There were no surprises in Apple’s earnings report yesterday, with the company reporting close to the $5B year-on-year fall in revenue it had warned us to expect.
Analysts got their usual chance to question CEO Tim Cook and chief financial officer Luca Maestri directly after the announcement. The pair always remain tight-lipped about specific plans, but there are a few things worth noting …
Premium iPhones selling well
Apple didn’t provide a breakdown, of course, but when asked about the split between standard and Pro iPhone models, Maestri did imply that premium demand was high – thanks to the company’s finance schemes.
We continue to to see a lot of interest at the top of the range of our products, and I think it’s a combination of consumers wanting to purchase the best product that we offer in the different categories and our ability to make those purchases more affordable over time. We’ve introduced several financing solutions from installment plans to trading programs that reduce the affordability threshold and therefore customers tend to want to buy at the top of the range […]
In general over the last several years—and that is also reflected in our gross margins—we’ve seen this trend which we think is pretty sustainable.
Vision Pro being used in Fortune 100 companies
As expected, Apple revealed nothing about Vision Pro sales. Cook did say it was being used in the enterprise sector.
It’s also great to see the enthusiasm from the enterprise market. For example, more than half of the Fortune 100 companies have already bought Apple Vision Pro units and are exploring innovative ways to use it to do things that weren’t possible before, and this is just the beginning.
Frankly, I’m surprised it’s only half: I would have thought every major company would want to at least play around with it and figure out whether it can make money from the device.
Too early to assess impact of DMA in Europe
Bank of America asked Apple to comment on the financial implications of the changes required to comply with Europe’s Digital Markets Act (DMA) antitrust law. Cook said it was too early to tell.
It’s really too early to answer the question. We just implemented in March, as you probably know, in the European Union, the alternate app stores and alternate billing, et cetera. So we’re, you know, we’re focused on complying while mitigating the impacts to user privacy and security that you mentioned, and so that’s our focus.
Exciting opportunities in emerging markets
Apple continues to face challenges in China, though it says it remains optimistic about the country and the impact of a growing middle class there. Additionally, the company had a record quarter in India. But Maestri says Apple is also excited about other emerging markets.
Obviously, China is by far the largest emerging market that we have. But when we start looking at places like India, like Saudi, like Mexico, Turkey, of course Brazil and Mexico, and Indonesia, the numbers are getting large and we’re very happy because these are markets where our market share is low, the populations are large and growing, and our products are really making a lot of progress in those markets. The level of excitement for the brand is very high.
Another record quarter for Services
Finally, it’s no surprise that the company announced another record quarter for Services, up 14% year-on-year. The installed user-base of Apple devices keeps increasing, with consequent increases in demand for everything from iCloud storage through Apple Music to the new Apple Sports.
Plus the company makes ever-increasing amounts from its lucrative deal to keep Google as the default search engine on Apple devices – making up around 15% of the iPhone maker’s total profits. Again, the more of those devices in use, the higher the amount Google is willing to pay.
Photo by The Climate Reality Project on Unsplash. Transcript: Six Colors.
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