Notes of interest from Apple's Q2 2018 conference call

AppleInsiderAppleInsider
Posted:
in AAPL Investors edited May 2018
Apple set a new high for the March quarter on the back of a premium-priced iPhone lineup anchored by iPhone X, as well as continued growth in the services segment. Following the publication of its first fiscal quarter 2018 results, the company provided additional detail on the record-setting performance in an earnings conference call.

Tim Cook and Luca Maestri


Participating in Thursday's call were Apple Chief Executive Tim Cook and Chief Financial Officer Luca Maestri.

Highlights

  • iPhone X was Apple's top-selling iPhone every week over the March quarter, first quarter in which top-of-the-line model is also most popular.

  • Board green-lights $100 billion share buyback program.

  • Wearables business, which consists of AirPods, Apple Watch and Beats headphones, is now size of Fortune 300 company.

  • Mac installs are up double digits, with 50 percent of sales coming from new customers.

  • Services showed strong growth, now the second-largest revenue segment.

Apple's iPhone business

  • Apple dispelled rumors that iPhone X was a flop, noting the high-end handset outsold all other iPhone models since its launch in November. The March quarter was also the first in which Apple's most expensive iPhone model was its most popular.

  • Cook said iPhone X is a "beloved" product, with interest from multiple demographics. Said he "could not be prouder" of the phone's performance.

  • Unit growth was up 3 percent, revenue growth at 14 percent on a larger mix of high-end model sales. Average selling price was $728.

  • iPhone X was most popular smartphone in China during the quarter, Cook said.

  • iPhone inventory has been reduced by 1.8 million, 600,000 more than the year-ago quarter.

  • In the first fiscal half-year, Apple hit $100 billion in iPhone revenue, the highest first half growth rate in three years.

  • Cook and company "surprised" by demand and sales popularity of iPhone X, with features creeping down expected to boost volume

Apple's Mac business

  • Mac install base rose "double digits" over the quarter. 4.1 million Macs sold.

  • Nearly 60 percent of purchases came from new Mac users, Maestri said.

  • Record year-over-year growth in emerging markets including Latin America, Middle East and Africa, Central and Eastern Europe, and India.

Apple's iPad business

  • The iPad install base of active devices is at an all-time high.

  • About half of sales during the quarter were generated by new iPad owners.

  • The Cisco and IBM partnerships are seeing growth, in part to the iPad.

Apple's Wearables business

  • Apple Watch once again saw its best-ever quarter, with 50 percent growth in overall wearables. The wider segment is now the size of a Fortune 300 company.

  • Cook said AirPods are a "runaway hit."

  • Apple Watch and AirPods reached new highs. Wearables and home products, which include HomePod, accounted for 90 percent of growth in the Other Products category.

Apple's Retail business

  • Highest March quarter revenue ever led by iPhone and strong AirPod sales. Maestri also mentioned HomePod, but failed to assign specific sales numbers to the speaker.

  • Hosted more than 250,000 Today at Apple sessions worldwide with emphasis on coding and app design.

  • Opened first stores in Austria and South Korea. New store in Tokyo brings total count to 502 around the world.

Apple's Services business

  • Services grew 31 percent year-over-year to hit $9.1 billion. That revenue is double that of four years ago, up 25 percent y/y in each of the five major geographic segments.

  • Cook said the segment's success owes to a collective effort and is not the result of a boom in a single service or product.

  • Apple saw records in iCloud to Apple Music to Apple Pay.

  • Apple Music reached a new revenue and paid subscribers, which now sits at 40 million, while iCloud storage revenue was up 50 percent year over year. Apple Care revenue grew at highest rate in five quarters.

  • Apple Pay is coming to Norway, Poland, and the Ukraine in the coming months.

  • Paid subscriptions moved up 100 million year-over-year to a total of 270 million by end of quarter.
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Comments

  • Reply 1 of 46
    nunzynunzy Posts: 662member
    Wall Street doesn't understand Apple. They never have.

