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Speaker 1: three thousand journalists and analysts around the world.
Speaker 2: Just want to get to Apple. Let's get to it.
Speaker 2: First quarter revenue one hundred and forty three point seventy
Speaker 2: six billion, Yes, a big beat. One hundred and thirty
Speaker 2: eight point four billion was what the street was expecting.
Speaker 2: First quarter EPs also a big beat. Two dollars eighty
Speaker 2: four cents a share. The street estimate was for two
Speaker 2: dollars sixty eight cents a share Greater China. They've been
Speaker 2: struggling there. Revenue in Greater China twenty five point fifty
Speaker 2: three billion dollars, folks, That is a beat. Twenty one
Speaker 2: point eighty two billion dollars was what the street was expecting.
Speaker 2: That's a new all time EPs record though overall, and
Speaker 2: the install base now has more than two and a
Speaker 2: half billion active devices. Well, got to say investors like
Speaker 2: in this report. In the Aftermarkett still up about two
Speaker 2: percent here in the postmarket trade. Hey, let's see what
Speaker 2: Bloomberg News Managing editor for Global Tech Consumer Tech thinks
Speaker 2: about this. He is Mark German, knows everything about this company,
Speaker 2: lots of exclusives. This feels pretty good.
Speaker 3: Tim Cook has to keep his job, at least for now.
Speaker 3: This is a massive, massive, massive quarter. This is a
Speaker 3: home run. Their greatest quarter ever by orders of magnitude.
Speaker 3: It's a gigantic beat on overall revenue. China is back.
Speaker 3: You have a big beat on the iPhone in particular.
Speaker 3: Eighty five billion dollar quarter is just insane. The installed
Speaker 3: based two and a half billion. The numbers are just
Speaker 3: beyond excellent. We could ignore the fact that they missed
Speaker 3: on wearables, home and accessories. We can ignore the fact
Speaker 3: they missed on Mac. We could ignore the fact that
Speaker 3: they barely you know, crossed expectations on services. I guess
Speaker 3: none of that matters when the iPhone is selling so well.
Speaker 3: But still there's the big existential question of what's next.
Speaker 3: It's an important question because of AI and Apple absolutely
Speaker 3: needs to figure out what's AI strategy. There needs to
Speaker 3: be an AI reckoning of some sort there. But they
Speaker 3: just bought themselves a very long time with this just
Speaker 3: insanely great quarter.
Speaker 1: So let's talk about a couple of the areas that
Speaker 1: you highlighted there. One is China and Another one is
Speaker 1: the sort of the concerns that people had about memory
Speaker 1: chips in this quarter and the rising prices of memory chips.
Speaker 1: How was Apple able to navigate this so it didn't
Speaker 1: hit its margins like people thought it would.
Speaker 3: They buy components and memory components quarters and months in advance,
Speaker 3: sometimes years in advance. They have these deals struck, so
Speaker 3: they're working off of numbers and pricing and materials here
Speaker 3: that really give them extensive pricing power over competitors. So
Speaker 3: we'll hear more about that on a call today, But
Speaker 3: it seems like they're fine.
Speaker 2: Mark, I love this. I mean, I'm looking at our
Speaker 2: live blog, so you must have like kicked this out
Speaker 2: before you jumped on air with us. But you did
Speaker 2: mention that the significant things on the call. You you've
Speaker 2: already talked about the AI strategy succession. You've kind of
Speaker 2: said maybe that's off the table for now because this
Speaker 2: was such a blowout quarter. You talk about the long
Speaker 2: term viability of the business if it doesn't get its
Speaker 2: AI act together. It's hard to even think about that
Speaker 2: when you see the numbers here and just what a
Speaker 2: big company this is and how significant is I feel
Speaker 2: like in so many different people's lives, like I have
Speaker 2: an Apple household. I think Tim has an Apple household.
Speaker 2: Is that is that really the long term viability if
Speaker 2: they don't get AI together.
Speaker 1: Call me Tim Apple.
Speaker 2: In fact they do, that's.
Speaker 3: Yes, I said long term right and the talking really
Speaker 3: and walking really long? Okay, uh, the little, the little,
Speaker 3: the really long term here right, Like, at some point
Speaker 3: there is going to be a need to fulfill these
Speaker 3: AI desires and you know they're going to have to
Speaker 3: figure that out well.
