What We Learned About Apple During Today's First Quarter Earnings Call

[MacRumors]

Apple today held its first earnings call of 2023, which covers the fourth calendar quarter of 2022. During the call, Apple CEO Tim Cook and Apple CFO Luca Maestri shared several interesting tidbits about recent product sales, services results, and more, and we've highlighted the most interesting parts of the call below.

AI

On the topic of artificial intelligence, particularly in services, Cook said that in the future, it will impact everything that the company does.

It's a major focus of ours. It's incredible in terms of how it can enrich customer lives, and look no further than some of the things that we announced in the fall with Crash Detection and Fall Detection, or a ways back with ECG. These have literally saved lives. We see an enormous potential in this space to affect virtually everything that we do. It is a horizontal technology, not vertical, so it will affect every product and every service that we have.

Services Revenue

While Apple's quarterly revenue was down five percent year over year, Apple's Services business hit an all-time revenue record of $20.8 billion. Services includes Apple Music, Apple TV+, Apple Arcade, iCloud+, AppleCare+, and more.

Apple now has more than 935 million paid subscriptions, up 150 million during the last 12 months. Apple also set revenue records for iCloud, payments, and Apple Music.

iPhone Sales

Apple in November issued a rare warning about iPhone 14 Pro shipment constraints, letting the market know that shipments would be lower than anticipated due to COVID-19 restrictions. The iPhone 14 Pro models were backordered throughout the holiday period, and as a result, iPhone sales were down year over year.

iPhone revenue was at $65.8 billion, down from $71.6 billion in the year-ago quarter. Production has since improved, and iPhone shipping times are shorter.

There were questions around whether customers opted for more affordable iPhones or would upgrade in the March quarter due to the November/December shortages, and Cook said that it is difficult to predict customer behavior. "It's hard to estimate recapture because you have to know what would have happened, how many people would have bought down, and it takes awhile to get those reports in during the quarter," Cook said. He added that Apple has made its "best guess" at recapture in the insight that it gave for the March quarter.

Cook also said that iPhone revenue would have grown in Q1 2023 had it not been for the supply shortage.

Wearables Revenue

Wearables revenue came in at $13.8 billion, down eight percent year over year. Despite the drop, Cook said that Apple continues to be "excited about the long term opportunity" in the wearables category.

The wearables category includes the AirPods and the Apple Watch at this time, but in the future, it will also encompass the mixed reality headset that Apple is expected to launch this year.

Though revenue was down, Apple CFO Luca Maestri said that the Apple Watch install base saw a new all-time record, largely because there were a record number of new users who purchased an Apple Watch during the quarter.

Macs and iPads

iPad revenue was up 30 percent thanks to the launch of new M2 iPad models, but Mac revenue saw a notable drop because there were no new Macs released in the final months of 2022.

Mac revenue was $7.7 billion, down from $10.9 billion in the year-ago quarter. iPad revenue was $9.4 billion, up from $7.2 billion in the year-ago quarter. Cook said that overall, Apple has a "low share and a competitive advantage with Apple silicon," which means the company is "well positioned within the market" in the long term.

March Quarter

Apple did not provide guidance for the upcoming March quarter, but did offer some directional insights. Apple CFO Luca Maesteri said that year over year, revenue is expected to be similar to the December quarter. Services and iPhone revenue are expected to be up, while Mac and iPad revenue will decline by double digits year over year.

Maestri explained that revenue will drop in those categories because of macro headwinds and challenging comparisons to the year-ago quarter due to product release timelines.

U.S. Manufacturing

Cook was asked whether manufacturing components in the United States (such as at TSMC's upcoming Arizona plants) would be more expensive than where components are manufactured now, and he said he wouldn't necessarily expect manufacturing to be pricier, as the person asking the question implied.

"We don't know what the impact will be at this point, but we're all in in terms of being the largest customer for TSMC in Arizona," said Cook. "We're very proud to take part in that."

Higher Average Selling Price

Cook was asked whether the higher average selling price that Apple is counting on for next quarter is "sustainable" in a tough macro environment, and Cook said that people are willing to "stretch" to get the best they can afford.

