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MacDailyNews presents live notes from Apple’s Q317 conference call

Tuesday, August 1, 2017 · 4:45 pm

MacDailyNews presents live notes from Apple’s Q317 Conference Call with analysts starting at 5pm EDT/2pm PDT today.

Apple will provide live audio streaming of its Q317 Results Conference Call using Apple’s industry-leading QuickTime multimedia software.

Apple today announced financial results for its fiscal 2017 third quarter ended July 1, 2017. The company posted quarterly revenue of $45.4 billion and quarterly earnings per diluted share of $1.67. According to Thomson Reuters, the analysts’ consensus estimates called for revenue of $44.89 billion and EPS of $1.57.

For their fiscal 2017 fourth quarter, Apple guided for revenue between $49 billion and $52 billion.

Apple is very likely to open regular trading at a new all-time high tomorrow! AAPL after hours: $159.59, +$9.54 (+6.36%) @ 5:59PM EDT Live notes from Apple’s Q117 Conference Call in ~~reverse~~ (I have put them in correct order—Swordmaker) chronological order:

Start of conference call

Apple CEO Tim Cook: Apple is proud to announce every strong results with unit and revenue growth in all of Apple’s product categories
Unit sales:
- iPhone: 41.026 million (+2% YOY)
- iPad: 11.424 million (+15% YOY)
- Mac: 4.292 million (+1% YOY)
Other Products revenue: $2.735 billion (+23% YOY)
(Other Products includes sales of Apple Watch, Apple TV, Beats products, iPod and Apple-branded and third-party accessories.)
Services revenue:7.266 billion (+22% YOY)
(Services includes revenue from Digital Content and Services, AppleCare, Apple Pay, licensing and other services.)
Apple returned $11.7 billion to investors during Q317, bringing cumulative capital returns to nearly $223 billion.
Apple had a very strong WWDC and the announcements will help delight Apple customers in the coming year
iPhone 7 was the most popular iPhone. iPhone 7 Plus was up strongly over iPhone 6s Plus
1.2 billion cumulative iPhone units sold to date
Apple Services up strongly – now the size of a Fortune 100 company
Apple achieved highest worldwide tablet marketshare in over four years thanks to new iPads
iPad unit sales have returned to growth
iPad sales up 32% YOY to U.S. education purchasers
Mac gained global unit marketshare; revenue grew 7% YOY
Apple off to a great start to Back to School with newly refreshed Mac portables
Apple Watch sales up over 50% YOY in the quarter
Apple Watch will become more intelligent than ever with watchOS 4 this fall
98% customer satisfaction for AirPods
Apple has increased AirPods production; still working to meet strong demand
Apple very excited about iOS 11, macOS High Sierra, tvOS, and watchOS 4 coming this fall
With ARKit, it’s clear that the imagination of developers has been captured
Apple believes AR has broad mainstream applicability
iOS will become the world’s biggest AR platform as soon as iOS 11 ships
HomePod coming this year with astounding audio quality – unlike any other wireless home speaker on the market
HomePod has strong home automation capabilities
Cook: Apple might even have some more innovations to share with you later this year
Luca Maestri reviews financials…
Apple now has lowest iPhone channel inventory in over 2 years
Apple very pleased with iPhone results, especially since it was a tough compare (Apple launched iPhone SE)
In the U.S. (451 Research) 95% customer sat. for iPhone 7 and 99% customer sat. for iPhone 7 Plus
App Store generates nearly twice the revenue of Google Play
Apple Pay is by far the #1 NFC payment service on mobile devices with over 90% of transactions worldwide
MacBook Pro is a strong performer (97% customer satisfaction)
Mac within Apple’s channel inventory target range
iPad within Apple’s channel inventory target range
iPad had 55% share of U.S. tablet market; 89% share of tablets prices over $200
iPad customer satisfaction ranges from 95-99% across all models
Walmart to deploy over 19,000 iPads to train associates across the U.S.
New Cisco partnership ads to enterprise security; will make cyber insurance more attainable to businesses
SAP app for human resources will support 45 million users worldwide
Maestri reviews U.S. schools deploying Apple iPads and other products
Apple Stores now total 497 locations worldwide
New record of $261.5 billion in cash and marketable securities
Apple repurchased 30.4 million Apple shares for about $4.5 billion in the quarter.