Speaker 2: Onor ag Ranov our BI team. He talked with Tim
Speaker 2: and I just moments ago, and he talked about, you
Speaker 2: know how they're working with Google when it comes to AI,
Speaker 2: relying on them right now for their models, and so
Speaker 2: they're not doing the big AI spend. That makes sense
Speaker 2: for now too. So do you agree that that's kind
Speaker 2: of a smart strategy now and kind of waiting it
Speaker 2: out a little bit, But at some point they've got
Speaker 2: to kind of do their own thing.
Speaker 3: It's not that they're waiting it out. It's that they
Speaker 3: have no choice, They have nothing internal. So it's not
Speaker 3: that they're waiting it out, it's that they need to
Speaker 3: do it. And so they're partnering with the best partner
Speaker 3: they can that's going to offer them the best pricing power,
Speaker 3: which for now is Google. They initially wanted to work
Speaker 3: with Anthropic, but from a pricing standpoint, that didn't work out.
Speaker 3: They couldn't work with open Ai because they're, you know,
Speaker 3: hardcore competitors at this point. So Google is all who
Speaker 3: was left. And obviously the judge didn't break up the
Speaker 3: search deal there, so it made sense and it'll aligned
Speaker 3: pretty nicely for them.
Speaker 1: Okay, do we know yet how Apple was able to
Speaker 1: beat expectations in China once again for the first quarter
Speaker 1: the most recent quarter, Greater China revenue came in at
Speaker 1: twenty five point five to three billion dollars. Twenty one
Speaker 1: point eight two was the estimate. You said it minutes ago.
Speaker 1: It is back in China. You're holding up an iPhone
Speaker 1: right now. That's what they did.
Speaker 3: I'm answering your question. I'm answering your question.
Speaker 1: It was the iPhone seven color orange. Oh, it's the
Speaker 1: color orange. It's that easy.
Speaker 3: It is the Promax. No, it's design. People buy the
Speaker 3: new designs. This is the first new design in half
Speaker 3: a decade. It got it done. That's why you do
Speaker 3: new designs because you're trying to bring in new customers,
Speaker 3: why does for upgrades? And but that's the way to
Speaker 3: do it.
Speaker 1: Didn't They know that?
Speaker 3: Of course they know that, But it takes time to
Speaker 3: do these new designs and you kind of want to
Speaker 3: get it right. And then you can't do it too
Speaker 3: often because if you do it too often, it doesn't
Speaker 3: have the power that it has if you do it
Speaker 3: only every so often.
Speaker 2: Hey, I want to roll into this a story you've
Speaker 2: got on the Bloomberg that you put out today, and
Speaker 2: this has to do with Apple buying the Israeli AI
Speaker 2: startup that interprets facial movement QAI. Is this important?
Speaker 3: I think it's going to enable some features for future
Speaker 3: air pods and smart glasses and mixed reality headsets and
Speaker 3: all that, but it's not fundamental to the overall AI strategy,
Speaker 3: which I think they're still trying to figure out. Also,
Speaker 3: just one piece of the puzzle, Okay.
Speaker 1: Mark. Another story that you reported on this week, Apple's
Speaker 1: Tim Cook calls for a de escalation after Alex Pretti's
Speaker 1: shooting in Minneapolis. There's this thread that Tim Cook is
Speaker 1: trying to a needle that Tim Cook is trying to thread.
Speaker 1: He was at the White House on Saturday, and to
Speaker 1: do a.
Speaker 3: Very good job. Why not the needle. Well, I think
Speaker 3: his statement was kind of worthless in some respects. I
Speaker 3: think that he's spent. I don't know if it's at
Speaker 3: this statement talking about how the president, the one who's
Speaker 3: overseeing the policies that led to the situation of Minneapolis,
Speaker 3: has his ears wide open to listen to feedback. I mean,
Speaker 3: I'm not sure that's what his employees, who are sort
Speaker 3: of revolting internally about this, we're looking for. I think
Speaker 3: they were looking for Tim Cook to take some sort
Speaker 3: of stand here, and he really didn't. You know. From
Speaker 3: his perspective is he's scared to upset Trump and get
Speaker 3: tariffs and other policies slapped onto Apple's business. So you'll
Speaker 3: see him continue to do what he's doing, because this
Speaker 3: is not about taking a stand at this point for him,
Speaker 3: this is about protecting the underlying business, and the results
Speaker 3: speak from themselves. Underlying business seems pretty well protected.
