Latest / Bloomberg Intelligence / Instant Reaction: Apple Delivers Upbeat Forecast

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Instant Reaction: Apple Delivers Upbeat Forecast · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is a breaking
• 0:10
  Speaker 1: news update from Bloomberg. Instant reaction and analysis from our
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  Speaker 1: three thousand journalists and analysts around the world.
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  Speaker 2: Just want to get to Apple. Let's get to it.
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  Speaker 2: First quarter revenue one hundred and forty three point seventy
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  Speaker 2: six billion, Yes, a big beat. One hundred and thirty
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  Speaker 2: eight point four billion was what the street was expecting.
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  Speaker 2: First quarter EPs also a big beat. Two dollars eighty
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  Speaker 2: four cents a share. The street estimate was for two
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  Speaker 2: dollars sixty eight cents a share Greater China. They've been
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  Speaker 2: struggling there. Revenue in Greater China twenty five point fifty
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  Speaker 2: three billion dollars, folks, That is a beat. Twenty one
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  Speaker 2: point eighty two billion dollars was what the street was expecting.
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  Speaker 2: That's a new all time EPs record though overall, and
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  Speaker 2: the install base now has more than two and a
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  Speaker 2: half billion active devices. Well, got to say investors like
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  Speaker 2: in this report. In the Aftermarkett still up about two
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  Speaker 2: percent here in the postmarket trade. Hey, let's see what
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  Speaker 2: Bloomberg News Managing editor for Global Tech Consumer Tech thinks
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  Speaker 2: about this. He is Mark German, knows everything about this company,
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  Speaker 2: lots of exclusives. This feels pretty good.
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  Speaker 3: Tim Cook has to keep his job, at least for now.
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  Speaker 3: This is a massive, massive, massive quarter. This is a
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  Speaker 3: home run. Their greatest quarter ever by orders of magnitude.
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  Speaker 3: It's a gigantic beat on overall revenue. China is back.
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  Speaker 3: You have a big beat on the iPhone in particular.
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  Speaker 3: Eighty five billion dollar quarter is just insane. The installed
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  Speaker 3: based two and a half billion. The numbers are just
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  Speaker 3: beyond excellent. We could ignore the fact that they missed
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  Speaker 3: on wearables, home and accessories. We can ignore the fact
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  Speaker 3: they missed on Mac. We could ignore the fact that
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  Speaker 3: they barely you know, crossed expectations on services. I guess
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  Speaker 3: none of that matters when the iPhone is selling so well.
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  Speaker 3: But still there's the big existential question of what's next.
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  Speaker 3: It's an important question because of AI and Apple absolutely
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  Speaker 3: needs to figure out what's AI strategy. There needs to
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  Speaker 3: be an AI reckoning of some sort there. But they
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  Speaker 3: just bought themselves a very long time with this just
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  Speaker 3: insanely great quarter.
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  Speaker 1: So let's talk about a couple of the areas that
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  Speaker 1: you highlighted there. One is China and Another one is
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  Speaker 1: the sort of the concerns that people had about memory
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  Speaker 1: chips in this quarter and the rising prices of memory chips.
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  Speaker 1: How was Apple able to navigate this so it didn't
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  Speaker 1: hit its margins like people thought it would.
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  Speaker 3: They buy components and memory components quarters and months in advance,
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  Speaker 3: sometimes years in advance. They have these deals struck, so
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  Speaker 3: they're working off of numbers and pricing and materials here
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  Speaker 3: that really give them extensive pricing power over competitors. So
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  Speaker 3: we'll hear more about that on a call today, But
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  Speaker 3: it seems like they're fine.
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  Speaker 2: Mark, I love this. I mean, I'm looking at our
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  Speaker 2: live blog, so you must have like kicked this out
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  Speaker 2: before you jumped on air with us. But you did
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  Speaker 2: mention that the significant things on the call. You you've
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  Speaker 2: already talked about the AI strategy succession. You've kind of
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  Speaker 2: said maybe that's off the table for now because this
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  Speaker 2: was such a blowout quarter. You talk about the long
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  Speaker 2: term viability of the business if it doesn't get its
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  Speaker 2: AI act together. It's hard to even think about that
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  Speaker 2: when you see the numbers here and just what a
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  Speaker 2: big company this is and how significant is I feel
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  Speaker 2: like in so many different people's lives, like I have
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  Speaker 2: an Apple household. I think Tim has an Apple household.