    Tim Cook is the best CEO ever!
    edited May 2018 anomeicoco3jony0SolibaconstangretrogustoStrangeDaysradarthekatbshankwatto_cobra
  • Reply 2 of 46
    FolioFolio Posts: 698member
    Pretty stellar. Any one of a number of best in class products draw people into ecosystem. Even if a person in China sees no great differentiator in iOS, she may buy an iPhone rather than Oppo because she wants Apple Watch. 
    icoco3watto_cobra
  • Reply 3 of 46
    anomeanome Posts: 1,533member
    So Wall Street's made up numbers didn't match reality again? I still don't see how this is always Apple's fault, when it's the analysts who are wrong.
    brisancemattinozjony0baconstangbshankwatto_cobra
  • Reply 4 of 46
    brisancebrisance Posts: 63member
    The analysts that misguided investors should be sued. They had only one job and they blew it. 
    jony0jonagoldwatto_cobra
  • Reply 5 of 46
    k2kwk2kw Posts: 2,075member
    Did they say anything about HomePod?
  • Reply 6 of 46
    Rayz2016Rayz2016 Posts: 6,957member
    • Cook and company "surprised" by demand and sales popularity of iPhone X
    Yes, this wasn’t the plan, so well done meeting the demand. 

    jony0watto_cobra
  • Reply 7 of 46
    65026502 Posts: 380member
    anome said:
    So Wall Street's made up numbers didn't match reality again? I still don't see how this is always Apple's fault, when it's the analysts who are wrong.
    Wall street estimates were pretty much spot on: Revenue: estimate = $61.1B, actual = $61.1B Earnings: estimate = $2.69/share, actual = $2.73/share iPhone unit sales: estimate: 52.3 M, actual: 52.2 M It's the rumors of lousy iPhone sales that were wrong.
    retrogustoh2pwatto_cobra
  • Reply 8 of 46
    saltyzipsaltyzip Posts: 193member
    nunzy said:
    Wall Street doesn't understand Apple. They never have.

    Tim Cook is the beat CEO ever!
    People keep expecting this is the year the iPhone sales will start to decline and it will eventually happen , I'd give it another couple of years before it starts. The iPhone X has given enough freshness to trickle down features to keep the numbers on the up.

    The Mac growth is zero because what is the reason for people to upgrade, no inovation in that segment. The iPhone will hit that ceiling at some point too. The phones are already more powerful than they need to be.
    edited May 2018 baconstangnetmage
  • Reply 9 of 46
    tzeshantzeshan Posts: 2,351member
    The good thing is iPhone X sales better than expected. The bad thing is the sales increase is not very high. It means for consumers that like Apple, their reception to iPhone X is positive. However, the high price failed to make significant switchers like iPhone 6 launch. Both iPhone X and 6 are revolutionary new products. Comparing sales of these two are more meaningful. 
  • Reply 10 of 46
    chasmchasm Posts: 3,294member
    k2kw said:
    Did they say anything about HomePod?
    Yes. You can listen to the audio call for yourself here: https://www.apple.com/investor/earnings-call/

    TL;DR, it was mentioned as one of the reasons for growth in the Other category, and Mastri mentioned it at the top as one of the growth drivers. Other than that, I don't think they said anything specific about the HomePod.
  • Reply 11 of 46
    saltyzipsaltyzip Posts: 193member
    brisance said:
    The analysts that misguided investors should be sued. They had only one job and they blew it. 
    They were expecting a supercycle of sales and that hasn't happened, which is why sales forecasts have been cut in supply chains.
  • Reply 12 of 46
    SpamSandwichSpamSandwich Posts: 33,407member
    nunzy said:
    Wall Street doesn't understand Apple. They never have.

    Tim Cook is the beat CEO ever!
    Of course they understand Apple. The stock is the easiest thing in the world for them to manipulate.
    jonagoldwatto_cobra
  • Reply 13 of 46
    anomeanome Posts: 1,533member
    SpamSandwich said:
    nunzy said:
    Wall Street doesn't understand Apple. They never have.

    Tim Cook is the beat CEO ever!
    Of course they understand Apple. The stock is the easiest thing in the world for them to manipulate.
    They don't need to understand Apple to do that. In fact, it might be easier if you don't know what you're talking about, as long as no-one else knows what you're talking about.
    baconstangwatto_cobra
  • Reply 14 of 46
    jungmarkjungmark Posts: 6,926member
    saltyzip said:
    brisance said:
    The analysts that misguided investors should be sued. They had only one job and they blew it. 
    They were expecting a supercycle of sales and that hasn't happened, which is why sales forecasts have been cut in supply chains.
    Nonsense. The analysts were wrong in predicting a super cycle. Apple knew it had three  new models and the X was $1000 so that didn't call for a super cycle. 

    The reports of cuts are laughable. They ordered a significantly higher quantity of components than their previous record amount sold? Nonsense. The days of super growth are over. 
    brisancewatto_cobra
  • Reply 15 of 46
    lmaclmac Posts: 206member
    nunzy said:
    Wall Street doesn't understand Apple. They never have.

