Transcript: Apple CEO Tim Cook dinner on the corporate's 2018 Q3 earnings

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Apple’s second-quarter outcomes for 2018 are in. Here is our transcript of the decision.

Apple CEO Tim Cook dinner and CFO Luca Maestri spoke with analysts through the firm’s Q2 2018 earnings name. Here is our ongoing reside transcript of their remarks!

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Cook dinner’s opening remarks

Tim Cook dinner

Thanks, Nancy, and because of everybody for becoming a member of us.

At this time we’re proud to report our greatest June quarter income and earnings ever, because of the sturdy efficiency of iPhone, providers, and wearables. We generated $53.three billion in income — a brand new Q3 file. That is a rise of 17% over final 12 months’s outcomes, making it our seventh consecutive quarter of accelerating development, our fourth consecutive quarter of double-digit development, and our strongest price of development previously 11 quarters. Our workforce generated file Q3 earnings per share of $2.34, a rise of 40% over final 12 months. We’re extraordinarily happy with these outcomes and I might wish to share some highlights with you.

First, iPhone had a really sturdy quarter. Income was up 20% 12 months over 12 months and our energetic put in base grew by double digits, pushed by switchers, first-time smartphone consumers, and our present prospects whose loyalty we enormously recognize. iPhone X was the preferred iPhone within the quarter as soon as once more, with a buyer satisfaction rating of 98% in accordance with 451 Analysis. Primarily based on the newest knowledge from IDC, iPhone grew sooner than the worldwide smartphone market, gaining share in lots of markets together with the U.S., Higher China, Canada, Germany, Australia, Russia, Mexico, and the Center East and Africa.

Second, we had a stellar quarter in providers which generated all time file income of $9.5 billion, fueled partially by double-digit development in our total energetic put in base. We really feel nice in regards to the momentum of our providers enterprise and we’re on the right track to achieve our objective of doubling our fiscal 2016 providers income by 2020. Our file providers outcomes had been pushed by sturdy efficiency in a variety of areas and I might wish to briefly point out simply a few of these. Paid subscriptions from Apple and third events have now surpassed 300 million, a rise of greater than 60% previously 12 months alone. Income from subscriptions accounts for a big and rising share of our total providers enterprise. What’s extra, the variety of apps providing subscriptions additionally continued to develop — there are nearly 30,000 out there within the App Retailer in the present day.

The App Retailer turned 10 years previous this month and we set a brand new June quarter income file. The App Retailer has exceeded our wildest expectations, igniting a cultural and financial phenomenon that has modified how folks work, study, and play. Clients around the globe are visiting the App Retailer extra usually and downloading extra apps than ever earlier than. And primarily based on third-party analysis estimates, the App Retailer generated practically twice the income of Google Play up to now in 2018. The app economic system is prospering and because of the App Retailer, it is producing jobs for tens of hundreds of thousands of individuals around the globe. Our builders have earned over $100 billion from the App Retailer since its launch and we could not be extra happy with them and what they’ve completed. We’re listening to plenty of developer pleasure round our upcoming OS releases — which I am going to discuss extra in a second — and might’t wait to see what they will provide you with subsequent. We have skilled fast development in our App Retailer search advert service, and as we introduced earlier this month, we’re increasing our geographic protection to Japan, South Korea, France, Germany, Italy, and Spain.

We’re additionally seeing sturdy development in most of the different providers as nicely. Only a few examples: Apple Music grew by over 50% on a 12 months over 12 months foundation; Apple Care income grew at its highest price in 18 quarters, partly because of our expanded distribution initiative; cloud providers income was additionally up over 50% 12 months over 12 months; our communications providers are experiencing file utilization — we have hit all time highs for each the variety of month-to-month energetic customers of Messages and the variety of FaceTime calls made, with development accelerating from the March to June quarters; Siri requests have already exceeded 100 billion up to now this fiscal 12 months; and the variety of articles learn on Apple Information greater than doubled 12 months over 12 months; Apple Pay continues to increase, with nicely over 1 billion transactions final quarter — triple the quantity from only a 12 months in the past, with development accelerating for the March quarter. To place that large development into perspective, this previous quarter we accomplished extra whole transactions than nice corporations like Sq. and extra cell transactions than PayPal. Apple Pay is now reside in 24 markets worldwide with over four,900 financial institution companions and we stay up for including Germany later this 12 months. We’re excited to share that within the U.S., eBay is starting to allow its sellers to just accept Apple Pay and CVS pharmacy and 7-Eleven will roll out Apple Pay acceptance in areas nationwide this fall. Transit is one other necessary space of development and Apple Pay can be utilized with iPhone and Apple Watch to shortly and conveniently experience public transit in 12 metropolitan areas. Apple Pay Money, our peer-to-peer cost service is already serving hundreds of thousands of consumers throughout the U.S. lower than eight months following its launch.