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  Speaker 2: Is that is that really the long term viability if
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  Speaker 2: they don't get AI together.
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  Speaker 1: Call me Tim Apple.
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  Speaker 2: In fact they do, that's.
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  Speaker 3: Yes, I said long term right and the talking really
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  Speaker 3: and walking really long? Okay, uh, the little, the little,
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  Speaker 3: the really long term here right, Like, at some point
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  Speaker 3: there is going to be a need to fulfill these
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  Speaker 3: AI desires and you know they're going to have to
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  Speaker 3: figure that out well.
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  Speaker 2: Onor ag Ranov our BI team. He talked with Tim
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  Speaker 2: and I just moments ago, and he talked about, you
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  Speaker 2: know how they're working with Google when it comes to AI,
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  Speaker 2: relying on them right now for their models, and so
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  Speaker 2: they're not doing the big AI spend. That makes sense
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  Speaker 2: for now too. So do you agree that that's kind
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  Speaker 2: of a smart strategy now and kind of waiting it
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  Speaker 2: out a little bit, But at some point they've got
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  Speaker 2: to kind of do their own thing.
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  Speaker 3: It's not that they're waiting it out. It's that they
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  Speaker 3: have no choice, They have nothing internal. So it's not
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  Speaker 3: that they're waiting it out, it's that they need to
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  Speaker 3: do it. And so they're partnering with the best partner
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  Speaker 3: they can that's going to offer them the best pricing power,
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  Speaker 3: which for now is Google. They initially wanted to work
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  Speaker 3: with Anthropic, but from a pricing standpoint, that didn't work out.
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  Speaker 3: They couldn't work with open Ai because they're, you know,
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  Speaker 3: hardcore competitors at this point. So Google is all who
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  Speaker 3: was left. And obviously the judge didn't break up the
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  Speaker 3: search deal there, so it made sense and it'll aligned
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  Speaker 3: pretty nicely for them.
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  Speaker 1: Okay, do we know yet how Apple was able to
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  Speaker 1: beat expectations in China once again for the first quarter
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  Speaker 1: the most recent quarter, Greater China revenue came in at
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  Speaker 1: twenty five point five to three billion dollars. Twenty one
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  Speaker 1: point eight two was the estimate. You said it minutes ago.
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  Speaker 1: It is back in China. You're holding up an iPhone
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  Speaker 1: right now. That's what they did.
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  Speaker 3: I'm answering your question. I'm answering your question.
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  Speaker 1: It was the iPhone seven color orange. Oh, it's the
• 5:16
  Speaker 1: color orange. It's that easy.
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  Speaker 3: It is the Promax. No, it's design. People buy the
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  Speaker 3: new designs. This is the first new design in half
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  Speaker 3: a decade. It got it done. That's why you do
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  Speaker 3: new designs because you're trying to bring in new customers,
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  Speaker 3: why does for upgrades? And but that's the way to
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  Speaker 3: do it.
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  Speaker 1: Didn't They know that?
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  Speaker 3: Of course they know that, But it takes time to
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  Speaker 3: do these new designs and you kind of want to
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  Speaker 3: get it right. And then you can't do it too
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  Speaker 3: often because if you do it too often, it doesn't
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  Speaker 3: have the power that it has if you do it
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  Speaker 3: only every so often.
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  Speaker 2: Hey, I want to roll into this a story you've
• 5:49
  Speaker 2: got on the Bloomberg that you put out today, and
• 5:52
  Speaker 2: this has to do with Apple buying the Israeli AI
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  Speaker 2: startup that interprets facial movement QAI. Is this important?
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  Speaker 3: I think it's going to enable some features for future
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  Speaker 3: air pods and smart glasses and mixed reality headsets and
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  Speaker 3: all that, but it's not fundamental to the overall AI strategy,
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  Speaker 3: which I think they're still trying to figure out. Also,
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  Speaker 3: just one piece of the puzzle, Okay.
