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Instant Reaction: Apple Earnings · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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  Speaker 2: You're listening to Bloomberg Business Week with krol Messer and
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  Speaker 2: Tim Stenebek on Bloomberg Radio and Television. All right here,
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  Speaker 2: the Apple numbers third quarter revenue coming in above estimates
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  Speaker 2: at eighty five point seven eight billion dollars. Estimates were
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  Speaker 2: for eighty four point four to six billion. Third quarter
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  Speaker 2: iPhone revenue coming in above estimates at thirty nine point
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  Speaker 2: three billion. Estimates are for thirty eight point nine to
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  Speaker 2: five billion third quarter Great Greater China revenue coming in
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  Speaker 2: below estimates. That one certainly watched very closely fourteen point
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  Speaker 2: seven three billion dollars. But we did see third quarter
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  Speaker 2: services revenue come in above estimates at twenty four point
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  Speaker 2: twenty one billion dollars. Shares of Apple bouncing around in
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  Speaker 2: the after hours. They were at first hire when these
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  Speaker 2: numbers first cross, now down about one percent.
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  Speaker 1: Yeah, they are bouncing kind of flat, if you will, right,
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  Speaker 1: They're bouncing around here. So we're trying to make sense
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  Speaker 1: of it. So let's get to it with our co
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  Speaker 1: host of Bloomberg Technology on Bloomberg Television, Ed La La.
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  Speaker 1: Here in our Bloomberg Interactive Broker studio up, Big Week,
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  Speaker 1: Big Day ed first Blush, What are you taking away from.
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  Speaker 3: THEE I kind of alluded to this in the preview
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  Speaker 3: in the top Live blog. Great beat for iPhone revenue
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  Speaker 3: in the quarter, which is interesting because we're pre sixteen.
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  Speaker 2: Yeah, like, why are people buying phones right now? They
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  Speaker 2: should be waiting right.
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  Speaker 3: There was a lot of waiting in markets like China
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  Speaker 3: that they were buying the fifteen generation with the intention
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  Speaker 3: of holding onto it. And then I go to the
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  Speaker 3: grater China revenue missing estimates and the third party data.
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  Speaker 3: Third party data is not always right, but he did
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  Speaker 3: tell us that Apple was slipping in greater China.
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  Speaker 2: Is the IDC data, the IDC data.
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  Speaker 3: There's counterpoint research, there's loads, But my point is that
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  Speaker 3: there was worried they would They did really face domestic
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  Speaker 3: pressure on the handset market there, and you always look
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  Speaker 3: to China as a point of focus. So you have
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  Speaker 3: to read between the lines because on the earnings call,
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  Speaker 3: CFO Lookame Street often addresses that issue head on how
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  Speaker 3: they did in the market in China, specifically.
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  Speaker 2: Erning's for share, earnings for share coming in one dollars
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  Speaker 2: and forty cents per share. That beat estimates of one
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  Speaker 2: dollar and thirty five cents, So a beat.
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  Speaker 4: There as well.
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  Speaker 1: Yeah, I don't know, you know, I'm looking at kind
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  Speaker 1: of our right through buyer mark Erman, you know, marking
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  Speaker 1: a return to revenue growth last quarter, he says, topping
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  Speaker 1: analyst estimates, indicating that upgraded iPads and a strong services
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  Speaker 1: business helped make up for some of those headwinds in China.
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  Speaker 1: So sales were up five percent to eighty five point
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  Speaker 1: eight billion in that fiscal third quarter, the iPhone maker, saying,
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  Speaker 1: putting out that statement, analyst had predicted eighty four point
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  Speaker 1: five So that's a beat. Three months ago, the CFO
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  Speaker 1: had said the company would grow by a percentage in
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  Speaker 1: the low single digits during the period. So some comparisons there. Again,
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  Speaker 1: just quick check on what Apple's doing here in the aftermarket,
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  Speaker 1: pulling it up here on my Bloomberg and because we
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  Speaker 1: said it's been bouncing around here, it's now up about
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  Speaker 1: two percent here in the aftermarket. Keep in mind, Apples
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  Speaker 1: up about thirteen percent so far in twenty twenty four.