Our third spotlight of the quarter is the excellent ends in wearables, which contains Apple Watch, AirPods, and Beats, and was up over 60% 12 months over 12 months with development accelerating from the March quarter. Our wearables income exceeded $10 billion over the past 4 quarters, a really exceptional accomplishment for a set of merchandise that has solely been available in the market for a couple of years. Apple Watch delivered file June quarter efficiency, with development within the mid 40% vary. And we’re thrilled to see so many purchasers having fun with AirPods, it jogs my memory of the early days of iPod once I began noticing white ear buds all over the place I went.

Various different notable occasions within the quarter: We expanded distribution of HomePod to 3 extra markets and we added new immersive-listening options with help for HomePod stereo pairs and a brand new multi-room audio system. In June, we hosted an especially profitable builders convention that previewed many main advances coming this fall to our 4 working programs: iOS, macOS, watchOS, and tvOS. Developer and buyer response has been very constructive and now we have over four million customers collaborating in our new OS beta packages. Beginning with iOS 12, Siri will take a serious step ahead with Siri shortcuts which ship a brand new, a lot sooner solution to get issues executed and permit any app to work with Siri. We consider this may make Siri much more helpful and considerably increase its adoption. We have additionally designed efficiency enhancements throughout iOS 12 to make on a regular basis duties sooner and extra responsive, digicam launches as much as 70% sooner, the keyboard seems as much as 50% sooner, and apps can launch as much as twice as quick. We have at all times been about empowering customers to get probably the most from our merchandise, however not about spending all of their time utilizing them. And so we’re including instruments to iOS to assist our prospects perceive and take management of the time each they and their households spend interacting with their iOS gadgets. Exercise Experiences will present info on the quantity and nature of time spent on iPhones an iPads, and Display screen Time will allow dad and mom to observe and restrict their kids’s exercise from their very own iOS gadgets utilizing Household Sharing in iCloud. Builders will be capable of construct much more clever apps with just some strains of code utilizing the ability of machine studying with CoreML and CreateML. We have additionally included our third launch of ARKit in just one 12 months. With ARKit 2, iOS 12 will present an much more highly effective platform to make dynamic AR apps, integrating shared and protracted AR experiences, object detection, and picture monitoring. We consider AR can allow profound experiences and Apple is uniquely positioned to supply one of the best AR expertise due to the seamless integration of our and software program. The brand new capabilities of ARKit 2 will construct on the potential of the hundreds of AR apps already out there within the App Retailer which can be altering the best way iPhone and iPad customers see and expertise the world. Turning to Mac, we need to empower our builders to convey their revolutionary apps from the iOS ecosystem to the Mac with minimal effort. Although iOS and macOS are completely different, they’ve shared widespread foundations from the very starting. So we have taken key frameworks from iOS and tailored them to particular Mac behaviors, like utilizing a mouse or trackpad, resizing home windows, copy and paste, and drag and drop. We have began with a few of our personal apps, so this fall, Information, Shares, Voice Memos, and House might be out there on the Mac for the primary time with macOS Mojave, and we’ll be bringing these nice new instruments to our builders subsequent 12 months. We consider this may dramatically broaden the ecosystem to learn all Mac customers, creating much more nice causes to decide on Mac. Additionally this fall, the Mac App Retailer is getting a full redesign with wealthy editorial content material to assist prospects uncover nice Mac apps from our builders.

