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Live blog: Apple’s fiscal year Q1 2016 earnings call

Tim Cook iPad Pro 16-9

Apple just posted its official Q1 2016 earnings report and we’ve broken down how that compares to previous quarters. Next up on the schedule is Apple’s quarterly conference call with analysts where CEO Tim Cook and CFO Luca Maestri typically recap the numbers and field questions about Apple’s financial situation.

To recap the big numbers from today’s report, Apple counted $75.9b in revenue, $18.4b in profit, 74.8m iPhones sold, 16.1m iPads sold, and 5.3m Macs sold during the final three months of last year. Apple Watch numbers aren’t broken out at this point and instead included in the Other category with iPods, Apple TVs, and other accessories.

We’ll be tuned in to the call as it plays out, and update this post with up-to-the-minute details while highlighting major updates. The call is scheduled to kick off at 2 pm PT/5 pm ET so stick around.

  • Earnings report is live!
  • You can listen along at home here.
  • 10 minutes to lift off!
  • No joke, I’m noticing a genre change in the conference call hold music: “High Hopes” by Onra featuring Reggie B is currently playing, according to Shazam. Next up: “Silver” by Caribou. I’m noticing a theme.
  • Don’t worry, we’ll get down into the weeds with financial stuff shortly.
  • There’s some throat clearing action going on, call is kicking off now.
  • CEO Tim Cook speaking first, followed by CFO Luca Maestri as expected. Q&A will follow.
  • Tim Cook recapping “strongest financial quarter ever”
  • Cook says iPhone numbers particularly impressive considering global slowing economic growth
  • 2/3 of Apple revenue generated outside of the US, says global currency flux has huge effect
  • Cook says condition in China have been source of concern for investors, says Apple has seen momentum despite turbulent environment with revenue growth, highest ever quarterly iPhone sales and App Store performance, notices softness starting early this month around Hong Kong, but still optimistic in long term expectations, maintaining investment plans in the region
  • Cook says company sees these times as opportunities to invest in India and other emerging markets as well
  • Cook recapping quarter’s launches, over 3600 Apple TV apps to date, best quarter ever for Apple TV sales, Apple Watch distribution reached 12,000 locations across 48 countries
  • Over 5 million contactless payment ready locations in countries where Apple Pay is available, coming to Exxon through Speedpass+ app, Apple Pay usage accelerated with a growth rate 10x during second half of 2015 compared to first half
  • CFO Luca Maestri now talking more in detail about Apple’s services business
  • Apple defines an active device as one that has accessed an Apple service within the past 90 days
  • With 1 billion active devices in use, Luca Maestri says Apple saw 25 year over year growth
  • iPhone grew 76% in India, 18% in China
  • Maestri cites survey data with highest ever purchase intent for iPhone
  • Maestri describes Mac sales decline year over year while beating PC sales, up 27% in China
  • Apple has over 100 MobileFirst IBM apps for iPad, Apple Watch, and iPhone
  • Cisco partnership ongoing, continuing to grow mobility partner program for enterprise
  • Services revenue increased with average amount spent per customer reaching all time high in December quarter
  • Apple Watch saw especially strong results during holiday buying season, but Maestri isn’t sharing numbers

  • Maestri reviewing upcoming quarter outlook, says Apple is providing a wider range for revenue due to volatility in the global market
  • Maestri says the March quarter will face the toughest year over year comparison than other quarters
  • Q&A time!
  • Goldman Sachs: In terms of March quarter guidance, clarify reasons for drop and how big international markets will impact quarter?
  • Maestri: Issues included in the guidance include strong year ago quarter, macro economic environment, commodity-drive markets weaker than a year ago, Apple increasing prices in certain international markets to protect margins but over time impacts demand, shown in guidance
  • Gene Munster: Talk about iPhone Upgrade Program and any high level thoughts on VR
  • Cook: Blown away by Android switchers last quarter, highest level so far, emerging markets including BRIC has opportunities with LTE penetration, Cook says overtime iPhone Upgrade Program will be more meaningful overtime with habit changes but other items more important short term, optimistic long term, Cook doesn’t think VR is niche, calls it “really cool” and “has some interesting applications”
  • Morgan Stanley: How might consumers react from average selling price perspective with cheaper products?
  • Maestri: Could have strong mid-tier, but happy with ASP currently.
  • Siri chime!
  • Maestri says data centers are growing expenditures for Apple with growing install base.
  • Maestri: We’re nearing completion of our new campus in Cupertino.
  • Toni Sacconaghi: Talk about iPhone decline in next quarter.
  • Cook: We are projecting decline, Q2 will be toughest compare because year ago quarter had catch up from Q1, we were heavily supply constrained in year ago Q1, new environment different on macro global economic level, all contributing factors, difficult to sort out how much is due to each factor, Apple doesn’t spend a lot of time predicting regarding the smartphone market, almost half of iPhones sold in China last quarter were to people buying first iPhone, in emerging markets share is much lower and LTE penetration near zero, lots of opportunity around the world for smartphones
  • Maestri pushing details on Apple as a service company heavily during this call.
  • Idea seems to be to draw attention to 1 billion active users on Apple devices and promote the Apple services business as ongoing revenue to existing customers ahead of quarter with iPhone sales decline for various reasons.
  • Cook: We have some great things in the pipeline, and we strongly believe in investing during downturns like the one everyone’s going through. We’re continuing to invest in China, particularly with Apple Stores, new markets like India, other markets like Russia and Brazil where economies are tied to oil.
  • Cook on China again: LTE penetration around end of October in mid-20s, enormous upgrade cycle for people using 3G handsets. Middle class in China less than 50m people in 2010, projected to be 500m by 2020. Provides us a great opportunity to win over some of those customers into our ecosystem. Angela and her team on aggressive rollout plan. 28 stores in China, 40 by summertime of this year. Distribution continuing with China in mind. Remain bullish on China
  • Cook on India: “very exciting” as growth is very good, 3rd largest smartphone market in the world, median age is 27, population is very young, almost half people in India below 25, demographics great consumer brand opportunity for people that want best products, very rapidly expanding country, government there interested in economic reforms that speak to good business environment in the future.
  • Cook on iPhone Upgrade Program: Not about trying to move iPhone customers from carriers to Apple Store, about making it easy to buy the latest iPhone, no idea over time how percentage will vary between carriers and Apple Retail Stores but that’s not our objective
  • Citi: Does Apple need to grow mid-tier business to grow services business?
  • Cook: Our strategy is always to make the best product, for the smartphone market we’re able to provide several different price points for our customers, we also have mid-price point with last year’s model, continue to offer two year’s ago model and don’t see us deviating from that approach. We don’t design to a certain price point.
  • That’s a wrap. An audio version of the call will be available on iTunes later today for two weeks. Until next time…

