WEBVTT - Instant Reaction: Apple Slides After Supply Shortages Hurt Its Sales Forecast

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News.

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<v Speaker 2>This is a breaking news update from Bloomberg.

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<v Speaker 3>Instant reaction and analysis from our three thousand journalists and

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<v Speaker 3>analysts around the world.

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<v Speaker 1>Covering Apple Punam Goyle with us from Bloomberg Intelligence, Anaragrana

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<v Speaker 1>as well an Edla Lowe, host of Bloomberg Tech. So

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<v Speaker 1>let's get to the numbers. Third quarter revenue one hundred

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<v Speaker 1>and nine point forty two billion.

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<v Speaker 2>That's a bap.

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<v Speaker 1>One hundred and eight point eighty five is what the

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<v Speaker 1>street was expecting. Third quarter EPs two dollars two cents

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<v Speaker 1>a share. That is definitely above what the street was

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<v Speaker 1>forecasting of a dollar eighty nine a share. If we

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<v Speaker 1>go to third quarter products revenue seventy eight point sixty

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<v Speaker 1>eight billion, that two is better than the street estimate

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<v Speaker 1>of seventy seven point twenty five billion. Services revenue thirty

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<v Speaker 1>point seven to four billion, a little bit light thirty

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<v Speaker 1>one point thirty six billion. Am. And again we're kind

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<v Speaker 1>of highlighting here on the Bloomberg what we call our

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<v Speaker 1>red sticky, our red headlines. Third quarter revenue again better

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<v Speaker 1>than what the street was forecasting, one hundred and nine

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<v Speaker 1>point forty two billion versus one hundred and eight point

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<v Speaker 1>eighty five billion. We're now getting iPhone revenue as well.

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<v Speaker 3>Tim, Yeah, the headline's crossing fast and furious. I'phoned revenue

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<v Speaker 3>coming in above estimates at fifty four point two five

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<v Speaker 3>billion dollars the estimates for fifty three point six billion dollars.

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<v Speaker 3>Shares Apple down about two point four percent in the

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<v Speaker 3>after hours. Apple also declaring a cash dividend of twenty

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<v Speaker 3>seven dollars a share. Third quarter Great of China revenue

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<v Speaker 3>coming in shy of estimates at eighteen point eight two

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<v Speaker 3>billion dollars. The estimate was for nineteen point five eight

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<v Speaker 3>billion dollars. Apple shares falling about two point four percent

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<v Speaker 3>in the post market. When these numbers crossed, they did

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<v Speaker 3>shoot higher, ever so slightly. You know, watch the after

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<v Speaker 3>hours carefully and with caution. We haven't heard yet what

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<v Speaker 3>they're going to say on the call. Very light commentary too,

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<v Speaker 3>as Apple is wont to do in their press release,

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<v Speaker 3>just saying that the company's proud to report the strongest

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<v Speaker 3>June quarter ever with double digit revenue growth across iPhone,

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<v Speaker 3>Mac and services and in every geographic segment.

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<v Speaker 1>This is Tim Cook setting June quarter records for both

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<v Speaker 1>EPs and operating cash flow. Still here with our team,

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<v Speaker 1>ed Lolo, I want to bring you back in here.

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<v Speaker 1>I know you're just kind of going through the numbers.

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<v Speaker 1>Two initial thoughts here. Again, we continue to see this

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<v Speaker 1>dockdown about two and a half percent here in the aftermarket.

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<v Speaker 4>Yeah, it's a slight beat against consensus or expectations across

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<v Speaker 4>the board. Other in iPad, I see a miss, and

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<v Speaker 4>then in services I see a miss on gross margin

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<v Speaker 4>coming in at fifty point one percent. Apple does explain

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<v Speaker 4>that there was roughly two percentage points benefit gross margin

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<v Speaker 4>from tariffree funds, so we can we can re litigate

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<v Speaker 4>that on the accounting side. But EPs therefore includes an

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<v Speaker 4>eleven cent benefit from those tariffree funds. But that's what

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<v Speaker 4>I see, you know, Tim summed it up. Well. The

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<v Speaker 4>Greater China will be a question, right, But I see

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<v Speaker 4>iPad miss and services miss. Services more likely to concern.