We consider privateness is among the most necessary problems with the 21st century and we’re at all times working to make our merchandise extra non-public and safer for our customers. As we introduced at WWDC, starting this fall, Safari will forestall share buttons and remark widgets on internet pages from monitoring customers with out their permission. Safari already protects private knowledge as customers browse the net so they will not be retargeted by advertisements. For Apple Watch, customers will see a big growth of options and performance in watchOS 5. Apple Watch will grow to be an excellent stronger companion for health, communication, and fast entry to info, with options together with new exercises, exercise sharing competitions, auto exercise detection, superior working options, walkie talkie, Podcasts, and third-party apps on the Siri Watch face. For Apple TV we have seen main development in gross sales because the introduction of Apple TV 4K final fall, as video suppliers around the globe select Apple TV 4K to ship their subscription providers. Later this 12 months, Constitution Communications will start providing Apple TV 4K to its prospects in practically 50 million U.S. households, offering entry to reside channels and tens of hundreds of on-demand packages by way of the Spectrum TV app on Apple TV 4K, iPhone and iPad. And tvOS will take the cinematic expertise of Apple TV 4K to the subsequent stage this fall, with help for Dolby Atmos audio and new options to simply discover fashionable exhibits and films. Apple TV 4K already provides prospects the most important assortment of 4K HDR films, and this fall iTunes would be the house to the most important assortment of Dolby Atmos supported films wherever.

I am proud that our workforce’s laborious work has an impression even past these revolutionary industry-leading services and products. We’re at all times working to depart the world higher than we discovered it, and as a part of our dedication to handle local weather change and improve using renewable vitality in our provide chain, we just lately introduced a first-of-its-kind funding fund in China. Initially, 10 suppliers will be part of us in investing practically $300 million over the subsequent 4 years into the China Clear Vitality Fund. The fund will spend money on and develop clear vitality initiatives totaling greater than 1 gigawatt of renewable vitality in China — the equal of powering practically a million properties.

We’re seeing nice momentum in our Everybody Can Code and Everybody Can Create initiatives. Greater than 5,000 faculties and group schools at the moment are instructing Everybody Can Code and greater than 350 faculties have dedicated to incorporating Everybody Can Create into their curricula for the upcoming faculty 12 months. Coding expertise are opening doorways for college students and job seekers around the globe as large development within the app economic system creates alternative all over the place we glance. We’re additionally teaming up with main educators for blind and deaf communities throughout the USA who will begin instructing Everybody Can Code this fall.

Trying forward, we could not be extra excited in regards to the services and products in our pipeline, in addition to limitless purposes for augmented actuality and machine studying know-how. We’re working with key companions within the enterprise to alter the best way work will get executed with iOS and Mac. We’re welcoming communities and providing studying alternatives at our retail areas by means of lots of of hundreds of At this time at Apple classes every quarter. We’re increasing our attain into rising markets and seeing sturdy double-digit development in income. And we’re making nice progress towards our objective of considerably increasing our providers enterprise. And now for extra particulars on the file June quarter outcomes, I might like to show the decision over to Luca.

Luca Maestri gives extra element on the quarter

Luca Maestri

Thanks, Tim. Good afternoon everybody.

