The following is the Cook said Chinese consumers praise the full range of iPhone 12 From Apple recommended by recordtrend.com. And this article belongs to the classification: 5g industry, iPad, iPhone, MacBook.
On April 29, 2021, apple (NASDAQ: AAPL) released its financial report for the second quarter of fiscal year 2021 (the first quarter of natural year 2021) after hours on Wednesday. According to the report, Apple’s net revenue in the second quarter was US $89.58 billion, up 54% from US $58.31 billion in the same period last year, exceeding analysts’ expectation of US $77.36 billion; The net profit was 23.63 billion US dollars, more than doubled from 11.25 billion US dollars in the same period last year; Diluted earnings per share was $1.40, up from $0.64 in the same period last year and 99 cents higher than analysts expected. Apple’s revenue in Greater China was $17.728 billion in the second quarter, up 87% year on year.
After the results were released, Apple’s management held a conference call, with CEO Tim Cook, CFO Luca Maestri and Investor Relations (Senior) director Nancy Paxton attending and answering questions from analysts.
The following is the actual record of the conference call:
Cross research analyst: my question is about iPhone. Under the current situation, 5g is advancing and affected by the epidemic. Considering the different products launched by operators and apple itself, what kind of opportunities does the management think iPhone will continue to attract new users?
Cook: the number of new Apple users or the population of Apple’s upgrading has achieved double-digit growth year on year, so the number of upgrading users should reach the peak in the last quarter. We are very satisfied with the achievements we have made so far. As far as 5g is concerned, it is still in an early stage. Different countries are in different positions on this track, but on the whole, the penetration rate of 5g is still relatively low. In the future, we will have more users for 5g upgrading. The speed of 5g construction in China and the United States is relatively fast, but it is relatively slow in other regions.
Cross research analyst: Apple Mobile’s gross profit growth has reached 42%, which is very fast. What are the main reasons behind this?
Maastri: we will try our best to reach a similar level in the second quarter. The main driving factors for growth in the last quarter are cost saving, product portfolio optimization and favorable foreign exchange rate. In the next quarter, cost saving will play a role, but the impact of foreign exchange rate will not be great.
Evercore analyst: how to evaluate the performance of service business?
Maastri: the performance of last quarter is better than our expectation. The overall product line has a stronger performance. During the epidemic period, we thought that the digital business performed very well. As we closed many sales stores, apple care was affected and the advertising business was also affected. In the last quarter, we reopened our sales stores and service centers for consumers. Our service business has increased, and the advertising industry has begun to recover. Our performance in the last quarter was relatively good. We don’t release guidelines for our products. In this business, we continue to pay attention to, such as the number of new paying users, the number of new subscribers, the increasing number of buyers, new service products, and optimizing the quality of existing services. From the above perspectives, we are very satisfied with our service business.
Evercore analyst: people are more popular with Apple products. How do you evaluate the changing trend of new generation consumers and new Apple users?
Cook: both new Apple product consumers and new generation consumers have seen growth, and the growth of new generation consumers has reached an all-time high in the last quarter. It’s hard to say the change of the market performance now, because our new products have only been updated for four and a half months, but we still have very positive growth expectations for the future.
In terms of global market performance, apple is in the top five best-selling mobile phones in the United States, China is in the top two, Japan is in the top four of the top five best-selling mobile phones, Britain is in the top four, and Australia is in the top six. In these key global markets, apple’s performance is very good. 5g is still in an early stage and this cycle will continue.
Morgan Stanley analyst: this quarter’s performance is very strong. My question is about the sustainability of consumer demand. I know that the management will not provide guidance or outlook for the next quarter. From a more macro point of view, which products do the management think have the opportunity to maintain the continuous growth of sales revenue next year, And reasonably predict that consumers may change their consumption focus demand?
Cook: our product performance is very strong. In the future, we will meet many challenges, and at the same time, we also have very strong demand. In terms of MAC, we have released M1 chip, which is also driven by home office and distance learning. In terms of iPad, there are home office and distance learning. In terms of products, our product portfolio is also very strong. The newly released iPad Pro is also equipped with M1 chip. As the epidemic continues, many companies choose to operate in a variety of ways, so the combination of home office and productivity is also very important.
Wearable devices are also doing well, with three-quarters of consumers buying Apple watches for the first time. This market is still a long way to go. Apple’s service business also had a very good performance in the last quarter, so to sum up, I am very satisfied with the overall performance.
Morgan Stanley analyst: accounts receivable generated by non operating activities increased by 8% in the current quarter, which was much lower than that in the previous quarter. Does this indicate that revenue growth will slow down in the future? Or do we encounter some difficulties in supply, resulting in increased pressure on inventory?
Maastri: there are two main factors that affect our normal seasonal changes. The first one is that last year we launched the new iPhone later than before, so we achieved the balance of supply and demand in the second quarter, which caused the quarterly changes to be larger than before. We’re running into a tight supply of $340 billion on iPads and Macs. In terms of inventory, what we have done is to reduce the inventory of iPhones as before. Because our inventory pressure is mainly on the iPad. The main reason for all this is that our market demand is large.
Bank of America analyst: my question is about content supply. Spotify and Netflix have recently raised prices. What’s Apple’s view on content supply prices and products? In addition, what’s the performance of the number of paid subscribers of Apple TV plus?
Cook: the performance of TV Plus is very good at present. Our goal of creating this business segment is to create high-quality original content and provide a platform for more content creators. We can see that TV Plus has launched more video content and gained more users, which proves our achievements.
Now we see that Apple’s original content has won 352 nominations and 98 awards, including Oscar nominations, Emmy nominations and so on. Our video content has also received very good feedback. We will not announce the number of subscribers to Apple TV plus. We are committed to providing more value to our users, and we are very satisfied with what we have achieved.
