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Apple Q2 FY2023 Investment Note
Apple Q2 iPhone sales beat expectations, with an additional $90 billion buyback prepared
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Key Takeaways:
Attitude: Apple reported an all-time record in Services and a March quarter record for iPhone despite a challenging macroeconomic environment, and to have its installed base of active devices reached an all-time high. The management was particularly pleased with the performance in emerging markets like Mexico, Indonesia, and the Philippines. Additionally, said Apple's CEO Tim Cook, "We continue to invest for the long term and lead with our values, including making major progress toward building carbon-neutral products and supply chains by 2030."
Product & Service: Apple expanded emergency SOS via satellite to six new countries this March, bringing its safety feature to more users in 12 countries currently. Mac business, which recorded $7.2 billion in revenue, faced a difficult comparison because of last year's successful rollout of the M1 chip Mac lineup. iPad revenue was $6.7 billion, and the versatility continues to be its greatest strength. Meanwhile, across wearables, home, and accessories, revenue was $8.8 billion. Apple's Services set an all-time record with $20.9 billion in revenue. Currently, Apple has more than 975 million paid subscriptions with the company's lineup of services.
Guidance: Apple expects the June quarter's YoY revenue performance to be similar to the March quarter. Foreign exchange will continue to be a headwind, and the company expects a negative YoY impact of nearly 4%. The management expects the gross margin to be between 44% and 44.5%, the OpEx to be between $13.6 and $13.8 billion. Besides, the expected OINE will be around negative $250 million, and the tax rate will be approximately 16%.
Apple's board has authorized an additional $90 billion for share repurchases. The company also has declared a cash dividend of $0.24 per share of its common stock, an increase of 4%. The dividend is payable on May 18, 2023, to shareholders of record as of the close of business on May 15, 2023.
Earnings Q&A
Q: Do you see the payments ecosystem as a separate revenue opportunity, or is it more about making devices more inseparable from us?
Tim Cook: Our efforts in payments are a bit like what we did with watches. We're focused on helping people live healthier days across our financial products. We're helping people have better financial health, like the Apple Card, and the fact that it doesn't have fees, like the savings account, has a desirable rate of return. So we're trying to help our users, but these things obviously have to stand on their own. But we're very user-centric, understanding what provides them with pivots and building our roadmap around that. "Buy now, pay later" is another option we've just come out of. But when it comes to savings accounts specifically, we're delighted with the initial response. It's incredible.
Tim Cook: Our efforts in payments are a bit like what we did with watches. We're focused on helping people live healthier days across our financial products. We're helping people have better financial health, like the Apple Card, and the fact that it doesn't have fees, like the savings account, has a desirable rate of return. So we're trying to help our users, but these things obviously have to stand on their own. But we're very user-centric, understanding what provides them with pivots and building our roadmap around that. "Buy now, pay later" is another option we've just come out of. But when it comes to savings accounts specifically, we're delighted with the initial response. It's incredible.
Q: How has consumer behavior changed in the past three to six months?
Luca Maestri: Customer behavior remains very consistent. Obviously, we've done particularly well in some of the services we've launched recently, like payments. With the adoption of Apple Pay and Apple Card and now the new services that Tim mentioned, we've had firm growth rates, and the adoption continues to increase. Cloud is a field that continues to grow. Users want to store more photos and videos and more content on their devices, so they adopt our cloud services, and overall, the model around paid subscriptions in the App Store continues to grow strongly. I mentioned that we now have over 975 million paid subscriptions on the platform, almost double what we had three years ago.
Luca Maestri: Customer behavior remains very consistent. Obviously, we've done particularly well in some of the services we've launched recently, like payments. With the adoption of Apple Pay and Apple Card and now the new services that Tim mentioned, we've had firm growth rates, and the adoption continues to increase. Cloud is a field that continues to grow. Users want to store more photos and videos and more content on their devices, so they adopt our cloud services, and overall, the model around paid subscriptions in the App Store continues to grow strongly. I mentioned that we now have over 975 million paid subscriptions on the platform, almost double what we had three years ago.