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  Speaker 2: Okay, overall revenue beat, iPhone revenue beat, MAC revenue beat,
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  Speaker 2: iPad revenue beat, wearables, homes and accessories also beat, so
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  Speaker 2: looking pretty good. There was that miss on China. Of course,
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  Speaker 2: Tim Cook saying in a statement that Apple's reporting a
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  Speaker 2: new June quarter revenue record of eighty five point eight billion,
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  Speaker 2: up five percent from a year ago. Talking about announcing
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  Speaker 2: software platforms at WWDC, Apple Intelligence ed, Apple Intelligence, what's
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  Speaker 2: the question that investors are going to be looking to
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  Speaker 2: the answer for the fun the call.
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  Speaker 3: Actually important to us what investors are looking for a
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  Speaker 3: lot of people looked at what the Apple Intelligence was
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  Speaker 3: and said, actually, it's fantastic. They understand the logic that
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  Speaker 3: what Apple wants to do is make the things already
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  Speaker 3: on iOS better. That's based on the conversations I've had
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  Speaker 3: with investors. The thing is that they had already accepted
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  Speaker 3: to a large extent, because it's priced into the stock
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  Speaker 3: that it's not ready for the primetime. It's not like here,
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  Speaker 3: and so I do think that it's going to be
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  Speaker 3: interesting to get some very specific detail from the call
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  Speaker 3: on geographic rollout, generation of iPhone roll out.
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  Speaker 4: Mark German has reported on all of this right.
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  Speaker 3: The delay by a few weeks post iOS eighteen generation
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  Speaker 3: software update, But that's what investors are looking at. They're
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  Speaker 3: trying to do the math on what prompts and individuals
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  Speaker 3: buy a new iPhone or up their subscription to Apple services,
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  Speaker 3: because how compelling that product is.
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  Speaker 4: That's it.
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  Speaker 1: Yeah, exactly. Well, like you know, we said, I'm going
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  Speaker 1: to buy a new phone. I know, postling he's going
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  Speaker 1: to buy a new phone.
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  Speaker 5: I know.
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  Speaker 1: I look at the end of the year all the
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  Speaker 1: money that goes out to Apple and all the various
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  Speaker 1: services and cloud storage and so on and so far.
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  Speaker 2: Well, here the CFO taking notes right now, Carol. Two
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  Speaker 2: new phones will be sold in the fourth quarter or
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  Speaker 2: third quarter of the year.
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  Speaker 1: Now, it's kind of interesting, right exactly. And you know,
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  Speaker 1: I'm looking at our live blog too. There isn't a
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  Speaker 1: single mention of the Vision Pro and Apple's earnings release.
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  Speaker 1: The thirty five hundred dollar our headset is Apple's first
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  Speaker 1: major new product in nearly a decade. There's not a
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  Speaker 1: ton left in the cupboard in terms of innovation with
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  Speaker 1: the company canceling itself driving card Viebruary. That's coming from
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  Speaker 1: our Mark Garment.
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  Speaker 2: What's interesting is that there's a post from Ed Lovelow
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  Speaker 2: in the live blog.
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  Speaker 1: How did he do that?
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  Speaker 2: While he's here in our studio with us.
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  Speaker 4: Yeah, I mean the fingers move fast to and the
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  Speaker 4: mouth sometimes.
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  Speaker 1: How are you thinking about We've been talking with you
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  Speaker 1: throughout the week about the tech reporting set, you know,
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  Speaker 1: season and the big megacap tech companies that have reported.
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  Speaker 1: How are you thinking about them? I don't know that
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  Speaker 1: there's one trend line to do.
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  Speaker 3: There is a trend line excluding Apple, which is capital expenditures.
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  Speaker 3: And what's so interesting is, like I was talking a
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  Speaker 3: bit about this in the blog earlier, Apple's capex is
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  Speaker 3: always low. A lot of investors always bemoaned it's cash balance.
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  Speaker 3: You know, it's so ginormous, right. I look at the
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  Speaker 3: release and I see Apple's board of directors declares a
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  Speaker 3: cash dividends of twenty five cents per share. There's one
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  Speaker 3: really important thing when you cover a stock like this,
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  Speaker 3: you need to remind yourself how widely held is the
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  Speaker 3: stock around the world.