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<v Speaker 4>If it's a miss, then iPad maybe, but otherwise strong.

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<v Speaker 2>Yeah.

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<v Speaker 1>Mark German is going to join us too for the

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<v Speaker 1>conversation in a little bit. But he's also pointing at

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<v Speaker 1>gross gross margins slightly above what Wall Street wanted. But

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<v Speaker 1>again the stock down about two percent, but let's not

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<v Speaker 1>forget the stock has been on quite a rally so

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<v Speaker 1>far this year. What you're looking for plex.

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<v Speaker 2>Yeah, I am. I want to bring in on a

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<v Speaker 2>rag on rog.

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<v Speaker 3>I know that you expected that the string of strong

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<v Speaker 3>iPhone results would continue this quarter next given the company

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<v Speaker 3>hasn't raised prices for smartphones, has your view changed at

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<v Speaker 3>all given what we've seen in the last few minutes

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<v Speaker 3>with with with these numbers coming out.

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<v Speaker 5>No, there was a beat on the iPhone number, so

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<v Speaker 5>that's there. But here is the kicker, and I'm looking

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<v Speaker 5>at gross malogeins which was also pretty decent, which was

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<v Speaker 5>a Now that's a surprise.

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<v Speaker 3>Because you would have made the memory price right.

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<v Speaker 5>Memory process to start to think. The only place where

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<v Speaker 5>I see slight hiccup is great to China. So we'll

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<v Speaker 5>find out what happened here. But it's a very minor way, boy,

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<v Speaker 5>very minor miss.

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<v Speaker 3>Are you saying that Apple doesn't need to raise prices

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<v Speaker 3>because their margins are intact?

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<v Speaker 5>I hope see for their sake, if they can figure

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<v Speaker 5>out not to raise iPhone lower end prices, it's going

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<v Speaker 5>to be very good for them. I think you have

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<v Speaker 5>to raise prices first of all, because the memory costs

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<v Speaker 5>are very high. But I think you and we think

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<v Speaker 5>it's better to do it on the higher end phones

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<v Speaker 5>because you know, people like you are not sensitive to

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<v Speaker 5>and you know, another few hundred dollars on an iPhone promac.

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<v Speaker 5>So it's not going to that's not going to be

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<v Speaker 5>the difference that.

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<v Speaker 2>We can make to be.

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<v Speaker 5>See, that's another reason why they did that. That's another

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<v Speaker 5>reason why they did that. So the thing is, I

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<v Speaker 5>think there is one more good quarter of iPhone coming in,

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<v Speaker 5>but then things get harder for them next year because

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<v Speaker 5>then comparisons get tough. You know, this is not a

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<v Speaker 5>company you can grow iPhone twenty two percent year after year.

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<v Speaker 5>You know, this is not a brand new product. This

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<v Speaker 5>is a replacement cycle story. So you could see a

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<v Speaker 5>little bit of a push for people pulling forward some

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<v Speaker 5>of these things, but things are going to get hard

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<v Speaker 5>next year when you I didn't do tougher competisons.

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<v Speaker 3>I want to bring in marker Emeni's back with US.

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<v Speaker 3>Apple shares down in the after hours. Marcus Bloomberg, news

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<v Speaker 3>managing at IT for Global Consumer Tech. You were live

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<v Speaker 3>blogging while you were on TV. Yes, what's what's your take.

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<v Speaker 6>My take is that the iPhone number looks great. My

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<v Speaker 6>take is that the Mac number looks amazing. My take

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<v Speaker 6>is at services a little soft, and the China number

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<v Speaker 6>missed the estimate we have here on the Bloomberg terminal.