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  Speaker 1: Mark. Another story that you reported on this week, Apple's
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  Speaker 1: Tim Cook calls for a de escalation after Alex Pretti's
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  Speaker 1: shooting in Minneapolis. There's this thread that Tim Cook is
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  Speaker 1: trying to a needle that Tim Cook is trying to thread.
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  Speaker 1: He was at the White House on Saturday, and to
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  Speaker 1: do a.
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  Speaker 3: Very good job. Why not the needle. Well, I think
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  Speaker 3: his statement was kind of worthless in some respects. I
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  Speaker 3: think that he's spent. I don't know if it's at
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  Speaker 3: this statement talking about how the president, the one who's
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  Speaker 3: overseeing the policies that led to the situation of Minneapolis,
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  Speaker 3: has his ears wide open to listen to feedback. I mean,
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  Speaker 3: I'm not sure that's what his employees, who are sort
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  Speaker 3: of revolting internally about this, we're looking for. I think
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  Speaker 3: they were looking for Tim Cook to take some sort
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  Speaker 3: of stand here, and he really didn't. You know. From
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  Speaker 3: his perspective is he's scared to upset Trump and get
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  Speaker 3: tariffs and other policies slapped onto Apple's business. So you'll
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  Speaker 3: see him continue to do what he's doing, because this
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  Speaker 3: is not about taking a stand at this point for him,
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  Speaker 3: this is about protecting the underlying business, and the results
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  Speaker 3: speak from themselves. Underlying business seems pretty well protected.
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  Speaker 2: Great stuff as always, and we'll be looking for your reporting.
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  Speaker 2: He is Mark URMs, Thank you, Mark, Managing editor for
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  Speaker 2: Global Consumer Tech for Bloomberg News. Out there out there
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  Speaker 2: on the West Coast, well, let's.
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  Speaker 1: Bringing Ed Ludlow. He's the coast of Bloomberg Tech on
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  Speaker 1: Bloomberg TV. He joins us from our San Francisco bureau.
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  Speaker 1: Ed the story from Mark German is out sales trouncing
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  Speaker 1: estimates after iPhone fuels record quarter. Tim Cook called the
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  Speaker 1: demand quote unprecedented. Is this all about the iPhone doing
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  Speaker 1: well around the world?
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  Speaker 4: Old? Yeah, all about the iPhone And in some ways
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  Speaker 4: it's like an issue of chronology and timing, right. Think
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  Speaker 4: about when Apple announces the iPhone seventeen generation and we're
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  Speaker 4: all there and Cooper Tino for it, and then it
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  Speaker 4: goes on sale and you have the holiday quarter, so
• 8:15
  Speaker 4: you know, actually it goes a little bit beyond that. Yeah,
• 8:18
  Speaker 4: you know, this is where the Bloomberg terminal comes in useful.
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  Speaker 4: So that is a big beat. You can just see
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  Speaker 4: it looking at the headline on a dollar basis. But
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  Speaker 4: not only is it nine percent above consensus even the
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  Speaker 4: top end of the most bullish ranges on how this
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  Speaker 4: iPhone would do, we're only about eighty one billion dollars.
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  Speaker 4: I think it came in above eighty five billion dollars.
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  Speaker 4: So they've done something. Either the phone has got traction
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  Speaker 4: or they've done something smart with the timing of it
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  Speaker 4: and it's sold well. The bit that's missing, of course,
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  Speaker 4: is that that commentary does not have anything specific to
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  Speaker 4: do with Greater China. We know the numbers in Greater
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  Speaker 4: China are really good, but how did this iPhone do there?
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  Speaker 2: Yeah, like, is it just whoa just a good quarter
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  Speaker 2: or do was it luck or was it really strategy?
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  Speaker 2: Right of understanding.
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  Speaker 4: I'm super cautious because sometimes we've relied on third party
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  Speaker 4: data like you. I won't name it, it would be
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  Speaker 4: a bit unfair, but there are various third party data
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  Speaker 4: sets that say, oh, no, Apple's doing really bad.
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  Speaker 1: You're talking about it's okay, okay, I'll.