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  Speaker 4: Yes, there are many.
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  Speaker 3: Institutional investors that hold it in volume. One of them
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  Speaker 3: was on my show today, Denny Fish of Janis. Think
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  Speaker 3: all the individuals that buy Apple stock because they think
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  Speaker 3: it's prestigious. I always find that fascinating. So little divvy
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  Speaker 3: goes a long way.
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  Speaker 1: It does go a long way. Hey, listen, we've been
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  Speaker 1: reading his comments along with Ed's on the blog. We
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  Speaker 1: read a story on Apple. Let's bring a bit. Mark
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  Speaker 1: German is Bloomberg News chief technology correspondent. We call them
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  Speaker 1: our Apple guru joining us right now. Coming off of earnings,
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  Speaker 1: Mark walk us through what you think the Bloomberg audience
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  Speaker 1: needs to know about this release.
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  Speaker 5: Yeah, the through line here is that Apple be across
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  Speaker 5: the board in every product category iPhone, iPad, wearables, home
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  Speaker 5: and accessories, mac and services. So nice beats across the board.
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  Speaker 5: There still the iPhone one percent year of a year decline,
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  Speaker 5: not terrible, especially given that we are going into the
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  Speaker 5: new iPhone season. The other thing to note though is
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  Speaker 5: Greater China. Greater China's down about six percent. This came
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  Speaker 5: in both below expectations and obviously is an annual decline.
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  Speaker 5: That's something that I think a lot of analysts and
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  Speaker 5: investors are going to want to take a look at.
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  Speaker 5: Why is China's performance continuing to decline. Apple does say
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  Speaker 5: though that they still see this as an improvement over
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  Speaker 5: the China situation in the first half of the year,
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  Speaker 5: but still this is not great. Looking ahead, we're going
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  Speaker 5: to want to know any color that Apple may have
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  Speaker 5: on its call about how they're thinking they're going to
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  Speaker 5: do in the current quarter. The fourth quarter. The new
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  Speaker 5: iPhone line, the sixteen, will go on sale towards the
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  Speaker 5: very end of Q four, towards the end of September,
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  Speaker 5: so that's going to be a significant moment obviously contribute
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  Speaker 5: quite significantly to the bottom line in the current period,
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  Speaker 5: which obviously we're looking ahead at that. Another thing I
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  Speaker 5: want to call out is the iPad. iPad grew twenty
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  Speaker 5: four percent, not entirely a surprise. I'm surprised that Wall
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  Speaker 5: Street estimated so low on the iPad. Let's not forget
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  Speaker 5: that Apple hadn't released a new version of the iPad
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  Speaker 5: for about a year and a half and then released
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  Speaker 5: two major versions of the new iPad in May, along
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  Speaker 5: with major updates to their accessories. So no surprise there.
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  Speaker 2: Mark. They're not giving guidance anymore for the current quarter,
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  Speaker 2: But what do you expect them in terms of color
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  Speaker 2: to give about how sales are going to be in
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  Speaker 2: the current quarter. And then you know, obviously they're not
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  Speaker 2: going to talk about new iPhones that haven't been announced yet,
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  Speaker 2: but what kind of tidbits could we get.
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  Speaker 5: Well, it's anyone's guess what they're going to say. I'm
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  Speaker 5: not going to speculate. It really can go, you know,
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  Speaker 5: one way or another.
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  Speaker 2: They could.
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  Speaker 5: They're probably going to give some sort of indicator of
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  Speaker 5: how the iPhone is going to do in the fourth quarter,
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  Speaker 5: and there's really three options they're going to say. You know,
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  Speaker 5: let me take a step back. There's really two options
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  Speaker 5: of what they're going to say on the skull. Either
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  Speaker 5: going to say that the iPhone performance for Q four
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  Speaker 5: is going to be in line with iPhone performance in
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  Speaker 5: Q four last year, or they're going to say iPhone
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  Speaker 5: performance will accelerate in Q four in comparison to last year.