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<v Speaker 6>But at the same time, that is, you know, pretty

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<v Speaker 6>nice growth on an annual basis. Where they were sort

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<v Speaker 6>of I guess in the toilet in China a couple

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<v Speaker 6>of years ago and last year, but they've totally rebounded there.

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<v Speaker 6>It's going to be interesting to see how the foldable

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<v Speaker 6>iPhone performs there as a status symbol well north of

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<v Speaker 6>two grand, so I think it's going to be a

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<v Speaker 6>hot product there, especially because foldibles are taking over the

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<v Speaker 6>smartphone market in China.

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<v Speaker 3>Yeah, I know you're going to buy a foldable phone

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<v Speaker 3>as or Sam, We'll be first in line. So is

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<v Speaker 3>it the light services in China that's moving the stock lower?

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<v Speaker 3>I mean, I know stock was twenty up to more

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<v Speaker 3>than twenty two percent going into this prem.

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<v Speaker 6>Yes, yes, I mean they smashed Mac right, But like,

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<v Speaker 6>I don't think investors have fully grasped the importance of

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<v Speaker 6>the Mac at this point. I mean, it sort of

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<v Speaker 6>feels like an afterthought. Compared to the iPhone and the iPad.

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<v Speaker 6>The iPad is always light. Wearables have been light for

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<v Speaker 6>a couple of years now because they haven't really done

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<v Speaker 6>a ton there, but that is going to accelerate big

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<v Speaker 6>time over the next three years with these AI devices.

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<v Speaker 6>Glasses are going to shoot those numbers up.

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<v Speaker 2>You think people will buy those? I do.

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<v Speaker 6>I think you'll buy them too. Tell me about them, Well,

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<v Speaker 6>they're going the Apple is not going necessarily after the

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<v Speaker 6>smartphone market. They're looking to create glasses that people want

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<v Speaker 6>to wear, just like the Apple Watch replace the traditional

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<v Speaker 6>watch market. They think that their smart glasses are going

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<v Speaker 6>to replace sort of the low end to mid tier

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<v Speaker 6>glasses market, not the Maison Bonets of the world, but

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<v Speaker 6>you know, the Eslar, Luxaticas of the world. So they're

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<v Speaker 6>really going to go after those brands there. They'll have

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<v Speaker 6>cameras built in, I'll do all the stuff that Meta does,

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<v Speaker 6>but a little bit more premium and apply because it'll

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<v Speaker 6>integrate with your iPhone, whereas they've really held back iPhone

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<v Speaker 6>integration with the metaglasses over the past couple of years.

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<v Speaker 1>Actually create something that is competitive in terms of share

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<v Speaker 1>at the company that moves the needle in terms of

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<v Speaker 1>the iPhone. Does something else finally come over in terms

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<v Speaker 1>of contributing more to the bottom line as the top line?

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<v Speaker 6>You know, I think Turnis will be CEO for the

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<v Speaker 6>next fifteen years, unless again, something goes wrong that we're

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<v Speaker 6>not expecting. And someone asked me earlier today on one

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<v Speaker 6>of the programs, what's going to be the most important

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<v Speaker 6>product in Turnas's tenure, and I, to their surprise, said

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<v Speaker 6>the iPhone. I think it's going to be the case

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<v Speaker 6>that we're always going to carry something in our pocket.

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<v Speaker 6>The iPhone or something like it is always going to

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<v Speaker 6>be at the center of everything, and then we're going

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<v Speaker 6>to be augmented by glasses, watches, earbuds, you name it.

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<v Speaker 6>But at some point there will be a transition to

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<v Speaker 6>be had. I just don't see it anytime in the

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<v Speaker 6>near future.

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<v Speaker 2>Has Apple given up on the Vision Pro?

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<v Speaker 6>Has Apple given up on the Vision Pro? It's on

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<v Speaker 6>the back burners of all back burners at this point.

