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Instant Reaction: Apple Slides After Supply Shortages Hurt Its Sales Forecast · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
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  Speaker 2: This is a breaking news update from Bloomberg.
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  Speaker 3: Instant reaction and analysis from our three thousand journalists and
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  Speaker 3: analysts around the world.
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  Speaker 1: Covering Apple Punam Goyle with us from Bloomberg Intelligence, Anaragrana
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  Speaker 1: as well an Edla Lowe, host of Bloomberg Tech. So
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  Speaker 1: let's get to the numbers. Third quarter revenue one hundred
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  Speaker 1: and nine point forty two billion.
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  Speaker 2: That's a bap.
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  Speaker 1: One hundred and eight point eighty five is what the
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  Speaker 1: street was expecting. Third quarter EPs two dollars two cents
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  Speaker 1: a share. That is definitely above what the street was
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  Speaker 1: forecasting of a dollar eighty nine a share. If we
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  Speaker 1: go to third quarter products revenue seventy eight point sixty
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  Speaker 1: eight billion, that two is better than the street estimate
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  Speaker 1: of seventy seven point twenty five billion. Services revenue thirty
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  Speaker 1: point seven to four billion, a little bit light thirty
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  Speaker 1: one point thirty six billion. Am. And again we're kind
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  Speaker 1: of highlighting here on the Bloomberg what we call our
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  Speaker 1: red sticky, our red headlines. Third quarter revenue again better
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  Speaker 1: than what the street was forecasting, one hundred and nine
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  Speaker 1: point forty two billion versus one hundred and eight point
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  Speaker 1: eighty five billion. We're now getting iPhone revenue as well.
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  Speaker 3: Tim, Yeah, the headline's crossing fast and furious. I'phoned revenue
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  Speaker 3: coming in above estimates at fifty four point two five
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  Speaker 3: billion dollars the estimates for fifty three point six billion dollars.
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  Speaker 3: Shares Apple down about two point four percent in the
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  Speaker 3: after hours. Apple also declaring a cash dividend of twenty
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  Speaker 3: seven dollars a share. Third quarter Great of China revenue
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  Speaker 3: coming in shy of estimates at eighteen point eight two
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  Speaker 3: billion dollars. The estimate was for nineteen point five eight
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  Speaker 3: billion dollars. Apple shares falling about two point four percent
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  Speaker 3: in the post market. When these numbers crossed, they did
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  Speaker 3: shoot higher, ever so slightly. You know, watch the after
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  Speaker 3: hours carefully and with caution. We haven't heard yet what
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  Speaker 3: they're going to say on the call. Very light commentary too,
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  Speaker 3: as Apple is wont to do in their press release,
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  Speaker 3: just saying that the company's proud to report the strongest
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  Speaker 3: June quarter ever with double digit revenue growth across iPhone,
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  Speaker 3: Mac and services and in every geographic segment.
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  Speaker 1: This is Tim Cook setting June quarter records for both
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  Speaker 1: EPs and operating cash flow. Still here with our team,
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  Speaker 1: ed Lolo, I want to bring you back in here.
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  Speaker 1: I know you're just kind of going through the numbers.
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  Speaker 1: Two initial thoughts here. Again, we continue to see this
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  Speaker 1: dockdown about two and a half percent here in the aftermarket.
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  Speaker 4: Yeah, it's a slight beat against consensus or expectations across
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  Speaker 4: the board. Other in iPad, I see a miss, and
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  Speaker 4: then in services I see a miss on gross margin
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  Speaker 4: coming in at fifty point one percent. Apple does explain
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  Speaker 4: that there was roughly two percentage points benefit gross margin
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  Speaker 4: from tariffree funds, so we can we can re litigate
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  Speaker 4: that on the accounting side. But EPs therefore includes an
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  Speaker 4: eleven cent benefit from those tariffree funds. But that's what
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  Speaker 4: I see, you know, Tim summed it up. Well. The
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  Speaker 4: Greater China will be a question, right, But I see
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  Speaker 4: iPad miss and services miss. Services more likely to concern.
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  Speaker 4: If it's a miss, then iPad maybe, but otherwise strong.
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  Speaker 2: Yeah.
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  Speaker 1: Mark German is going to join us too for the
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  Speaker 1: conversation in a little bit. But he's also pointing at
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  Speaker 1: gross gross margins slightly above what Wall Street wanted. But
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  Speaker 1: again the stock down about two percent, but let's not
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  Speaker 1: forget the stock has been on quite a rally so
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  Speaker 1: far this year. What you're looking for plex.
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  Speaker 2: Yeah, I am. I want to bring in on a
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  Speaker 2: rag on rog.
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  Speaker 3: I know that you expected that the string of strong
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  Speaker 3: iPhone results would continue this quarter next given the company
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  Speaker 3: hasn't raised prices for smartphones, has your view changed at
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  Speaker 3: all given what we've seen in the last few minutes
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  Speaker 3: with with with these numbers coming out.