I would say that the smartphone - for us the iPhone - has become so integral into people's lives, it contains their contacts, health information, banking information, smart home, and so many different parts of their lives. It's a payment vehicle for many people. I think people are willing to really stretch to get the best they can afford in that category.

Read More

A more complete picture of Apple's earnings on a per-category basis can be found in our official results article.

Article Link: What We Learned About Apple During Today's First Quarter Earnings Call

 

[PauloSera]

Cook was asked whether the higher average selling price that Apple is counting on for next quarter is "sustainable" in a tough macro environment, and Cook said that people are willing to "stretch" to get the best they can afford.

"And we plan to lean into that and milk every dime we can from customers."

 

[AppleEnthusiast1995]

Good to know that U.S. manufacturing will not be more expensive.

 

[MBAir2010]

seems to me  is the only company that can release a product
that works
that is easy to set up
that works over 10 years
that has competent tech support.
that has great earning results
in 2023

I have a "nice" new bike story I purchased today.....

 

[Grolubao]

No **** sherlock, they jacked up the prices especially in Europe and the UK. An iPhone 14 Pro costs almost £1500 in the UK. The average Joe will not buy it, period

 

[russell_314]

"And we plan to lean into that and milk every dime we can from customers."

Wait, you mean they try to maximize the amount of money they make? Shocking!

I'm sure they're not really nice like you that would go to their boss and say hey I realize I'm making too much money. How about you take a few dollars off my salary because it's just too much. I can work for less money and still be happy!

 

[KeithBN]

No **** sherlock, they jacked up the prices especially in Europe and the UK. An iPhone 14 Pro costs almost £1500 in the UK. The average Joe will not buy it, period

Haha!

iPhone 14 Pro, UK price £1,099 (128GB model).

 

[Marshall73]

"And we plan to lean into that and milk every dime we can from customers."

No **** sherlock, they jacked up the prices especially in Europe and the UK. An iPhone 14 Pro costs almost £1500 in the UK. The average Joe will not buy it, period

It’s £1099 for the Pro, £1199 for the Pro Max you can get these through carriers on 12, 24, 36 and 48 month interest free deals. Average people still buy them because they keep their phones for multiple years. Samsuns are selling the S23 Ultra from £1249 on similar deals, these prices are what they see the market can handle.

 

[Mr. Dee]

Cook said that overall, Apple has a "low share and a competitive advantage with Apple silicon," which means the company is "well positioned within the market" in the long term.

Their solution is likely to obsolete more Intel based Macs this year and drive upgrades. I wouldn't be surprised if they drop macOS 14 support for 2018 and older devices. Or they might turn Ventura into a LTS release for those Macs.

 

[ian87w]

So, iPhone 15 lineup price increases are confirmed?

 

[ian87w]

It’s £1099 for the Pro, £1199 for the Pro Max you can get these through carriers on 12, 24, 36 and 48 month interest free deals. Average people still buy them because they keep their phones for multiple years. Samsuns are selling the S23 Ultra from £1249 on similar deals, these prices are what they see the market can handle.

In my country, for the price of the 256GB iPhone 14 Plus on sale, I can now get a 512GB S23 Ultra. The price discrepancy of Apple stuff is hilarious.

 

[ian87w]

Cook said that overall, Apple has a "low share and a competitive advantage with Apple silicon," which means the company is "well positioned within the market" in the long term.

Their solution is likely to obsolete more Intel based Macs this year and drive upgrades. I wouldn't be surprised if they drop macOS 14 support for 2018 and older devices. Or they might turn Ventura into a LTS release for those Macs.

Dropping support of intel macs soon is not surprising. They dropped PPC support very quickly after intel transition. They will probably do the same, considering they have transitioned everything (including the mac mini) on the consumer end. The only one remaining is the mac Pro, but for practical purposes, it has been superseded by the mac Studio.

I doubt Apple will bother with LTS version of macOS. They have never done so. Many macs have quite short software support (eg the first intel macs). Apple will simply move.

 

[Seanm87]

No **** sherlock, they jacked up the prices especially in Europe and the UK. An iPhone 14 Pro costs almost £1500 in the UK. The average Joe will not buy it, period

Mine cost £1100. Where did you get 1500 from?