Speaker 2: Great stuff as always, and we'll be looking for your reporting.
Speaker 2: He is Mark URMs, Thank you, Mark, Managing editor for
Speaker 2: Global Consumer Tech for Bloomberg News. Out there out there
Speaker 2: on the West Coast, well, let's.
Speaker 1: Bringing Ed Ludlow. He's the coast of Bloomberg Tech on
Speaker 1: Bloomberg TV. He joins us from our San Francisco bureau.
Speaker 1: Ed the story from Mark German is out sales trouncing
Speaker 1: estimates after iPhone fuels record quarter. Tim Cook called the
Speaker 1: demand quote unprecedented. Is this all about the iPhone doing
Speaker 1: well around the world?
Speaker 4: Old? Yeah, all about the iPhone And in some ways
Speaker 4: it's like an issue of chronology and timing, right. Think
Speaker 4: about when Apple announces the iPhone seventeen generation and we're
Speaker 4: all there and Cooper Tino for it, and then it
Speaker 4: goes on sale and you have the holiday quarter, so
Speaker 4: you know, actually it goes a little bit beyond that. Yeah,
Speaker 4: you know, this is where the Bloomberg terminal comes in useful.
Speaker 4: So that is a big beat. You can just see
Speaker 4: it looking at the headline on a dollar basis. But
Speaker 4: not only is it nine percent above consensus even the
Speaker 4: top end of the most bullish ranges on how this
Speaker 4: iPhone would do, we're only about eighty one billion dollars.
Speaker 4: I think it came in above eighty five billion dollars.
Speaker 4: So they've done something. Either the phone has got traction
Speaker 4: or they've done something smart with the timing of it
Speaker 4: and it's sold well. The bit that's missing, of course,
Speaker 4: is that that commentary does not have anything specific to
Speaker 4: do with Greater China. We know the numbers in Greater
Speaker 4: China are really good, but how did this iPhone do there?
Speaker 2: Yeah, like, is it just whoa just a good quarter
Speaker 2: or do was it luck or was it really strategy?
Speaker 2: Right of understanding.
Speaker 4: I'm super cautious because sometimes we've relied on third party
Speaker 4: data like you. I won't name it, it would be
Speaker 4: a bit unfair, but there are various third party data
Speaker 4: sets that say, oh, no, Apple's doing really bad.
Speaker 1: You're talking about it's okay, okay, I'll.
Speaker 4: Stick to my guns and you know, and then Apple
Speaker 4: comes around with earnings and the opposite has been true
Speaker 4: on more than one occasion. But this occasion, like the
Speaker 4: third party data that this sort of incremental and anecdote
Speaker 4: of people queuing up for the iPhone seventeen in all markets,
Speaker 4: but like Greater China, it was kind of there. So
Speaker 4: so that's interesting. Where else do you want to go?
Speaker 1: I mean this, you know, this is Apple.
Speaker 4: There's anything we want to go to AI? Because yes,
Speaker 4: you want to ask me about the thing that they
Speaker 4: have nothing to say about.
Speaker 1: WHOA sure every analyst is really pointed to that. I mean,
Speaker 1: we can we can talk about the relationship that Apple
Speaker 1: has with with Google and for gem and we could
Speaker 1: talk about all the money going to Open AI potentially
Speaker 1: from Amazon and other companies, about a potential one hundred
Speaker 1: billion dollar fundraising around We could talk about Apple relying
Speaker 1: on third parties rather than building its own Is there
Speaker 1: a risk in doing that?
Speaker 4: I go back to basics, and you know, I kind
Speaker 4: of rely on Bloomberg's Mark Guman, who is one of
Speaker 4: the world's leading journalists when it comes to covering not
Speaker 4: just Apple but consumer electronics. And in the context of
Speaker 4: this earnings print, what he's written is probably true that
Speaker 4: Apple has done enough to mask over or allay the
Speaker 4: concerns that investors have about a lack of progress in
Speaker 4: AI as a product. You know, the reporting's quite clear,
Speaker 4: and it's been announced now officially, right that at least
Speaker 4: on the interim, Apple's AI generation of Siri will be
Speaker 4: underpin underpinned by Gemini. And Mark's reported a lot about
Speaker 4: the financials around that. Right, it's a one billion perannum agreement.