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  Speaker 5: No, there was a beat on the iPhone number, so
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  Speaker 5: that's there. But here is the kicker, and I'm looking
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  Speaker 5: at gross malogeins which was also pretty decent, which was
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  Speaker 5: a Now that's a surprise.
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  Speaker 3: Because you would have made the memory price right.
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  Speaker 5: Memory process to start to think. The only place where
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  Speaker 5: I see slight hiccup is great to China. So we'll
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  Speaker 5: find out what happened here. But it's a very minor way, boy,
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  Speaker 5: very minor miss.
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  Speaker 3: Are you saying that Apple doesn't need to raise prices
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  Speaker 3: because their margins are intact?
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  Speaker 5: I hope see for their sake, if they can figure
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  Speaker 5: out not to raise iPhone lower end prices, it's going
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  Speaker 5: to be very good for them. I think you have
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  Speaker 5: to raise prices first of all, because the memory costs
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  Speaker 5: are very high. But I think you and we think
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  Speaker 5: it's better to do it on the higher end phones
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  Speaker 5: because you know, people like you are not sensitive to
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  Speaker 5: and you know, another few hundred dollars on an iPhone promac.
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  Speaker 5: So it's not going to that's not going to be
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  Speaker 5: the difference that.
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  Speaker 2: We can make to be.
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  Speaker 5: See, that's another reason why they did that. That's another
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  Speaker 5: reason why they did that. So the thing is, I
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  Speaker 5: think there is one more good quarter of iPhone coming in,
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  Speaker 5: but then things get harder for them next year because
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  Speaker 5: then comparisons get tough. You know, this is not a
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  Speaker 5: company you can grow iPhone twenty two percent year after year.
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  Speaker 5: You know, this is not a brand new product. This
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  Speaker 5: is a replacement cycle story. So you could see a
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  Speaker 5: little bit of a push for people pulling forward some
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  Speaker 5: of these things, but things are going to get hard
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  Speaker 5: next year when you I didn't do tougher competisons.
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  Speaker 3: I want to bring in marker Emeni's back with US.
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  Speaker 3: Apple shares down in the after hours. Marcus Bloomberg, news
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  Speaker 3: managing at IT for Global Consumer Tech. You were live
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  Speaker 3: blogging while you were on TV. Yes, what's what's your take.
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  Speaker 6: My take is that the iPhone number looks great. My
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  Speaker 6: take is that the Mac number looks amazing. My take
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  Speaker 6: is at services a little soft, and the China number
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  Speaker 6: missed the estimate we have here on the Bloomberg terminal.
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  Speaker 6: But at the same time, that is, you know, pretty
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  Speaker 6: nice growth on an annual basis. Where they were sort
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  Speaker 6: of I guess in the toilet in China a couple
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  Speaker 6: of years ago and last year, but they've totally rebounded there.
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  Speaker 6: It's going to be interesting to see how the foldable
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  Speaker 6: iPhone performs there as a status symbol well north of
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  Speaker 6: two grand, so I think it's going to be a
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  Speaker 6: hot product there, especially because foldibles are taking over the
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  Speaker 6: smartphone market in China.
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  Speaker 3: Yeah, I know you're going to buy a foldable phone
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  Speaker 3: as or Sam, We'll be first in line. So is
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  Speaker 3: it the light services in China that's moving the stock lower?
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  Speaker 3: I mean, I know stock was twenty up to more
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  Speaker 3: than twenty two percent going into this prem.
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  Speaker 6: Yes, yes, I mean they smashed Mac right, But like,
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  Speaker 6: I don't think investors have fully grasped the importance of
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  Speaker 6: the Mac at this point. I mean, it sort of
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  Speaker 6: feels like an afterthought. Compared to the iPhone and the iPad.
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  Speaker 6: The iPad is always light. Wearables have been light for
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  Speaker 6: a couple of years now because they haven't really done
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  Speaker 6: a ton there, but that is going to accelerate big
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  Speaker 6: time over the next three years with these AI devices.
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  Speaker 6: Glasses are going to shoot those numbers up.
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  Speaker 2: You think people will buy those? I do.
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  Speaker 6: I think you'll buy them too. Tell me about them, Well,
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  Speaker 6: they're going the Apple is not going necessarily after the
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  Speaker 6: smartphone market. They're looking to create glasses that people want
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  Speaker 6: to wear, just like the Apple Watch replace the traditional
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  Speaker 6: watch market. They think that their smart glasses are going
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  Speaker 6: to replace sort of the low end to mid tier
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  Speaker 6: glasses market, not the Maison Bonets of the world, but
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  Speaker 6: you know, the Eslar, Luxaticas of the world. So they're
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  Speaker 6: really going to go after those brands there. They'll have
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  Speaker 6: cameras built in, I'll do all the stuff that Meta does,
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  Speaker 6: but a little bit more premium and apply because it'll
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  Speaker 6: integrate with your iPhone, whereas they've really held back iPhone
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  Speaker 6: integration with the metaglasses over the past couple of years.