 

[Marshall73]

In my country, for the price of the 256GB iPhone 14 Plus on sale, I can now get a 512GB S23 Ultra. The price discrepancy of Apple stuff is hilarious.

the galaxy fold says hello £1649, plastic display with a crease in it. Mobiles are overpriced by all.

 

[McTaste]

good to see apple surviving these challenging $30bn profit times

 

[Marshall73]

Dropping support of intel macs soon is not surprising. They dropped PPC support very quickly after intel transition. They will probably do the same, considering they have transitioned everything (including the mac mini) on the consumer end. The only one remaining is the mac Pro, but for practical purposes, it has been superseded by the mac Studio.

I doubt Apple will bother with LTS version of macOS. They have never done so. Many macs have quite short software support (eg the first intel macs). Apple will simply move.

Dropping Intel is a no brainier, Apple want to own as much as they can inside the devices to control and maximise cost and pricing.

 

[Realityck]

AI
On the topic of artificial intelligence, particularly in services, Cook said that in the future, it will impact everything that the company does.

That sales pitch has been used before. Mostly with appliances, we can make life better. Then you use Siri, and think this cloud based limited AI is so primitive you still need the right words to get the correct result.

 

[TracesOfArsenic]

Skillful dodge on consumers not being so interested in the iPhone 14, Mr Cook. Hubris is on point.

 

[TimHalfCooked]

Cook said that people are willing to "stretch" to get the best they can afford.

Tim is working on the principle of; if I keep saying people want to run themselves into debt to buy our products, people will eventually run themselves into debt buying our products.

"Developers will stretch to give me 30% of their revenue to say on our platform too"

 

[bartolo5]

Good to know that U.S. manufacturing will not be more expensive.

It could be even cheaper in the big picture after all. You have a wildly more predictable supply chain without geopolitical tension nonsense. You have a process you can control and doesn't depend on the whims of tricky foreign goverments.

 

[Realityck]

Skillful dodge on consumers not being so interested in the iPhone 14, Mr Cook. Hubris is on point.

In a way they aren't as much. Wireless companies are finding customers hang onto their iPhones longer. It occurs when the next model isn't much different than the previous model. Why Upgrade. Raise prices in the future will further reinforce this.

Ahead of Apple earnings, did wireless companies send a troubling signal?

Apple is due to report results after Thursday's closing bell, but a pair of analysts saw something that was "not a good data point" in other earnings so far.

www.marketwatch.com

 

[sevoneone]

We learned that slowly turning up the price point and fragmenting the leading product is not a long-term strategy for keeping the "line" moving up. When the economic outlook gets hazy, the number of people willing/able to spend $1,100 or commit $35/mo on a phone is going to shrink. And I say this as someone that just shattered the back of his 12 Pro and replaced it with a 14 Pro and wonder every day what exactly made the upgrade worth the money...

 

[ian87w]

That sales pitch has been used before. Mostly with appliances, we can make life better. Then you use Siri, and think this cloud based limited AI is so primitive you still need the right words to get the correct result.

Yeah. I chuckled when I read that. Apple talking highly about AI is like a bad joke considering how bad still a decade old Siri is. It's like what AI are they talking about?

 

[ian87w]

We learned that slowly turning up the price point and fragmenting the leading product is not a long-term strategy for keeping the "line" moving up. When the economic outlook gets hazy, the number of people willing/able to spend $1,100 or commit $35/mo on a phone is going to shrink. And I say this as someone that just shattered the back of his 12 Pro and replaced it with a 14 Pro and wonder every day what exactly made the upgrade worth the money...

But you still upgraded anyway... That's the magic of Apple.
People buy iPhones not because they need a phone, it's because they want the Apple brand. Thus bad economic situations won't affect luxury companies like Apple that badly. This report might "look bad" for Apple, but when we look at the rest of Apple's competitors, Apple is still doing extremely well considering what's going on around the world.

 

[spartan1967]

That sales pitch has been used before. Mostly with appliances, we can make life better. Then you use Siri, and think this cloud based limited AI is so primitive you still need the right words to get the correct result.

And correct results from Siri are diminishing.