    Tim Cook is the beat CEO ever!
    You know who also set sales records? Sculley. No ideas. Riding on the momentum of earlier innovation. Cook is great a milking the cash cows, but despite being an Apple fanboy since 1987, I've never been less interested in their products.
    SpamSandwich
  • Reply 16 of 46
    SoliSoli Posts: 10,035member
    1) So where are all the people that kept saying that the iPhone X was a flop?

    2) I do see a lot of AirPods on the street.

    3) I don't care for the increase in Mac purchases coming from Mac users. I'd love to see"switchers" being a growing segment of the Mac market, and if I get my wish that will happen in the not too distant future.

    4) If services are up to $9.1 billion I wonder what Fortune n company range that puts that segment of their business. [edit: Per the first link, below, it would put it at #304 on the Fortune 500 list.]

    5) Apple is already the most profitable company on the Fortune 500 list—and almost double that of the #2 spot—and it's listed as #3 in terms of revenue. Unless Berkshire Hathaway is making crazy growth Apple will be #2 soon enough. Getting to #1 in terms of revenue to beat     Walmart is going to take awhile. So why exactly do pundits and detractors keep saying Apple is doomed? We've been hearing this since before Jobs came back as iCEO. It's about fucking time this nonsense ended.

    edited May 2018 brisanceStrangeDayswatto_cobra
  • Reply 17 of 46
    k2kwk2kw Posts: 2,075member
    chasm said:
    k2kw said:
    Did they say anything about HomePod?
    Yes. You can listen to the audio call for yourself here: https://www.apple.com/investor/earnings-call/

    TL;DR, it was mentioned as one of the reasons for growth in the Other category, and Mastri mentioned it at the top as one of the growth drivers. Other than that, I don't think they said anything specific about the HomePod.
     I think the HomePod will be a lot like apple Watch.   It will start off slow and then grow to dominate its category as the Software is updated especially when the new guy fixes Siri.      There will definitely be a spike when Stereo is added.   
    jonagoldwatto_cobra
  • Reply 18 of 46
    brisancebrisance Posts: 63member
    saltyzip said:
    brisance said:
    The analysts that misguided investors should be sued. They had only one job and they blew it. 
    They were expecting a supercycle of sales and that hasn't happened, which is why sales forecasts have been cut in supply chains.
    No, it’s poor journalism, if it can even be called journalism. It’s outright lies and none of the liars have been called to account. The narrative was that because Samsung’s display unit is the sole supplier for the iPhone X’s OLED screen, the former’s poor performance would mean commensurately tepid sales of the iPhone X. So either the comapnies’ people are lying in their respective earnings conference calls or the analysts are lying by creating a false link between two seemingly unconnected events.
    tmayRayz2016watto_cobra
  • Reply 19 of 46
    jonagoldjonagold Posts: 31member
    Same doom and gloom we’ve seen the last 15 years.  I was on the sideline hoping a for a huge selloff so that I could swoop in and buy more shares. Oh well.

    I think one must to have had followed Apple during the SJ years closely to understand the product rollout and philosophy. The iPhone X was not meant to be In the hands of everyone. It was priced high for a reason as every newly-featured device has been so the early adopters can pay for the R&D while economies of scale allow the features to trickle down to later devices. This has happened since the beginning of time with Apple, they’ve always tempered the features.  Of course they could sell the X at a 5% margin on day one, but they have never sold anything for a margin less than 30-40%.  Everyone (analysts) should know this by now.  Apple has never raced to the bottom...ever.  They are more mature than that and it is why they sit on a hoard of cash they don’t know what to do with.  Of course Apple could sell out their customers like FB and GOOG for a quick buck, but they’re more far-sighted and innovative than that. It takes a lot of restraint on behalf of the team to continue what made Apple a different company from the beginning.  I commend them, as does my portfolio. 
    StrangeDaysnetmageblah64watto_cobra
  • Reply 20 of 46
    retrogustoretrogusto Posts: 1,111member
    I’m puzzled by this:

    ”iPhone X was Apple's top-selling iPhone every week over the March quarter, first quarter in which top-of-the-line model is also most popular.”

    Apart from the plus-size models (so to speak) in the years that they have existed, haven’t the top-of-the-line models always been the most popular? For example, when the 5s came out, wasn’t it more popular than the 5, which was still available for purchase? Or are they saying that the iPhone X 256 is selling better than the 64?
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