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<v Speaker 6>There's a revamped version that's lighter in development. I don't

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<v Speaker 6>anticipate it before the end of twenty eight or early

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<v Speaker 6>twenty nine. Could go further back from that because they

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<v Speaker 6>have been heavily prioritizing this glasses push smart glasses with

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<v Speaker 6>no display, smart glasses.

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<v Speaker 2>With ar display.

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<v Speaker 6>They've got a long roadmap of multiple generations ahead of

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<v Speaker 6>both of those categories, and you'll see them introduce the

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<v Speaker 6>glasses strategies early is June of next year.

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<v Speaker 2>What do you want to hear on the call.

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<v Speaker 6>I want to hear about the memory shortage. I know

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<v Speaker 6>it's not sexy, but investors are interested in that. I

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<v Speaker 6>want to hear about Tim Cook's thoughts on how the

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<v Speaker 6>transition is going. Most importantly, I want to hear Turnas's

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<v Speaker 6>vision for Apple. Are we going to hear that on

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<v Speaker 6>this call or we're going to hear that on the

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<v Speaker 6>next call? Probably not. These guys don't really say anything.

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<v Speaker 3>I'm laughing because you know, you shared with us earlier

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<v Speaker 3>about John Turnas and Tim Cook being dressed identically, Like,

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<v Speaker 3>you know, his vision is going to be whatever Tim

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<v Speaker 3>Cook says the vision is.

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<v Speaker 2>Is it going to be? Is it is that?

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<v Speaker 6>What it's going to be?

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<v Speaker 5>Yeah?

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<v Speaker 6>No, I think that. I mean he's going to come

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<v Speaker 6>in and make major changes to the company, just like

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<v Speaker 6>you know Steve Jobs, arguably one of the greatest CEOs

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<v Speaker 6>and visionaries of all time. Tim Cook came in there.

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<v Speaker 6>It's not like you took a wrecking ball, but he

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<v Speaker 6>shook things up pretty quickly. He was the one who

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<v Speaker 6>instated the buyback program, he was the one who instated

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<v Speaker 6>environmental initiatives. He was the one who instated and tons

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<v Speaker 6>of new product lines. And you can bet Turnus is

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<v Speaker 6>going to do the same thing. And so we'll see

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<v Speaker 6>how long that takes. But he's not going to come

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<v Speaker 6>on and say he's going to do things differently than

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<v Speaker 6>his predecessor. He's going to go on and say how

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<v Speaker 6>incredible Tim Cook has done. And even if I do

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<v Speaker 6>half of what you do, it'll be a success.

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<v Speaker 3>Yeah, five trillion dollar marketcap pretty close to and expectations

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<v Speaker 3>were high going into this prend What's the question that

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<v Speaker 3>if you were able to ask a question on the

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<v Speaker 3>call today, what would it be?

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<v Speaker 6>If I were able to answer or ask a question,

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<v Speaker 6>I would straight up ask Turnas, what is your vision

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<v Speaker 6>for the future of this company? How are you going

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<v Speaker 6>to get to this next stage of growth? And how

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<v Speaker 6>are you going to create an AI devices strategy? Well,

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<v Speaker 6>I mean the good news is I don't get a

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<v Speaker 6>question because the bad news is he wouldn't answer.

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<v Speaker 2>That, and just I was keeping track, that was three questions.

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<v Speaker 6>Well, you know, I'm a journalist.

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<v Speaker 2>That's what these analysts do too.

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<v Speaker 1>But if he's not going to answer a question about

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<v Speaker 1>vision and you kind of know that, where else would

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<v Speaker 1>you what else would you want to know?

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<v Speaker 6>I would want to drill down into his operational expertise

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<v Speaker 6>and get his viewpoint as someone who's not from the

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<v Speaker 6>operations department about the memory shortage, how long he sees

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<v Speaker 6>that running for, and what work is going on internally

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<v Speaker 6>to solve that other than just hiking prices.