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Comments

  1. RP - 8 years ago

    So Apple had a great quarter..based on expansion into China. If not for China it would have had a decline. That’s how important China has been. 25% of of their sales.
    The last iteration of the iPhone has done well based momentum, on China and pent up demand for a larger screens, (market category that took them far too long to take),But the the iPhone 6 series has been very un-Apple. Overly humongous compared to other smartphones of even larger sizes. A design that is tacky and frumpy instead of sexy. Unsightly bands on the back, a bump for camera, and they even offered in yellow and a salamander color. Of all possible colors on a color-wheel, they chose salamander!. And starting wiith ios7 the tackiest UI design ever imagined was brought to life, Then it all culminated with the infamous battery pack.

    Apple has been very un-Apple lately. Here is a SJ quote that sums it up. Just replace “Latin America” with China

    “And how are monopolies lost? Think about it. Some very good product people invent some very good products, and the company achieves a monopoly. But after that, the product people aren’t the ones that drive the company forward anymore. It’s the marketing guys or the ones who expand the business into Latin America or whatever. Because what’s the point of focusing on making the product even better when the only company you can take business from is yourself? So a different group of people start to move up. And who usually ends up running the show? The sales guy.”

    • rahhbriley - 8 years ago

      But remember-

      “Silence is not only golden, it is seldom misquoted.”
      (Bob Monkhouse)

  2. Doug Aalseth - 8 years ago

    OK, if you want to grow Apple Services here’s where to start:

    iCloud: Reduce the price. It’s high compared to other services. Let people back up to iCloud. If the price were less I would like to run Time Machine to an iCloud backup and this would necessitate I rent more space. More space, more rental income.

    iPhoto: Let me upload PART of my library to iCloud Photo Library. I’d use it if I didn’t have to upload the whole 90GB. If I used it I’d likely rent more space.

    iTunes: Overhaul it completely. The latest version is garbage; buggy, slow, with a terrible interface. With a version that worked right I’d be more likely to use iTunes Match. Hell, I’d likely buy more from the iTunes Store. As it is, the DB for iTunes is so bad that last week I stripped all of my music and video out and started over. I got sick of waiting for iTunes to load. Make it run faster, cleaner, and with an interface that works and I’d be buying and renting more. As it is, I only start it occasionally to rent a movie.

    iTunes Store: OK and speaking of renting, the store needs work, a lot of work. The video selection is second rate. Movies are hit and miss, and rentals are out way after the purchase option hits (I waited almost two years to rent Frozen, I still can’t rent the third Hobbit film). Lastly, link up with IMDB so I can enter a movie into my Wish List that’s not in iTunes. Might let you know what people want. Music? I can’t say. iTunes is so bad I have stopped using it to listen to music. Oh and split Beats1 (2,3,4,5?) out into their own App. It apparently is not part of Apple Music and you don’t pay for it so don’t stick it on the tab where everything else is behind a paywall..

    Speaking of stores. the iOS store is good but searching is often difficult. Like drinking from a fire hose. I’d like to see more advanced searching options so I could narrow down the results to what I actually want.

    The MacApp store is in trouble. Developers don’t like it. I can’t find most of what I want there. It started with such high hopes but I’m now going back to my old habits: I decide on an app and go to the developer site to download it. The MacApp Store needs a total rethink.

    Oh and one more thing: I rent iCloud space at the 99 cents a month rate. Why isn’t there an option to pay for a year in advance? I can do that with my web hosting company. These 99 cent charges each month are annoying. The clutter up the statement. Just hit me up for $12 once a year and I’d be much happier.

  3. Robert - 8 years ago

    It’s amazing to see all the doom and gloom in the media, some outlets twisting what Apple actually said to fit the story they already decided to write.

    There will be no end to the nonsense. Investor’s today complained that iPhones are too expensive and that Apple needs to hit lower price points to get more business. When Apple do hit a lower price point with the upcoming 4 inch device the same people will fear that it will cannibalize sales of the more expensive phones. Whatever Apple do they are ‘doomed’! It’s all nonsense from investors that don’t know the business.

  4. vkd108 - 8 years ago

    Overall profit 24%, what happened to that 30% value we constantly hear about?

Author

Avatar for Zac Hall Zac Hall

Zac covers Apple news, hosts the 9to5Mac Happy Hour podcast, and created SpaceExplored.com.