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  Speaker 4: Stick to my guns and you know, and then Apple
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  Speaker 4: comes around with earnings and the opposite has been true
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  Speaker 4: on more than one occasion. But this occasion, like the
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  Speaker 4: third party data that this sort of incremental and anecdote
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  Speaker 4: of people queuing up for the iPhone seventeen in all markets,
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  Speaker 4: but like Greater China, it was kind of there. So
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  Speaker 4: so that's interesting. Where else do you want to go?
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  Speaker 1: I mean this, you know, this is Apple.
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  Speaker 4: There's anything we want to go to AI? Because yes,
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  Speaker 4: you want to ask me about the thing that they
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  Speaker 4: have nothing to say about.
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  Speaker 1: WHOA sure every analyst is really pointed to that. I mean,
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  Speaker 1: we can we can talk about the relationship that Apple
• 9:58
  Speaker 1: has with with Google and for gem and we could
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  Speaker 1: talk about all the money going to Open AI potentially
• 10:03
  Speaker 1: from Amazon and other companies, about a potential one hundred
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  Speaker 1: billion dollar fundraising around We could talk about Apple relying
• 10:10
  Speaker 1: on third parties rather than building its own Is there
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  Speaker 1: a risk in doing that?
• 10:16
  Speaker 4: I go back to basics, and you know, I kind
• 10:18
  Speaker 4: of rely on Bloomberg's Mark Guman, who is one of
• 10:21
  Speaker 4: the world's leading journalists when it comes to covering not
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  Speaker 4: just Apple but consumer electronics. And in the context of
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  Speaker 4: this earnings print, what he's written is probably true that
• 10:31
  Speaker 4: Apple has done enough to mask over or allay the
• 10:36
  Speaker 4: concerns that investors have about a lack of progress in
• 10:39
  Speaker 4: AI as a product. You know, the reporting's quite clear,
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  Speaker 4: and it's been announced now officially, right that at least
• 10:45
  Speaker 4: on the interim, Apple's AI generation of Siri will be
• 10:50
  Speaker 4: underpin underpinned by Gemini. And Mark's reported a lot about
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  Speaker 4: the financials around that. Right, it's a one billion perannum agreement.
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  Speaker 4: We don't. We don't and you won't get this sort
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  Speaker 4: of announcement like here it is, here's the date it's coming,
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  Speaker 4: and this is what it can do until it's here.
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  Speaker 4: You know, that's not how Apple operates.
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  Speaker 2: Yeah, it's just you know, I mean it's pretty like
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  Speaker 2: like where do you go? Where do you go?
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  Speaker 3: You know?
• 11:19
  Speaker 2: Here we are looking. I mean the stock isn't up
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  Speaker 2: as much as it was earlier. We were talking about,
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  Speaker 2: you know, more than a two percent gain. I think
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  Speaker 2: at its highs here in the aftermarket, it's just up
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  Speaker 2: about three quarters of one percentage point. What is it
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  Speaker 2: that they need to do? Maybe on the call? Is
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  Speaker 2: it ai? Is it that this is sustainable, this is
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  Speaker 2: a strategy, this is you know, we figured out China.
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  Speaker 4: Like, what is it? Well? You know that I don't
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  Speaker 4: forgive me because I was blogging, I didn't hear what
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  Speaker 4: you guys were talking about just before. But in this
• 11:50
  Speaker 4: very limited earnings release and statement, you guys maybe you
• 11:54
  Speaker 4: went over the risk factors and forward looking.
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  Speaker 1: Yeah, we talked about that. We talked about that, you know,
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  Speaker 1: I talked about how you started pointing that out back
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  Speaker 1: in May of last year.
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  Speaker 4: In May of last year, I was sat next to
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  Speaker 4: the you two at New York studio, do you remember,
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  Speaker 4: and we were like, oh, that's interesting, and they've never
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  Speaker 4: said that before.
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  Speaker 1: But that was only your first report post Liberation Day, right.
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  Speaker 4: The only observation I'll make in line with that is
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  Speaker 4: that this release also says nothing about the environment for
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  Speaker 4: memory chips. And you know, like memory chip prices are
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  Speaker 4: very high.
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  Speaker 2: But their margin was so good, right.