Speaker 4: We don't. We don't and you won't get this sort
Speaker 4: of announcement like here it is, here's the date it's coming,
Speaker 4: and this is what it can do until it's here.
Speaker 4: You know, that's not how Apple operates.
Speaker 2: Yeah, it's just you know, I mean it's pretty like
Speaker 2: like where do you go? Where do you go?
Speaker 3: You know?
Speaker 2: Here we are looking. I mean the stock isn't up
Speaker 2: as much as it was earlier. We were talking about,
Speaker 2: you know, more than a two percent gain. I think
Speaker 2: at its highs here in the aftermarket, it's just up
Speaker 2: about three quarters of one percentage point. What is it
Speaker 2: that they need to do? Maybe on the call? Is
Speaker 2: it ai? Is it that this is sustainable, this is
Speaker 2: a strategy, this is you know, we figured out China.
Speaker 4: Like, what is it? Well? You know that I don't
Speaker 4: forgive me because I was blogging, I didn't hear what
Speaker 4: you guys were talking about just before. But in this
Speaker 4: very limited earnings release and statement, you guys maybe you
Speaker 4: went over the risk factors and forward looking.
Speaker 1: Yeah, we talked about that. We talked about that, you know,
Speaker 1: I talked about how you started pointing that out back
Speaker 1: in May of last year.
Speaker 4: In May of last year, I was sat next to
Speaker 4: the you two at New York studio, do you remember,
Speaker 4: and we were like, oh, that's interesting, and they've never
Speaker 4: said that before.
Speaker 1: But that was only your first report post Liberation Day, right.
Speaker 4: The only observation I'll make in line with that is
Speaker 4: that this release also says nothing about the environment for
Speaker 4: memory chips. And you know, like memory chip prices are
Speaker 4: very high.
Speaker 2: But their margin was so good, right.
Speaker 4: And their margins were pretty good, and there's a scarcity,
Speaker 4: and that the principal difference is like this. This is
Speaker 4: why it's so fun to cover hardware companies. And it's
Speaker 4: a privilege to be a technology journalist when you get
Speaker 4: access to all these companies and speak to the CEOs.
Speaker 4: If you're a very big company, you have leverage with
Speaker 4: your supply base. If a supplier has to choose, I've
Speaker 4: got this number of things and I can only send
Speaker 4: them here, or I can send them there, or I
Speaker 4: can split. It helps to be Apple, is what I'm saying.
Speaker 4: And there are companies that I've covered whose CEOs you know,
Speaker 4: will privately just agonize over how difficult it is to
Speaker 4: convince supplies to give them the things they need. So
Speaker 4: on the call that will come up. You know, the
Speaker 4: cell sider likely to ask about it.
Speaker 1: But you know, there are high prices, and then there's
Speaker 1: Apple dealing with high prices. And when I asked Mark
Speaker 1: this question about how they were able to successfully navigate
Speaker 1: these higher memory prices, he said, well, one they're Apple,
Speaker 1: and two they buy so far in advance, and they
Speaker 1: buy the components too that go in, so at a
Speaker 1: certain point ed it'll hit them.
Speaker 2: Right.
Speaker 4: Well, it's not just that the memory prices are high.
Speaker 4: The reason that memory prices are high is that historically
Speaker 4: memory dram and and flash memory is a very cyclical
Speaker 4: up and down business. Boom and bust. You know, that's
Speaker 4: what I and King would say, boom and bust in
Speaker 4: King leads are semiconductive coverages right at Apploomberg. And it
Speaker 4: is correct that Apple supply chain teams are its secret source.
Speaker 4: You know, that was Tim Cook's whole thing. He was
Speaker 4: coo like, that's what he was good at. But the
Speaker 4: reason prices are high is because of scarcity of availability,
Speaker 4: you know, because there is such demand for equivalent chips
Speaker 4: that are going into data centers and so like Mark's
Speaker 4: answer is appropriate. Apple has leverage and the ability of
Speaker 4: scale to say like, Okay, we have got ahead of this,
Speaker 4: and one would imagine that their supply chain team is
Speaker 4: sophisticated enough to have foreseen some of the things that
Speaker 4: we're now experiencing in that market.
