Apple Rises After Beating Estimates: Live Blog

Eric Jhonsa

Apple shares were rising 2.1% after-hours on Tuesday after it beat earnings and revenue expectations for its December quarter. The tech giant reported earnings of $4.99 versus estimates of $4.54, while revenues of $91.8 billion came in ahead of consensus estimates for $88.4 billion. 

TheStreet's tech columnist, Eric Jhonsa, is analyzing the company's earnings report, and its call with analysts that's scheduled to begin at 5:00 p.m. ET.

Comments (77)
No. 1-50
Eric Jhonsa
Eric Jhonsa

Editor

Thanks for joining us.

Eric Jhonsa
Eric Jhonsa

Editor

Apple's call has ended. Shares are currently up 1.5% after hours to $322.32 after (against a backdrop of high expectations) the company soundly beat December quarter estimates with the help of better-than-expected iPhone sales and continued wearables strength.

Apple also issued above-consensus March quarter sales guidance, while noting that its guidance range is bigger than normal due to uncertainty related to China's coronavirus outbreak.

Eric Jhonsa
Eric Jhonsa

Editor

Question about Japanese revenue declining.

Maestri: Regulatory changes related to carrier subsidies had an impact. But the iPhone still did well in Japan, and Services and wearables rose faster than the company average. Japan is a country we've historically had a lot of success. Customers there tend to be very loyal/engaged.

Eric Jhonsa
Eric Jhonsa

Editor

Question about iPhone growth. How confident is Apple about sustaining iPhone growth this year?

Cook: We only give quarterly guidance. March quarter guidance takes into account iPhone expectations.

Eric Jhonsa
Eric Jhonsa

Editor

Another question about opex growth, and how it will trend.

Maestri: Our expense ratio is very good relative to peers. We still think we have a lot of great opportunities, and want to invest in them.

Eric Jhonsa
Eric Jhonsa

Editor

Question about iPhone mix, and the impact on gross margin.

Maestri: Strong iPhone 11/11 Pro demand has helped our iPhone mix.

Also notes that Services will be a larger % of revenue in FQ2, and that this will be a margin tailwind.

Eric Jhonsa
Eric Jhonsa

Editor

Question about augmented reality (there have been reports that Apple has been working on AR headsets).

Cook: When you look at AR today, there are both consumer and enterprise applications. That's part of why I'm excited about AR. There are a lot of AR apps in the App Store, and we expect more to launch.

Eric Jhonsa
Eric Jhonsa

Editor

Question about the impact wearables is having in terms of bringing people into the Apple ecosystem.

Cook: With each Apple product that's purchase, people get more drawn into the Apple ecosystem. For many, the iPhone is the first product, but I also think the Watch is the first product for some.

Eric Jhonsa
Eric Jhonsa

Editor

Question about opex growth: How much is it from moves such as Intel modem asset purchase?

Maestri: We feel good about opex. Apple is investing in advertising/marketing for new services. The Intel deal also increased opex, as did "variable expenses" related to higher revenue, such as credit card fees.

Eric Jhonsa
Eric Jhonsa

Editor

Question about TV+'s revenue impact.

Maestri: There was a very small revenue impact related to revenue deferrals from people getting a free year of TV+, and from people subscribing otherwise. For people getting a year of free TV+, revenue is recognized over the course of 12 months.

Eric Jhonsa
Eric Jhonsa

Editor

Question about Watch Series 3 and AirPods Pro supply constraints.

Cook: We're hopeful Watch Series 3 supply/demand will come into balance this year. Don't know when it will happen for AirPods Pro. Apple working hard to increase supplies.

Eric Jhonsa
Eric Jhonsa

Editor

Question about new spectrum being deployed for 5G, and whether carriers now feel more incentivized to drive phone upgrades.

Cook: We have some great partners that really helped us last quarter. They're working to keep customers loyal, and I expect that to continue.

Eric Jhonsa
Eric Jhonsa

Editor

Question about 5G iPhone launches.

Cook: I can't talk about future product plans. It's still early innings for 5G.

Eric Jhonsa
Eric Jhonsa

Editor

Question about Services growth slowing a little relative to FQ4.

Maestri: Services rose 17% in FQ1, compared with 16% in the year-ago quarter. Many services businesses did well. Paid subscriptions growing rapidly.

Adds that while new services didn't have a material impact on FQ1 Services revenue, he expects them to eventually.

Eric Jhonsa
Eric Jhonsa

Editor

Question about memory prices and inventories.

Maestri: We're seeing a benign commodity environment. Most commodities declined in December quarter, we expect same to happen in March quarter. We monitor prices, and sometimes we buy commodities in advance when we think it makes sense.

Eric Jhonsa
Eric Jhonsa

Editor

Question about China.

Cook: We had double-digit iPhone growth in Mainland China. Services also rose double-digits, wearables saw "extremely strong" double-digit growth. iPhone 11 "doing particularly well." Trade-in/financing programs also helping. Says ~3/4 of Chinese Mac buyers and nearly 2/3 of iPad buyers are first-time buyers.

Regarding coronavirus, says Apple is working with various groups and making donations, and has limited travel to certain areas. Notes Apple has some suppliers in the Wuhan area, but adds that there are alternate sources.

Says impact is "less clear" for Chinese suppliers outside of the Wuhan area. Mentions Apple has closed 1 Chinese retail store, and that some resellers have closed stores. Notes Chinese retail traffic has been affected by coronavirus in recent days.

Eric Jhonsa
Eric Jhonsa

Editor

Cook: Apple Card monthly payment plans contributed to the strong iPhone growth that Apple's retail business saw.