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  Speaker 4: And their margins were pretty good, and there's a scarcity,
• 12:29
  Speaker 4: and that the principal difference is like this. This is
• 12:32
  Speaker 4: why it's so fun to cover hardware companies. And it's
• 12:34
  Speaker 4: a privilege to be a technology journalist when you get
• 12:37
  Speaker 4: access to all these companies and speak to the CEOs.
• 12:40
  Speaker 4: If you're a very big company, you have leverage with
• 12:43
  Speaker 4: your supply base. If a supplier has to choose, I've
• 12:46
  Speaker 4: got this number of things and I can only send
• 12:48
  Speaker 4: them here, or I can send them there, or I
• 12:50
  Speaker 4: can split. It helps to be Apple, is what I'm saying.
• 12:53
  Speaker 4: And there are companies that I've covered whose CEOs you know,
• 12:56
  Speaker 4: will privately just agonize over how difficult it is to
• 12:59
  Speaker 4: convince supplies to give them the things they need. So
• 13:02
  Speaker 4: on the call that will come up. You know, the
• 13:04
  Speaker 4: cell sider likely to ask about it.
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  Speaker 1: But you know, there are high prices, and then there's
• 13:09
  Speaker 1: Apple dealing with high prices. And when I asked Mark
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  Speaker 1: this question about how they were able to successfully navigate
• 13:14
  Speaker 1: these higher memory prices, he said, well, one they're Apple,
• 13:18
  Speaker 1: and two they buy so far in advance, and they
• 13:20
  Speaker 1: buy the components too that go in, so at a
• 13:23
  Speaker 1: certain point ed it'll hit them.
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  Speaker 2: Right.
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  Speaker 4: Well, it's not just that the memory prices are high.
• 13:34
  Speaker 4: The reason that memory prices are high is that historically
• 13:37
  Speaker 4: memory dram and and flash memory is a very cyclical
• 13:43
  Speaker 4: up and down business. Boom and bust. You know, that's
• 13:45
  Speaker 4: what I and King would say, boom and bust in
• 13:47
  Speaker 4: King leads are semiconductive coverages right at Apploomberg. And it
• 13:52
  Speaker 4: is correct that Apple supply chain teams are its secret source.
• 13:55
  Speaker 4: You know, that was Tim Cook's whole thing. He was
• 13:57
  Speaker 4: coo like, that's what he was good at. But the
• 14:00
  Speaker 4: reason prices are high is because of scarcity of availability,
• 14:04
  Speaker 4: you know, because there is such demand for equivalent chips
• 14:08
  Speaker 4: that are going into data centers and so like Mark's
• 14:11
  Speaker 4: answer is appropriate. Apple has leverage and the ability of
• 14:14
  Speaker 4: scale to say like, Okay, we have got ahead of this,
• 14:17
  Speaker 4: and one would imagine that their supply chain team is
• 14:20
  Speaker 4: sophisticated enough to have foreseen some of the things that
• 14:23
  Speaker 4: we're now experiencing in that market.
• 14:26
  Speaker 1: So the first thing Mark said to us, I no, no,
• 14:30
  Speaker 1: you were blogging ed and you were looking at the results.
• 14:34
  Speaker 1: Was Tim Cook just bought himself time? Tim Cook gets
• 14:37
  Speaker 1: to keep his job. I mean, there's been a lot
• 14:40
  Speaker 1: of questions about succession. Mark says, That's one of two
• 14:42
  Speaker 1: questions he would ask on the call. The other would
• 14:44
  Speaker 1: be about AI in your view, was his job not
• 14:49
  Speaker 1: at risk? But you know there are questions about who
• 14:53
  Speaker 1: leads this company after Tim Cook.
• 14:56
  Speaker 4: I am not Bloomberg's Mark g What right is that?
• 15:04
  Speaker 4: When Mark did that recent reporting and it's been it's
• 15:08
  Speaker 4: been over a period of time about which executives are
• 15:12
  Speaker 4: now more at the forefront of Apple's future, he was
• 15:15
  Speaker 4: crystal clear in that reporting that there is no suggestion
• 15:20
  Speaker 4: that Tim Cook being replaced or stepping down or retiring
• 15:25
  Speaker 4: is imminent. You know that that that this was a
• 15:28
  Speaker 4: longer term thing. What I would reflect on is the
• 15:32
  Speaker 4: conversations that I have with people in industry and those
• 15:35
  Speaker 4: that come on the show and talk about it is
• 15:38
  Speaker 4: you know, Tim cook is is the operator that many
• 15:42
  Speaker 4: people would want. In an environment like this where we
• 15:45
  Speaker 4: still have trade and tariff considerations, the movement of goods
• 15:50
  Speaker 4: between borders from point A to point B is quite difficult.