Q: Can you talk about Artificial Intelligence? How you see it through your products and services.
Tim Cook: I do think it's really important to be thoughtful and deliberate when dealing with these things. As discussed in many different places, many issues need to be addressed. But the potential is undoubtedly exciting. Clearly, we've made great strides in integrating AI and machine learning across the ecosystem, and we've been building it into products and features for years. You can see that in terms of fall detection, collision detection, and electrocardiograms, these things are great features and can save people's lives. So it's absolutely phenomenal. So we think AI is really important, and we're going to continue to build it into our products on a very thoughtful basis.
Tim Cook: I do think it's really important to be thoughtful and deliberate when dealing with these things. As discussed in many different places, many issues need to be addressed. But the potential is undoubtedly exciting. Clearly, we've made great strides in integrating AI and machine learning across the ecosystem, and we've been building it into products and features for years. You can see that in terms of fall detection, collision detection, and electrocardiograms, these things are great features and can save people's lives. So it's absolutely phenomenal. So we think AI is really important, and we're going to continue to build it into our products on a very thoughtful basis.
Q: Why do you see India as an important market, and what do you have to do within the country to ensure it becomes a more material mix of your business?
Tim Cook: India is an exciting market and a major focus for us. Three years ago, we launched the Apple Store online, and we launched two stores a few weeks ago, and they're off to a great start, one in Mumbai and one in Delhi. We've got a number of channel partners in the country as well that we're partnering with. Overall, I couldn't be more delighted and excited by the enthusiasm I'm seeing for the brand there. Many people are coming into the middle class, and I feel that India is at a tipping point. It was a great quarter for emerging markets in general, despite the headwinds of currency that were mentioned before. So we're putting efforts in a number of these markets and really see, particularly given our low share and the dynamics of the demographics, a great opportunity for us in emerging markets.
Tim Cook: India is an exciting market and a major focus for us. Three years ago, we launched the Apple Store online, and we launched two stores a few weeks ago, and they're off to a great start, one in Mumbai and one in Delhi. We've got a number of channel partners in the country as well that we're partnering with. Overall, I couldn't be more delighted and excited by the enthusiasm I'm seeing for the brand there. Many people are coming into the middle class, and I feel that India is at a tipping point. It was a great quarter for emerging markets in general, despite the headwinds of currency that were mentioned before. So we're putting efforts in a number of these markets and really see, particularly given our low share and the dynamics of the demographics, a great opportunity for us in emerging markets.
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This article is a script from the AAPL Q2 FY23 earnings conference call. In order to facilitate reading, we have made appropriate cuts and revisions. This presentation is for information and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Before investing, please consult a licensed professional. See this link for more information.
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SGHengOngHuat : just starting to invest. Will always try add more and hold out long term. still waiting for a good time to DCA thou. Any chance to add will be good if the fundamental remains. Add to the moon for me!
Cathbeby SGHengOngHuat : The market is currently forming a shakeout period and is all set to pull upwards in the short term. What kind of impact do you think next week's CPI data will have on the stock market?
71535537 : never bet against America!
Shuseido : Apple is a good company for long term investment.
However, with its share price reaching ATH at current macro environment. I would continue to hold my Apple shares in my portfolio but wouldn't add more at this price.
I will wait for the next opportunity if ever come to add more. Think about why you buy Apple share at the first place and stick to the plan! Trade safe and good luck!
72734102 Shuseido : What scares me away is I know Tesla is Really advanced it’s technology! And since Tesla announced its new Solar powered 110 mega pixel camera, that needs no Signal towers because it will link to Tesla’s StarLink Apple scrapped its IPhone For 2024! Knowing or believing The New Tesla PI phone would get way more market share! Plus, Tesla is big on AI and will be a Major Player! Tesla power packs for Utilities companies and industry could reach a trillion dollar business. Tesla is WAY More than the Leader in EV sales! My $ money is on multi money maker Tesla.
Shuseido 72734102 : huh? can I have the news about Apple scrapping iPhone in 2024?