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Apple, January 28, 2021( NASDAQ:AAPL )After the closing of the US stock market on Wednesday (early morning Beijing time on Thursday), the company released its first quarter results of fiscal year 2021. According to the report, Apple’s net revenue in the first quarter was $111.439 billion, up 21% from $91.819 billion in the same period last year, setting the latest record in the company’s history and exceeding Wall Street analysts’ previous expectations; its net profit was $28.755 billion, up 29% from $22.236 billion in the same period last year; and its diluted earnings per share was $1.68, up 25% from $1.25 in the same period last year Compared with the growth of 35%, it also exceeded analysts’ previous expectations.

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.

[Apple’s revenue in the first quarter of fiscal year 2021 hit a new record, and its net profit increased by 29% year on year]

The following is the record of the financial report meeting:

Morgan Stanley analyst: the gross profit performance of this quarter is higher than the original expectation. Has the impact of the depreciation of the US dollar been fully considered? In view of the exchange rate hedging in the December quarter, what are the favorable and unfavorable conditions after the second quarter?

Maastri: the gross profit performance of this quarter is very good, higher than the expectation at the beginning of the year. The main reason is that the sales volume is strong and the combination of products and services is very good. In autumn, we launched new products and have a new cost structure. Therefore, the impact of cost has been mitigated to a certain extent.

In the fourth quarter of last year, there was indeed exchange rate hedging, but at present, the exchange rate of the US dollar against some countries is better, such as Russia, Turkey and Latin American countries. If the US dollar continues to be in the doldrums, it will indeed form a positive factor for us, affecting the second quarter. According to the current exchange rate, it will probably have an impact of 60-70 basis points.

Morgan Stanley analyst: one of the difficulties for investors to evaluate apple is that they can’t see the overall situation of the company’s development plan. Please talk about the areas that may be explored in the future and how to evaluate the value and success of new market development?

Cook: we will first ask whether the products and services are what we want. This is a very high threshold. We do not have a fixed evaluation standard. Instead, we take all factors into consideration. The combination of hardware, software and services is meaningful. This has also brought some good opportunities. Our current product line has a relatively small market share in some relatively large markets, which means great opportunities. The service business we have been promoting over the years also has great potential. Last year, we launched about five service products.

Bank of America analyst: Although the IPO is later than before, iPhone sales far exceed expectations. What are the main driving factors? How will it affect the management’s view of the second quarter? Will supply remain tight?

Maastri: iPhone is the main factor that our performance is higher than our internal expectations. We have a very good product line, and consumers have very good feedback on various models, especially pro and pro max. The reasons include product and pricing. We do face supply pressure, especially pro and pro max. We launched two models in the middle of the quarter and several others a few weeks later.

The performance of the Chinese market is very strong, in part because China is building 5g rapidly, and people also have relatively large demand for 5g. The performance of the global market is very good. We are very confident in the second quarter and believe that the balance between supply and demand can be achieved in the middle of the quarter.

Bank of America analyst: the installment buying behavior has been growing throughout the quarter, so what is the change trend of replacement behavior and upgrade behavior (old model for new model)?

Cook: in the past quarter, we launched two iPhones two weeks after the start of the quarter, and the other two seven weeks later. At present, there has been a strong year-on-year growth in replacement and upgrade behavior, and the number of upgrade users has reached an all-time high.

Cross research analyst: iPhone sales in China have seen strong month on month growth. Considering all product categories, what are the main performances? To what extent will it return to normal?

Cook: China’s iPhones are doing very well. Like the rest of the world, there are also record upgrades. In the previous quarter, there was public opinion about new mobile phones. Because China’s 5g construction is advancing very fast, the vast majority of models sold in the Chinese market are 5g models, so people expect apple to release the same 5g products. But it wasn’t just the iPhone that contributed to this quarter’s good performance. The Mac, iPad, wearable devices and accessories all exceeded expectations. In the last quarter, the epidemic situation in China was basically well controlled, and economic activity recovered. In this quarter, cases appeared in some places and were blocked. But at present, it has no impact on Apple’s business, and the number of these cases is far less than that in other countries.