• 15:53
  Speaker 4: And as we just talked about, you know, like specifically
• 15:57
  Speaker 4: memory pricing, that's within his you know, his his range.
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  Speaker 4: This is not me speaking, This is how people would
• 16:02
  Speaker 4: relay it to me. Mark when he goes on air
• 16:05
  Speaker 4: and when he writes, and again I'm not speaking on
• 16:07
  Speaker 4: his behalf. He would talk a lot more about the
• 16:09
  Speaker 4: product you know, fresh products, reiterated and renewed products, in
• 16:13
  Speaker 4: the product pipeline for the future. And right now, I
• 16:17
  Speaker 4: don't know that people are necessarily so worried about that,
• 16:20
  Speaker 4: at least in my world. They are worried about when
• 16:22
  Speaker 4: they're going to get the software bit right with AI.
• 16:25
  Speaker 2: You know, it's interesting, you say, AI. It's something we
• 16:27
  Speaker 2: talked about just briefly with Mark German. It's a story
• 16:30
  Speaker 2: that he put out Apple bys Israeli AI startup that
• 16:33
  Speaker 2: interprets facial movements. He's like, you know, interesting will help
• 16:38
  Speaker 2: in terms of I guess product development, but not necessarily
• 16:42
  Speaker 2: a big big deal.
• 16:43
  Speaker 1: So Ed, we have one time for one more question,
• 16:45
  Speaker 1: and we'd be really remiss if we didn't ask you
• 16:47
  Speaker 1: your view on AMAZ. This news come in just late
• 16:50
  Speaker 1: in the day, switching gears a little bit still on Ai,
• 16:52
  Speaker 1: Amazon talk and talks to invest fifty billion dollars and
• 16:56
  Speaker 1: open Ai expand tizzed this could be part of a
• 16:59
  Speaker 1: one high hundred billion dollar funding round, which would value
• 17:05
  Speaker 1: open Ai at more than eight hundred billion dollars. When
• 17:08
  Speaker 1: we're talking about a funding round of one hundred billion dollars,
• 17:11
  Speaker 1: I mean we're talking about just the massive, massive scale.
• 17:16
  Speaker 1: What does it mean that that Amazon could invest this
• 17:19
  Speaker 1: much money.
• 17:21
  Speaker 4: Well, Amazon probably can invest that much money. You know.
• 17:24
  Speaker 4: What we've seen is most of the hyperscalers that were
• 17:27
  Speaker 4: wedded to one player have diversified, and Thropic and Microsoft
• 17:31
  Speaker 4: deepened their interaction. And Thropic was very heavily aligned with Amazon.
• 17:36
  Speaker 4: Google and Anthropic have very heavily aligned and propic relies
• 17:39
  Speaker 4: on TPUs. Amazon from a software perspective, has tried to
• 17:43
  Speaker 4: accommodate all the players on its Bedrock platform, which is
• 17:46
  Speaker 4: basically a workplace where you can either train or build
• 17:49
  Speaker 4: on top of existing models. So the financials are there,
• 17:52
  Speaker 4: like if you have a if people are watching that
• 17:55
  Speaker 4: are investors in those companies, phone me explain the dilution,
• 17:58
  Speaker 4: to me, explain the post and pre evaluation. But open
• 18:03
  Speaker 4: ai needs capital. It is coming from multiple places apparently,
• 18:07
  Speaker 4: and one would imagine based on the reporting that's been
• 18:10
  Speaker 4: done by Bloomberg and others, this is a big, large
• 18:14
  Speaker 4: anchor round before a future I PO as well of
• 18:17
  Speaker 4: some part of the open ai entity.
• 18:19
  Speaker 1: The scale is just otherworldly, the amounts of money that
• 18:21
  Speaker 1: we're talking about right now,