s full report on the Apple stock spike: Apple stock surges on record-breaking Q1 2017 earnings
The call should start any moment now. Still waiting for Tim and Luca to put down the champagne and start getting serious.
Everybody in Cupertino must be stoked today. And anybody holding AAPL. Here’s Buster’s full report on the earnings numbers:
Apple shatters records with blockbuster Q1 2017 earnings
Spoiler alert: Total revenues of $78.4 billion, profit of $17.9 billion.
Pretty shocking that Apple beat its own expectation of $76 – $78 billion in revenue. iPhone sales were slightly better than expected too. Tim Cook must be stoked today.
Bet that guy who bet it all on Apple getting crushed is feeling a little bit woozy right about now.
Apple just reported its numbers, with record-breaking performance across the board: “We’re thrilled to report that our holiday quarter results generated Apple’s highest quarterly revenue ever, and broke multiple records along the way. We sold more iPhones than ever before and set all-time revenue records for iPhone, Services, Mac and Apple Watch,” said Tim Cook in the pre-earnings-call release. “Revenue from Services grew strongly over last year, led by record customer activity on the App Store, and we are very excited about the products in our pipeline.”
We’ll know how well Apple did in about 10 minutes. The company will post its earnings press release at 130PT and then start the phone call at 2PM PT.
You can tune into the call by going to investor.apple.com
Not everybody thinks Apple is going to blow away the street today. MarketWatch has an interesting post on a guy who is going all in on Apple taking a fall. His position, in a nutshell: “If Apple, which currently sits near $122, trades at $128 or above after the report — poof! — $240,000 gone,” MarketWatch says.
Here’s the story: This trader bets it all on Apple getting crushed after earnings. (Just be sure to come back to Cult of Mac after reading that tale of YOLO madness.)