Eric Jhonsa
Eric Jhonsa

Editor

Question about TV+, and how Apple measures success.

Cook: We're measuring ourselves based on the number of subscribers (includes a lot of people getting a free year with device purchases).

Eric Jhonsa
Eric Jhonsa

Editor

Question about strong FQ2 gross margin guidance.

Maestri: We lose some revenue leverage in FQ2. But this is being offset by a favorable mix and cost savings.

Eric Jhonsa
Eric Jhonsa

Editor

First question is about wearables. How much growth is coming from first-time buyers, and how does Apple see the growth runway?

Cook: Wearables revenue rose 44% in FQ1. Watch and AirPods did very well. ~75% of Watch sales are to new buyers.

Eric Jhonsa
Eric Jhonsa

Editor

The Q&A session is starting.

Eric Jhonsa
Eric Jhonsa

Editor

Regarding guidance, Maestri says that Apple's wider-than-normal revenue range represents China uncertainty related to the coronavirus outbreak.

Eric Jhonsa
Eric Jhonsa

Editor

Maestri: We had $99B in net cash at the end of the quarter. Still aim to be net cash neutral.

Eric Jhonsa
Eric Jhonsa

Editor

Maestri now going over Apple's enterprise efforts. Highlights some engagements with healthcare firms.

Eric Jhonsa
Eric Jhonsa

Editor

Regarding Macs and iPads, Maestri notes they faced tough annual comps. Adds that nearly half of all Mac/iPad sales were to first-time buyers.

Eric Jhonsa
Eric Jhonsa

Editor

Maestri notes Apple's third-party subscription business (a point of contention for Spotify and some other firms) rose nearly 40%. Also says AppleCare had a strong quarter.

Eric Jhonsa
Eric Jhonsa

Editor

Maestri: Apple now has 480M paid subscriptions across its ecosystem, up 120M Y/Y. Expect to top 500M this quarter, and now aim to reach 600M before the end of 2020.

Eric Jhonsa
Eric Jhonsa

Editor

Maestri: New revenue records for Apple Music, payments, cloud services, App Store search ads. Also a new December quarter revenue record for the App Store.

Eric Jhonsa
Eric Jhonsa

Editor

Maestri: We set all-time iPhone revenue records in the US and a number of other markets. The iPhone installed base hit a new high, and is growing in each of Apple's geographic segments.

Eric Jhonsa
Eric Jhonsa

Editor

The FQ1 tax rate was officially 14.2% (that boosted EPS a little). Excluding discrete items, the rate was 16.5%, in line with guidance.

Eric Jhonsa
Eric Jhonsa

Editor

Maestri: GM benefited from the leverage produced by higher revenue. Saw a 60 bps headwind from forex.

Eric Jhonsa
Eric Jhonsa

Editor

Maestri: We set new records in the US, Canada, Mexico, Brazil, Germany, Spain, Poland, Vietnam.

Eric Jhonsa
Eric Jhonsa

Editor

CFO Luca Maestri now talking.

Eric Jhonsa
Eric Jhonsa

Editor

Concludes by saying Apple is well into working on some "new and exciting developments" for 2020.

Eric Jhonsa
Eric Jhonsa

Editor

Cook: We're closely following the coronavirus outbreak.

Eric Jhonsa
Eric Jhonsa

Editor

Apple is largely holding steady after hours: Shares are currently up 1.9%.

Eric Jhonsa
Eric Jhonsa

Editor

Cook going over Apple's education and health efforts, including its work with research organizations.

Eric Jhonsa
Eric Jhonsa

Editor

Cook: Retail stores set an all-time record, with strong double-digit growth for iPhone sales (aided by strong trade-in activity).

Eric Jhonsa
Eric Jhonsa

Editor

Though iPad and Mac revenue fell Y/Y, the installed bases continued growing.

Eric Jhonsa
Eric Jhonsa

Editor

He notes that Apple is seeing supply constraints for the Watch Series 3 and AirPods Pro.

Eric Jhonsa
Eric Jhonsa

Editor

Cook: Wearables business now the size of a Fortune 150 company. AirPods demand continues to be phenomenal, particularly for the AirPods Pro.

Watch set a revenue record, with over 75% of the quarter's Watch buyers being first-time buyers.

Eric Jhonsa
Eric Jhonsa

Editor

Apple Pay revenue and transactions more than doubled Y/Y. Annual transaction run rate now above 15B.

Eric Jhonsa
Eric Jhonsa

Editor

Cook: $386M spent on the App Store on New Year's (+20% Y/Y). Apple Arcade has been "fast off the block." TV+ "off to a rousing start."

Eric Jhonsa
Eric Jhonsa

Editor

Cook: We saw double-digit services growth in all geographic segments. Saw record revenue for a number of services.

Eric Jhonsa
Eric Jhonsa

Editor

Says Apple saw double-digit growth in the US, UK and France. Also did well in emerging markets such as Brazil, India and Mainland China.

Eric Jhonsa
Eric Jhonsa

Editor

Cook: There was "exceptional demand" for the iPhone 11/11 Pro.

Eric Jhonsa
Eric Jhonsa

Editor

Cook: Wearables had "a blowout quarter."

Eric Jhonsa
Eric Jhonsa

Editor

Cook: We set revenue records for Americas, Europe and Rest of Asia-Pac. Non-iPhone revenue once more rose double-digits.

Eric Jhonsa
Eric Jhonsa

Editor

Tim Cook talking.

Eric Jhonsa
Eric Jhonsa

Editor

Apple is going over its safe-harbor statement.


Earnings

FEATURED
COMMUNITY