Cross research analyst: the management has repeatedly mentioned Apple’s service products, such as apple pay, etc., but the closure of some stores has also had a negative impact on the revenue of these services. Please talk about the main driving factors of the service business?

Maastri: during the epidemic period, two major businesses were adversely affected, one was Apple care, the other was advertising business, which was consistent with the overall trend of economic activity. In December this quarter, we saw an increase in new users, which will also have a positive impact on Apple care. There are many stores closed in the United States and Western European countries, but on the whole, we can still provide support for more users. The other is the advertising business, which also has a month on month growth. The performance was excellent. The main driving factors were digital services, including cloud services and music. These services also performed very well during the epidemic period.

Bernstein analyst: in terms of iPhone sales channel inventory, now that the first quarter is about to pass, the balance between supply and demand is slowly recovering. Will there be a seasonal increase in sales?

Maastri: in fact, the sales cycle of the iPhone this time is different from that in the past, because the time when we launched new products is different from that in the past. After our products were launched, the demand is very strong. At the same time, we are also facing the pressure of supply and inventory. By the end of December, the inventory of the iPhone is lower than that of the same period last year. In the second quarter, the supply side pressure will be gradually resolved.

We expect the seasonal sales fluctuation to be consistent with the past. Due to the impact of the epidemic, the market performance last year is not typical. We can refer to 2018 and 2019. Some categories, such as services and wearable devices, are slightly difficult to compare. You can refer to the performance of the iPhone for judgment.

Bernstein analyst: Apple achieved 30 billion revenue, the main source of growth? A reasonable growth rate in the next five years?

Cook: we announced the growth rate for the quarter. The main driving factors include that our current hardware devices are the most powerful in history, we also have very exciting new products and services to go online, and the number of users has reached an all-time high. At present, there are very large user groups for replacement and upgrading, which can be combined with strong service business and contribute revenue in the future.

The wearable device business has grown since its inception, but it is still in its early stage. If we look at the market share of other Apple products, such as the iPhone, Mac and iPad have a lot of room for growth in different markets, especially in emerging markets. We are very satisfied with the progress we have made so far, but we still have a lot of room for development in these markets. For example, in India, although our business scale doubled in the last quarter compared with the same period last year, our absolute business scale is much smaller Our opportunities are still very small. Therefore, we have many opportunities and some new plans in the pipeline, which will contribute to the company’s performance just like our previous plans.

Evercore analyst: this growth rate is amazing. What are the main driving forces? Is it sustainable?

Maastri: we have achieved a growth rate of 21% because of our strong product structure. All product categories have seen a strong growth in sales, which has brought about an increase in gross profit. This is the most important reason. Moreover, our product portfolio in all product categories, including service products, is excellent, and the overall business environment is also benign. In a previous Q & A, we once said that the impact of exchange rate on us was often unfavorable in the past, but this time the situation has changed.

Evercore analyst: in the past three quarters, the growth rates of MAC and iPad have been maintained in the range of 20% to 40%. What are the driving factors, including the first purchase, joining Apple ecology, home work and learning needs? What kind of growth rate do you think is sustainable?

Cook: globally, buying a Mac for the first time Users of apple and iPad account for about half of the new users who buy Apple products for the first time. In fact, the user group is expanding and more consumers are joining Apple’s ecosystem. This is true for both Mac and iPad. We see a new growth trend for Mac. Although we are still in a two-year transition period, we are not satisfied with the goal We are very satisfied with the progress we have made before. Several of our iPad products also include the iPad Air, this time, the iPad products are very powerful as a whole. We can’t deny that some people have bought the iPad as a substitute for computers. The growth of iPad is amazing, reaching 41%. Some of them are really purchased for home work and study, but we can’t ignore that iPad and MAC are very attractive as products themselves, and the proportion of MAC in the global computer market It’s very small, so there are still many challenges in this area.

JP Morgan analyst: my question is about iPhone sales. China and North America are making rapid progress in 5g infrastructure construction. In Europe, the progress in this area is a little slower. What impact does this have on the promotion of new iPhone products and user participation in Europe?