We’re very happy to report the monetary outcomes of our greatest June quarter ever. As now we have executed in each quarter this fiscal 12 months, we set new quarterly information for each income and earnings per share, with income up 17 % 12 months over 12 months and EPS up 40 %. We generated $53.three billion of income, with 12 months over 12 months development in all of our geographic segments and new June quarter information within the Americas, Europe, Japan, and the remainder of Asia Pacific. We grew in every of our prime 15 markets, with particularly sturdy efficiency within the U.S., Hong Kong, Russia, Mexico, the Center East, and Africa — all locations the place income was up by greater than 20 %. Gross margin was 38.three % — flat sequentially — as value enhancements and overseas alternate offset the seasonal lack of leverage. Internet revenue was $11.5 billion, up $2.eight billion, or 32 % over final 12 months. And it was additionally a brand new June quarter file. Diluted earnings per share had been $2.34, up 40 % and in addition a brand new file for the June quarter. And money stream from operations was very sturdy at 14.5 billion. iPhone income grew 20 % 12 months over 12 months, with iPhone ASP rising to $724 from $606 a 12 months in the past, pushed by the sturdy efficiency of iPhone X, iPhone eight, iPhone eight Plus internationally. Throughout the quarter we bought 41.three million iPhones with double-digit unit development in a number of markets together with the U.S., Canada, Germany, Switzerland, Mexico, Hong Kong, Russia, the Center East, and Africa. Our efficiency from a buyer demand standpoint was stronger than our reported outcomes as we decreased iPhone channel stock by three.5 million models through the quarter. We exited the June quarter in the direction of the decrease finish of our goal vary of 5 to 7 weeks of iPhone channel stock. Buyer satisfaction with iPhone continues to be excellent and is the very best within the . The newest survey of U.S. shoppers from 451 Analysis signifies that throughout all iPhone fashions, buyer satisfaction was 96 %. And mixing iPhone eight, eight Plus, and iPhone X, it was even greater at 98 %. And amongst enterprise consumers who plan to buy smartphones within the September quarter, 81 % plan to buy iPhones — up three factors from the final survey.

Turning to providers, we had our greatest outcomes ever with all-time file income of $9.5 billion . Providers income included a positive 236 million one-time merchandise in reference to the ultimate decision of assorted lawsuits. Excluding this quantity, providers income was nonetheless an all-time file and the underlying development price of our providers enterprise was a terrific 28 % over final 12 months. We generated double-digit providers development in all our geographic segments and the App Retailer, Apple Care, Apple Music, cloud providers, and Apple Pay all set new June quarter information.

Our Different Product class additionally set a brand new file for the June quarter with income of over $three.7 billion. That is up 37 % from final 12 months, with nice momentum for each Apple Watch and AirPods. Apple Watch continues to be the best-selling good watch by a large margin and models and income grew dramatically through the quarter. AirPods proceed to be a runaway success and we have been promoting them as quick as we are able to make them since their launch a 12 months and a half in the past.

Subsequent I might like to speak in regards to the Mac. We had been very completely happy to see double-digit 12 months over 12 months development in our energetic put in base of Macs, to a brand new all-time excessive, with practically 60 % of purchases through the quarter coming from prospects who’re new to Mac. Our 12 months over 12 months gross sales efficiency was impacted by the completely different timing of the MacBook Professional launch, which didn’t happen till early This fall this 12 months versus June final 12 months with the following channel subject through the June quarter. Even with the tough launch comparability, we noticed nice momentum in lots of rising markets with development nicely into double digits, and we established new June quarter information for Mac gross sales in India, Turkey, Chile, and Central and Jap Europe.

iPad models gross sales grew for the fifth consecutive quarter and we gained important share of the worldwide pill market, primarily based on the newest estimates from IDC. We recorded double-digit iPad unit development in each our Higher China and remainder of Asia Pacific segments, with a brand new June quarter file for iPad gross sales in mainland China. Virtually half of iPad purchases within the quarter had been by prospects new to iPad and our energetic put in base of iPads reached a brand new all time excessive. Our total efficiency in comparison with final 12 months was impacted by the introduction of latest iPad Professional fashions in June of final 12 months, which resulted in each a unique combine with greater ASPs and channel subject a 12 months in the past. NPD signifies that iPad has 60 % share of the U.S. pill market within the June quarter ,up from 51 % share a 12 months in the past. And the newest client survey from 451 Analysis measured iPad buyer satisfaction scores of 94 %, and amongst enterprise prospects who plan to buy tablets within the September quarter, 75 % plan to buy iPads.

We proceed to make nice strides with enterprise prospects throughout a number of industries. For instance, monetary providers establishments are more and more utilizing iPads to deploy digital signature options for buyer consent, compliance necessities, new account openings, and providers transactions. Within the railway , companies around the globe are utilizing iPhone and iPad to help operations, coaching, passenger engagement, and upkeep actions. And main automotive corporations are deploying iPads in dealerships for gross sales enablement and end-to-end customer support administration.

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