Guidance for next fiscal quarter:

Apple is providing the following guidance for its fiscal 2017 fourth quarter:
- revenue between $49 billion and $52 billion
- gross margin between 37.5 percent and 38 percent
- operating expenses between $6.7 billion and $6.8 billion
- other income/(expense) of $500 million
- tax rate of 25.5 percent

Analysts’ questions begin…

Maestri more difficult memory prices vs. a year ago
Product transitions affect gross margins
Cook: We’re looking very much forward to the product rollouts [to come in 2H 2017]
We are very encouraged by the results this quarter; exceeded Cook’s expectations
iPad grew dramatically more than market; Mac grew much more than market; Services grew extremely strongly
iPhone held its own
What Apple sees in mainland China is definitely encouraging
WeChat makes the switching opportunity for Apple even greater
Apple sees Tencent as one of Apple’s biggest and best developers; Apple looks forward to working with Tencent even more
iPhone upgrade totals for this fiscal year are the highest that Apple’s seen
Based on the amount of “iPhone 8” rumors, Cook feels there is a “pause” in iPhone sales; bodes well for pent-up demand
Cook: Outside of China, Android switchers up YOY and helped with Apple’s successful channel inventory reduction during the quarter
Cook: Apple has created 2 million jobs in the U.S. (3/4 of that 2 million are app developers)
Cook: Apple could have only been created here in the U.S., so we feel a responsibility to job creation in the U.S.
Cook talks of Swift Playgrounds helping increase developer base
Cook: Apple has purchased about $50 billion worth of goods and services from U.S. suppliers
Apple has established a $1 billion (to start) fund for U.S. manufacturing and plants
$200 million has already been invested in a Corning plant
Cook: 2/3rd of employee base in the U.S. and we’ll have “some things we’ll say about that later in the year.”
Cook ducks question about President Trump’s claim that Apple will build 3 “big, beautiful” manufacturing plants in the U.S.
Cook: Central gov’t in China tightened regulations on VPN apps. A license is required
Cook: We were required to remove unlicensed VPN apps from App Store in China; other app stores
Cook: There are VPN apps available in China App Store
Cook: In every country, we abide by the laws of that country
Cook: We believe in engaging the countries where we do business; se state our point of view in the appropriate ways
Cook hopes/expects to see some loosening of China’s stance on VPN apps in the future
Maestri: We feel very good about the performance of the business right now; Appel Watch and AirPods are doing incredibly well
We think China performance will continue to improve and that drives of guidance
Cook: Apple original content. We’re currently focused on Apple Music original content. It’s for our own learning and also to give Apple Music subscribers exclusive content. We’ve recently hired two producers of top notch content
Cook: We are very focuses on autonomous driving systems from a core tech point of view; it’s the “Mother of all AI projects.”
Cook: autonomous systems goes beyond cars and that’s all I want to say about that
Cook: I could not be more excited about AR and ARKit – just take a look at the early ARKit projects we’re seeing the Web already
Cook: AR is big and profound and we will look back someday and marvel at the start of it
It feels great to get this thing [AR] going at a level that can get so many developers involved
Maestri: Our Services business is very broad
Services is accelerating because the App Store is seeing an increasing large amount of paying accounts
Apple is making it easier for customers outside the U.S. to pay for apps on the App Store
Quality and quantity of App Store content continues to improve
Apple Music is growing very fast as are iCloud storage subscriptions
Customers get on the App Store and start spending and then, in general, tend to spend more over time
Cook re next-gen iPhones: We have no comment on anything that’s not announced.
Cook: I do think we can grow both in iPhone unit sales and market share; the installed base is growing which generates more upgrades; Apple feels good about ability to convince people to switch to iPhone; and in emerging markets [like India], Apple hasn’t even really gotten started
Cook: India reminds me of where we were in China several years ago; we are very excited about our opportunities in India
End of call.

Apple’s Q417 revenue guidance of between $49 billion and $52 billion for this quarter exceeded expectations, with analysts’ consensus at $49.2 billion

AAPL after hours: $157.65, +$7.60 (+5.06%) @ 4:42PM EDT

AAPL after hours: $158.28, +$8.23 (+5.48%) @ 4:45PM EDT

Apple is trading above its all-time high in after hour trading