Cook: it is undeniable that the construction of 5g in Europe is far behind that of China. In addition, the construction of 5g in some regions is also very fast, such as South Korea. In fact, the construction of 5g in the world is very unbalanced. Some countries are developing very fast, some regions in some countries are developing fast, while other regions are relatively backward, and some places have not started yet, such as Latin America. These places are full of opportunities. In Europe, we also see the construction of 5g.

JPMorgan analyst: Apple has launched the apple one bundle. How is its current performance?

Cook: it’s too early to answer this question, because we only launched at the beginning of this quarter. Our goal is to make it easier for people to use our services. So far, it’s going very well, but it’s still in a very early stage.

Analyst: what are the growth opportunities in search advertising?

Cook: the search advertising business of search engine is growing well. People have the intention to search. We also strictly abide by the privacy related policies and attach great importance to privacy. Therefore, people are willing to try their business in this area. At present, the growth trend is good.

Analyst: in terms of game business, in the second quarter of China, we generally see a sharp increase in game downloads. Will the same situation happen this year?

Maastri: in the second quarter of China, our performance is generally very good. The demand for services and app store will rise. Last Spring Festival, the activities related to the demand for services further increased because the whole country of China was locked up for several weeks after the Spring Festival because of the epidemic, so the demand cycle for games is longer than before. But last year was a special year, so it was not representative.

Raymond James analyst: my question is about the iPhone ASP (average selling price). The pricing structure of this year’s new models is different from that of the past. How much of the sales growth comes from this factor? Can this pricing structure be maintained in the future?

Maastri: the iPhone has achieved 17% growth, partly from sales and partly from ASP. At present, it is still in an early stage, because we only launched the new iPhone a few weeks ago. What we are seeing is the huge demand for pro and pro Max models, and we will try our best to increase the supply. In the first quarter, we saw some pressure on the supply side, and we will try our best to solve this problem in the second quarter.

Raymond James analyst: Apple also has some very strong promotional policies, such as the trade in plan and subsidies from communication companies. Does this contribute to sales? How long can it last?

Cook: subsidies will always help, because they can reduce the actual price paid by consumers. What we are seeing now is the increasing competition in the United States, because all communication companies want more consumers to use their 5g, while subsidies can not be used in some other places. Machines and services are separated.

Citigroup analyst: in some developed countries, owning Apple products is the norm. In other countries, such as India, Apple’s market share is relatively low. The management has also made some efforts. It seems that the global share is not balanced. What’s the management’s view?

Cook: in the Indian market, our market share is really low. Compared with the same quarter last year, we have doubled our business. We are very satisfied with the growth. In India, we have made a lot of efforts, such as opening the first online store. It has been a quarter since now, and we have gained a lot of profits from consumers Very good feedback. We have also achieved the set goal. We are about to open more retail stores in India, and we will make efforts in distribution channels. Besides India, our share in other countries is actually low, and in developed countries, it is not high, so our share in all markets in the world is not very large.

Apple: 2q20 earnings report teleconference record stock repurchase plan adds another $50 billion Apple: app store generates revenue of $519 billion in 2019 China reaches $246 billion Apple: 1q21 net revenue of $111.439 billion Apple: 2q20 net profit of $11.249 billion for the first time in history Apple: net profit of 22.2 billion US dollars in the first quarter of fiscal year 2020, with record revenue and profit. Apple: 4q20 financial report teleconference record. Cook said that China’s performance is not good because there is no new iPhone in September. Apple: excellent performance in China’s market in the first quarter of 2020 IPhone sales achieve double-digit growth, domestic mobile phones beat iPhone, apple ushered in 12 years to dark moment Apple: during the epidemic period, service revenue increased by 1% year on year to 58.3 billion US dollars Apple: 3q20 revenue increased strongly, non iPhone revenue accounted for more than 50%, apple tax criticized by developers accounted for nearly 40% of Apple’s gross profit Jaffray: American local tyrant owns and yearns for Apple products comScore:2010 Google’s share of the U.S. smartphone market rose to 17% in July

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