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  Speaker 1: Actually create something that is competitive in terms of share
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  Speaker 1: at the company that moves the needle in terms of
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  Speaker 1: the iPhone. Does something else finally come over in terms
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  Speaker 1: of contributing more to the bottom line as the top line?
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  Speaker 6: You know, I think Turnis will be CEO for the
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  Speaker 6: next fifteen years, unless again, something goes wrong that we're
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  Speaker 6: not expecting. And someone asked me earlier today on one
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  Speaker 6: of the programs, what's going to be the most important
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  Speaker 6: product in Turnas's tenure, and I, to their surprise, said
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  Speaker 6: the iPhone. I think it's going to be the case
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  Speaker 6: that we're always going to carry something in our pocket.
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  Speaker 6: The iPhone or something like it is always going to
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  Speaker 6: be at the center of everything, and then we're going
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  Speaker 6: to be augmented by glasses, watches, earbuds, you name it.
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  Speaker 6: But at some point there will be a transition to
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  Speaker 6: be had. I just don't see it anytime in the
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  Speaker 6: near future.
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  Speaker 2: Has Apple given up on the Vision Pro?
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  Speaker 6: Has Apple given up on the Vision Pro? It's on
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  Speaker 6: the back burners of all back burners at this point.
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  Speaker 6: There's a revamped version that's lighter in development. I don't
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  Speaker 6: anticipate it before the end of twenty eight or early
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  Speaker 6: twenty nine. Could go further back from that because they
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  Speaker 6: have been heavily prioritizing this glasses push smart glasses with
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  Speaker 6: no display, smart glasses.
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  Speaker 2: With ar display.
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  Speaker 6: They've got a long roadmap of multiple generations ahead of
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  Speaker 6: both of those categories, and you'll see them introduce the
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  Speaker 6: glasses strategies early is June of next year.
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  Speaker 2: What do you want to hear on the call.
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  Speaker 6: I want to hear about the memory shortage. I know
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  Speaker 6: it's not sexy, but investors are interested in that. I
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  Speaker 6: want to hear about Tim Cook's thoughts on how the
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  Speaker 6: transition is going. Most importantly, I want to hear Turnas's
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  Speaker 6: vision for Apple. Are we going to hear that on
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  Speaker 6: this call or we're going to hear that on the
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  Speaker 6: next call? Probably not. These guys don't really say anything.
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  Speaker 3: I'm laughing because you know, you shared with us earlier
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  Speaker 3: about John Turnas and Tim Cook being dressed identically, Like,
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  Speaker 3: you know, his vision is going to be whatever Tim
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  Speaker 3: Cook says the vision is.
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  Speaker 2: Is it going to be? Is it is that?
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  Speaker 6: What it's going to be?
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  Speaker 5: Yeah?
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  Speaker 6: No, I think that. I mean he's going to come
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  Speaker 6: in and make major changes to the company, just like
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  Speaker 6: you know Steve Jobs, arguably one of the greatest CEOs
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  Speaker 6: and visionaries of all time. Tim Cook came in there.
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  Speaker 6: It's not like you took a wrecking ball, but he
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  Speaker 6: shook things up pretty quickly. He was the one who
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  Speaker 6: instated the buyback program, he was the one who instated
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  Speaker 6: environmental initiatives. He was the one who instated and tons
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  Speaker 6: of new product lines. And you can bet Turnus is
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  Speaker 6: going to do the same thing. And so we'll see
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  Speaker 6: how long that takes. But he's not going to come
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  Speaker 6: on and say he's going to do things differently than
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  Speaker 6: his predecessor. He's going to go on and say how
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  Speaker 6: incredible Tim Cook has done. And even if I do
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  Speaker 6: half of what you do, it'll be a success.
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  Speaker 3: Yeah, five trillion dollar marketcap pretty close to and expectations
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  Speaker 3: were high going into this prend What's the question that
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  Speaker 3: if you were able to ask a question on the
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  Speaker 3: call today, what would it be?
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  Speaker 6: If I were able to answer or ask a question,
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  Speaker 6: I would straight up ask Turnas, what is your vision
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  Speaker 6: for the future of this company? How are you going
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  Speaker 6: to get to this next stage of growth? And how
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  Speaker 6: are you going to create an AI devices strategy? Well,
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  Speaker 6: I mean the good news is I don't get a
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  Speaker 6: question because the bad news is he wouldn't answer.
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  Speaker 2: That, and just I was keeping track, that was three questions.
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  Speaker 6: Well, you know, I'm a journalist.
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  Speaker 2: That's what these analysts do too.
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  Speaker 1: But if he's not going to answer a question about
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  Speaker 1: vision and you kind of know that, where else would
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  Speaker 1: you what else would you want to know?
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  Speaker 6: I would want to drill down into his operational expertise
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  Speaker 6: and get his viewpoint as someone who's not from the
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  Speaker 6: operations department about the memory shortage, how long he sees
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  Speaker 6: that running for, and what work is going on internally
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  Speaker 6: to solve that other than just hiking prices.