Bank of America analyst: what is the main reason for the quarterly decline mentioned by the management in the third quarter? Is it the pressure from the supply side of US $300-4 billion? What are the main sources of the pressure?
Maastri: our seasonal changes in the past few years have always maintained a similar level, but this year’s level will be higher than before, mainly due to two factors. The first is that we launched new products later than before, and the demand in the second quarter was very high. The second is the supply pressure of three to four billion dollars. Semiconductor supply pressure actually affects many industries. On the one hand, we have a shortage of suppliers. On the other hand, the market demand for iPad and MAC is very large. MAC has actually sold the best three quarters in the past three quarters. Now, home office and distance education drive the growth of demand.
Wells Fargo analyst: iPhone 12 sales are strong. How is the product mix different from the past? Is it sustainable? How to promote revenue growth?
Cook: the full range of iPhone 12 is very popular, and we’ve seen sales growth on Pro and max. The growth of revenue is the result of unit growth and single unit revenue growth. We do not publish guidelines for future performance.
Wells Fargo analyst: when does the management expect the supply side pressure to ease for the whole industry?
Cook: the main problem we are facing is legacy nodes, but they are also used in various industries, so to answer this question, I need to know their real market demand and the change trend in the next few months. So the problem is very complicated. We are very confident in Apple’s market demand, but we are not clear about other industries.
Piper Sandler analyst: in terms of semiconductor supply, when will Apple be able to stabilize supply?
Cook: we didn’t have a serious supply shortage in the second quarter, which allowed us to achieve better sales than expected after entering the second quarter.
Piper Sandler analyst: the U.S. economy is now trying to recover. The management also mentioned the supply of MAC and iPad. Does the management expect that the supply will keep up with the sales of MAC and iPad in the second half of the year?
Cook: we don’t provide any guidance because the epidemic continues to have an impact. But the shortage of supply I mentioned earlier has a greater impact on the iPad and MAC. I think we will be mainly affected by supply rather than demand.
Cowen & Company analyst: the Chinese market performed very well last quarter. What are the main factors? Which product is the driving force?
Cook: in the second quarter, the Chinese market achieved a new high in revenue, and all products achieved double-digit growth, because revenue growth is composed of many aspects. We’ve also received praise from consumers for the full range of iPhone 12. Last year, China closed its cities in the second quarter, which was earlier than other countries, so we should take this factor into account when we look at the data. The market reaction to the iPad was also very good, with two-thirds of MAC and iPad buyers buying products for the first time. We attach great importance to attracting new users.
Cowen & Company analyst: many investors are worried about some regulatory and censorship issues. Does the management think that publishing the data of service business can help to eliminate the concerns of investors?
Cook: what we are concerned about is explaining clearly the reasons why we have taken some measures, telling our own stories and publishing the data can help us move forward on this road. The measures we take in the app store and other businesses are flexible. For example, we reduce the Commission of small developers to 15%. This is an example. We’ve been learning, with clear goals, and protecting privacy is what consumers need.
Jeffrey analyst: we think that the growth of iPhone sales can drive the sales growth of wearable devices such as airpods and Iwatch. However, due to the epidemic situation, the management has also said that consumers prefer to buy wearable devices in physical stores, so the city blockade will have a negative impact. The management thinks that when the economy gradually returns to normal, the city blockade will have a negative impact, How does the placement rate of wearable devices change?
Cook: our physical stores play a very important role. When they are in normal operation, our performance in the second quarter is better than before. But there are still many physical stores in the restricted business state, or completely closed, so we still need some time to recover. I think the gradual recovery of physical store business can stimulate wearable sales. Of course, now our own performance is also good, online sales performance is very good.
UBS analyst: what’s the management’s view on app tracking and att (editor’s note: app tracking transparency, ATT for short)? Is there any initial response and performance to share?
Cook: att focuses on users and gives them the power to decide whether they want their data to be tracked. The response of our users is very good both before and after the launch of this service, so we need to safeguard the interests of users in this regard.
UBS analyst: what is the current data performance? What is the choice trend of consumers?
Cook: we can’t predict that. In addition, even if only a small number of people choose not to be tracked, it is worth doing so. They should have a clear understanding of their own needs.
JP Morgan analyst: my question is about the performance of various markets. The performance of Europe is very outstanding. Management mentioned that 5g iPhone replacement wave will continue in the future, and Europe should also be among them. What are the main reasons for the growth in Europe? Has the consumer chosen to change the machine, but the operator service has not yet appeared?
Maastri: Europe grew 56% in the second quarter, maybe the only market that exceeded our original expectations. We have achieved double-digit growth overall, covering all product categories. Europe was also affected by the closure, which lasted even longer than the United States. In some places, Apple stores are still closed, but our online business is doing well. Distance learning and office and limited entertainment are good for sales.
The European market is very broad, including Western Europe, Eastern Europe, the Middle East and even India. These emerging markets sell well, including India, Russia and so on.
JP Morgan analyst: Apple’s announced investment plan for the United States is about $430 billion. What’s the impact on the company’s operating expenses and operating rate?
Maastri: we announced a huge investment in the United States in 2018. It was the next five years, with a total investment of $350 billion. Over the years, we have exceeded our goals. We think it’s time to set bigger goals. For example, we mentioned that in the next five years, we will create 20000 jobs in the United States. Our performance is growing, and the corresponding target for suppliers is also growing. At the same time, we have entered into new business areas, such as TV +. A lot of content is produced in the United States.
In terms of operating expenses, over the years, the growth of operating expenses is even faster than the revenue, and the revenue exceeds the expenditure in some places. This year, the growth rate of revenue exceeded the expenditure. But we have to continue to invest. Operating expenses will continue to increase, especially in R & D, which will always be the core of the company.
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