Speaker 1: So the first thing Mark said to us, I no, no,
Speaker 1: you were blogging ed and you were looking at the results.
Speaker 1: Was Tim Cook just bought himself time? Tim Cook gets
Speaker 1: to keep his job. I mean, there's been a lot
Speaker 1: of questions about succession. Mark says, That's one of two
Speaker 1: questions he would ask on the call. The other would
Speaker 1: be about AI in your view, was his job not
Speaker 1: at risk? But you know there are questions about who
Speaker 1: leads this company after Tim Cook.
Speaker 4: I am not Bloomberg's Mark g What right is that?
Speaker 4: When Mark did that recent reporting and it's been it's
Speaker 4: been over a period of time about which executives are
Speaker 4: now more at the forefront of Apple's future, he was
Speaker 4: crystal clear in that reporting that there is no suggestion
Speaker 4: that Tim Cook being replaced or stepping down or retiring
Speaker 4: is imminent. You know that that that this was a
Speaker 4: longer term thing. What I would reflect on is the
Speaker 4: conversations that I have with people in industry and those
Speaker 4: that come on the show and talk about it is
Speaker 4: you know, Tim cook is is the operator that many
Speaker 4: people would want. In an environment like this where we
Speaker 4: still have trade and tariff considerations, the movement of goods
Speaker 4: between borders from point A to point B is quite difficult.
Speaker 4: And as we just talked about, you know, like specifically
Speaker 4: memory pricing, that's within his you know, his his range.
Speaker 4: This is not me speaking, This is how people would
Speaker 4: relay it to me. Mark when he goes on air
Speaker 4: and when he writes, and again I'm not speaking on
Speaker 4: his behalf. He would talk a lot more about the
Speaker 4: product you know, fresh products, reiterated and renewed products, in
Speaker 4: the product pipeline for the future. And right now, I
Speaker 4: don't know that people are necessarily so worried about that,
Speaker 4: at least in my world. They are worried about when
Speaker 4: they're going to get the software bit right with AI.
Speaker 2: You know, it's interesting, you say, AI. It's something we
Speaker 2: talked about just briefly with Mark German. It's a story
Speaker 2: that he put out Apple bys Israeli AI startup that
Speaker 2: interprets facial movements. He's like, you know, interesting will help
Speaker 2: in terms of I guess product development, but not necessarily
Speaker 2: a big big deal.
Speaker 1: So Ed, we have one time for one more question,
Speaker 1: and we'd be really remiss if we didn't ask you
Speaker 1: your view on AMAZ. This news come in just late
Speaker 1: in the day, switching gears a little bit still on Ai,
Speaker 1: Amazon talk and talks to invest fifty billion dollars and
Speaker 1: open Ai expand tizzed this could be part of a
Speaker 1: one high hundred billion dollar funding round, which would value
Speaker 1: open Ai at more than eight hundred billion dollars. When
Speaker 1: we're talking about a funding round of one hundred billion dollars,
Speaker 1: I mean we're talking about just the massive, massive scale.
Speaker 1: What does it mean that that Amazon could invest this
Speaker 1: much money.
Speaker 4: Well, Amazon probably can invest that much money. You know.
Speaker 4: What we've seen is most of the hyperscalers that were
Speaker 4: wedded to one player have diversified, and Thropic and Microsoft
Speaker 4: deepened their interaction. And Thropic was very heavily aligned with Amazon.
Speaker 4: Google and Anthropic have very heavily aligned and propic relies
Speaker 4: on TPUs. Amazon from a software perspective, has tried to
Speaker 4: accommodate all the players on its Bedrock platform, which is
Speaker 4: basically a workplace where you can either train or build
Speaker 4: on top of existing models. So the financials are there,
Speaker 4: like if you have a if people are watching that
Speaker 4: are investors in those companies, phone me explain the dilution,
Speaker 4: to me, explain the post and pre evaluation. But open
Speaker 4: ai needs capital. It is coming from multiple places apparently,
Speaker 4: and one would imagine based on the reporting that's been
Speaker 4: done by Bloomberg and others, this is a big, large
Speaker 4: anchor round before a future I PO as well of
Speaker 4: some part of the open ai entity.
Speaker 1: The scale is just otherworldly, the amounts of money that
Speaker 1: we're talking about right now,