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  Speaker 5: If they don't say either of those things, I think
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  Speaker 5: it's a pretty good indicator that they think it's probably
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  Speaker 5: going to decline a little bit, or they're not entirely sure.
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  Speaker 5: They're probably not going to come out and say that
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  Speaker 5: in the iPhone launch cord or the iPhone is going
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  Speaker 5: to do more poorly than it did last year.
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  Speaker 3: Hey, Mark, it's unbelievable that you and I are speaking
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  Speaker 3: on Bloomberg Radio and simultaneously blogging live on the Bloomberg terminal.
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  Speaker 3: There are going to be terminals subscribers around the world
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  Speaker 3: that just understand what's happening. One thing I'd love to
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  Speaker 3: do with you, and I know it's hard, is the
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  Speaker 3: math on China. You know you get that three Q
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  Speaker 3: iPhone B and then the weakness in Greater China.
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  Speaker 4: Is it likely to be.
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  Speaker 3: Products specific in terms of iPhone or where does Apple
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  Speaker 3: tend to point to us when they have a specific
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  Speaker 3: geographic weakness.
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  Speaker 5: Well, the thing is is Apple never really gets into
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  Speaker 5: geographic weakness on a product ed product basis. What they
• 9:25
  Speaker 5: have said over the past several quarters as people have
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  Speaker 5: asked about the declines in China is that these declines
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  Speaker 5: are not due to the iPhone. Now, they're not saying
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  Speaker 5: what those other products are that are contributing to the declines.
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  Speaker 5: Whether it's the iPad, whether it's the Math, whether it's wearables.
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  Speaker 5: They're not sharing that information, So who knows what they're
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  Speaker 5: going to tell us this time. I believe personally that
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  Speaker 5: it does have to do with the iPhone and some
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  Speaker 5: of the softness we're seeing there. A lot of people
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  Speaker 5: are buying Huawei Vivo Opah, the local phonemakers instead of
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  Speaker 5: the iPhone. At this point, so I would say this
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  Speaker 5: has to do with the iPhone this quarter. Whether or
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  Speaker 5: not Apple's going to come out and say that that's
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  Speaker 5: another story.
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  Speaker 1: We're talking with Mark German, We're talking with Ed Ludlow.
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  Speaker 1: Apple third quarter iPhone revenue that's a beat. Third quarter
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  Speaker 1: Greater China revenue that was a miss. Third quarter revenue overall,
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  Speaker 1: that was a beat. Mark in terms of AI and
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  Speaker 1: Apple Intelligence, which they showed off a lot at the
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  Speaker 1: Developers conference in June. What would be a question that
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  Speaker 1: you'd want to know about that. I know they're still developing,
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  Speaker 1: they're working on it, but what do you want to know?
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  Speaker 5: I want to know if they think it's going to
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  Speaker 5: drive sales, because I can tell you after using it
• 10:28
  Speaker 5: for the past few days or so, I don't think
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  Speaker 5: there's any reason why anyone should buy a new iPhone
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  Speaker 5: based solely on the new features that are currently available
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  Speaker 5: or will be available from Apple Intelligence at the get go.
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  Speaker 5: I happen to think that Apple Intelligence is really a
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  Speaker 5: late twenty twenty five story, and maybe next year is
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  Speaker 5: one of that's going to drive sales, but the current
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  Speaker 5: incarnation it shouldn't be a sales driver. Quite frankly, based
• 10:51
  Speaker 5: on their marketing and some some ridiculous comments I've seen
• 10:54
  Speaker 5: from Wall Street analysts and others who cover Apple. Maybe
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  Speaker 5: they'll still grow based on it. Some people will be
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  Speaker 5: just appointed if they buy the iPhone based on Apple intelligence,
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  Speaker 5: at least from the beginning.
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  Speaker 2: Ed come on back in here to remind us about
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  Speaker 2: capex and why CAPEX should be looked at differently with
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  Speaker 2: Apple than with that Microsoft Alphabet, Amazon and Meta just.
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  Speaker 3: Because historically capital expenditures for Apple are just kind of
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  Speaker 3: a non event. They're not at the ten percentage point
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  Speaker 3: to twenty percentage point range that the hyperscalers have, particularly
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  Speaker 3: in the current environment. Right, It's just not a part
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  Speaker 3: of their story. And Mark always correct me if I'm wrong.
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  Speaker 3: But what I find so interesting about Apple strategy is
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  Speaker 3: the cost of where they're trying to get to, which
• 11:29
  Speaker 3: is Apple intelligence.
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  Speaker 4: Think about the partnerships, right.
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  Speaker 3: You know, Apple is not as hyper focused on the
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  Speaker 3: building of its own large language model. It has some
• 11:38
  Speaker 3: activity there, but it partners with open ai, so open
• 11:41
  Speaker 3: ai takes the R and D cost. How does Apple
• 11:44
  Speaker 3: facilitate its cloud It relies on GCP Google Cloud platform,
• 11:48
  Speaker 3: you know, and Google does its own R and D
• 11:50
  Speaker 3: investment on the silicon side, and I find that so interesting,
• 11:52
  Speaker 3: And you know that's why I'm a tongue in you know,
• 11:54
  Speaker 3: you guys know what I'm like, tongue in cheek. But
• 11:56
  Speaker 3: it's why I post in the blog about the divvy
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  Speaker 3: and about cash generation and the growing balance sheet because
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  Speaker 3: investors always say, I wonder what they'll do with that
• 12:06
  Speaker 3: one day.
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  Speaker 4: Do you know what I mean?
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  Speaker 1: Like, well, listen, they say, during the quarter of our
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  Speaker 1: record business performance generated EPs growth of eleven percent, nearly
• 12:13
  Speaker 1: twenty nine billion in operating cash flow, allowing us to
• 12:16
  Speaker 1: return over thirty two billion to shareholders. I mean, I
• 12:19
  Speaker 1: always think about this mark whenever we talk with you,
• 12:21
  Speaker 1: and whenever we talk with that I mean, just the
• 12:23
  Speaker 1: law of large numbers when it comes to Apple specifically,
• 12:27
  Speaker 1: as you continue to look at this this report and release,
• 12:31
  Speaker 1: I don't know what should we leave our investors with.
• 12:34
  Speaker 1: What do you think that they should be thinking at
• 12:35
  Speaker 1: top of mind when it comes to Apple.
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  Speaker 5: I'll simplify it for you. From a financial standpoint, everything
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  Speaker 5: is just fine, right, a little bit of concern in China.
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  Speaker 5: But my concerns about Apple aren't the financials today. It's
• 12:50
  Speaker 5: that this company is not pushing out products at the
• 12:54
  Speaker 5: pace that they used to. I'm simply not seeing that
• 12:57
  Speaker 5: game changing innovation that we used to see. I'm simply
• 13:01
  Speaker 5: not seeing them leap frog ahead of the competition. I'm
• 13:04
  Speaker 5: seeing a lot of response to the competition. Like with
• 13:06
  Speaker 5: Apple Intelligence, I'm seeing something that's not as good as
• 13:08
  Speaker 5: the competition with Apple Intelligence. I'm seeing them add features
• 13:13
  Speaker 5: to iOS that Android has had for a number of years.
• 13:16
  Speaker 5: I'm seeing really impressive new technology like the Vision Pro
• 13:20
  Speaker 5: that's not a product, it's more of a prototype or
• 13:23
  Speaker 5: developer kit.
• 13:24
  Speaker 1: Yeah.
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  Speaker 5: So I'm concerned about Apple products right now, and obviously
• 13:30
  Speaker 5: products hardware surprives this company.
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  Speaker 2: Yeah, so long term Mark, because you have such a
• 13:35
  Speaker 2: good view into the pipeline, much to the chagrin of Apple,
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  Speaker 2: I imagine no car coming Vision Pro, as you mentioned
• 13:42
  Speaker 2: the live blog, not even mentioned in this report.
• 13:44
  Speaker 5: Is that right? That's right?
• 13:47
  Speaker 2: So what is the big picture for the pipeline over
• 13:50
  Speaker 2: the next five years.
• 13:53
  Speaker 5: I think we're probably two or three years away from
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  Speaker 5: a bigger new product push, whether that's augmented reality glasses,
• 14:03
  Speaker 5: foldable phones, new types of touchscreen devices, new home devices,
• 14:09
  Speaker 5: new macs. But I'm not seeing anything in the next
• 14:11
  Speaker 5: two to three years that you know is going to
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  Speaker 5: be a game changer, right, division pro technology is a
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  Speaker 5: game changer. Nobody wants it. It's too heavy, it's too expensive,
• 14:23
  Speaker 5: there's no content.
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  Speaker 1: All Right, we're gonna leave it there. Listen your gem.
• 14:26
  Speaker 1: You have so much going on and so appreciate it. Markerman,
• 14:28
  Speaker 1: he's Bloomberg News chief technology correspondent joining us out there
• 14:31
  Speaker 1: from the West Coast. We're not gonna let Ed lad
• 14:33
  Speaker 1: logo yet because Ed, you know, we lean on you
• 14:36
  Speaker 1: like we lean on Mark. I feel like we've been
• 14:38
  Speaker 1: going through a lot of the tech news.
• 14:39
  Speaker 2: That's why we flew him out to New York this
• 14:41
  Speaker 2: week on the.
• 14:42
  Speaker 1: On the Bloomberg Jet, the good and the bad of
• 14:47
  Speaker 1: the big tech that have been reporting.
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  Speaker 4: Yeah, that's a really, really smart question.
• 14:51
  Speaker 3: So there's one thing that I learned very quickly, which
• 14:54
  Speaker 3: was Microsoft, do not miss Wall Street estimates.
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  Speaker 4: That won't go well for you.
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  Speaker 3: And I think that it's because we've just about the
• 15:00
  Speaker 3: money machine, but now the investors are really starting to
• 15:04
  Speaker 3: do the math on it. You know, the Capex number
• 15:06
  Speaker 3: was everything. I think I even Heardy and King on
• 15:08
  Speaker 3: the phone to you just say couples of expenditures and
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  Speaker 3: then hang up. It's because with that you can basically
• 15:16
  Speaker 3: do the math on the timing of sales growth from
• 15:20
  Speaker 3: bottom line growth from artificial intelligence, and then you can
• 15:23
  Speaker 3: sort of extrapolay it out further afield. That's why Amazon's
• 15:26
  Speaker 3: so interesting. Until the call, we're not really going to
• 15:29
  Speaker 3: know if it's a capex issue for AI or if
• 15:31
  Speaker 3: their retail business wasn't very good.
• 15:34
  Speaker 1: It's a really great point. Yeah, right, Like you need
• 15:36
  Speaker 1: to know these details.
• 15:37
  Speaker 2: Amazon in the after hours. Now as we do wait
• 15:40
  Speaker 2: for details from that call. Down five point seven percent.
• 15:44
  Speaker 1: I'm like, do we want to they'll let them go?
• 15:45
  Speaker 1: I guess we need to.
• 15:46
  Speaker 2: Yeah, we gotta let them go because we got another
• 15:47
  Speaker 2: interview to do.
• 15:48
  Speaker 5: Well.
• 15:49
  Speaker 3: I just got a day's point. So on the CFO call,
• 15:51
  Speaker 3: there's a media call that's just started with Amazon. Amazon
• 15:54
  Speaker 3: spent thirty five billion dollars on capital expenditures in the
• 15:58
  Speaker 3: first half of twenty twenty four, So we don't have
• 16:02
  Speaker 3: a number for the quarter, but it was thirty five
• 16:04
  Speaker 3: billion in one h and it will be more than
• 16:07
  Speaker 3: that in two h which is largely due to investments.
• 16:10
  Speaker 4: In AWS infrastructure. So I think I answered that question.
• 16:13
  Speaker 1: We did answer it. Astin answered all right, Kit, I listen.
• 16:16
  Speaker 1: Thank you so much, So great to have him here
• 16:17
  Speaker 1: on the East Coast this week, the co host of
• 16:19
  Speaker 1: Bloomberg Technology on Bloomberg TV. Catch them eleven am Wall
• 16:23
  Speaker 1: Street Time, Monday through Friday on Bloomberg Television. Of course,
• 16:26
  Speaker 1: the one and only Edla Love