Apple earnings conference call record: Cook said Chinese users had a warm response to the iPhone 12 Pro

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Tencent technology, July 28 – Apple (NASDAQ: AAPL) released its financial statements for the third fiscal quarter ending June 26, 2021 (i.e. the second quarter of 2021). According to the financial report, Apple’s total revenue in the third quarter was $81.434 billion, a year-on-year increase of 36%; The net profit attributable to Apple was $21.744 billion, a year-on-year increase of 93%.
After the earnings release, Apple CEO Tim Cook, chief financial officer Luca Maestri and other executives attended the earnings conference call and answered analysts’ questions on the spot.
The following is the record of the earnings conference call:
Analyst: with regard to performance guidelines, first of all, I would like to ask about the delayed release of iPhone last year, which is rare in other years. Can you talk about this? In addition, compared with last year, what are the different products?
Maastri: first of all, we expect strong growth, which will be double-digit growth. We think the growth we see this year will continue to the next quarter. We mentioned that the growth rate will be less than 36%, and put forward five factors.
First, the dollar is weak relative to other currencies, which will reduce the growth rate by about 3% in the next quarter.
Second, the growth rate of services in the second quarter was 33%, which was a fairly high level in history.
Third, some service categories, such as advertising and Apple Care, were seriously affected when COVID-19 closed the city last year.
Therefore, compared with the second quarter of this year, this performance is particularly good, but we don’t think this trend will continue into the next quarter.
In addition, I also mentioned the supply constraints, which will be more severe in the third quarter than in the second quarter. Three months ago, we expected supply constraints to reach $3 or $4 billion worth of products, mainly iPads and Macs. We finally succeeded in alleviating this problem at the beginning of the second quarter and controlling the supply constraints to the low level of our expected range, but we think the situation in this area will be more difficult.
Taking all these factors into account, the third quarter will achieve double-digit growth.
Analyst: I want to know more about the supply constraints. Do you think this will affect the fourth quarter? What impact will this have on the holiday sales season? In addition, do you bear higher costs, such as the impact on gross profit margin or product cost?
Cook: as for cost, our expenditure on freight is higher than usual, but the cost of parts and components continues to decline on the whole. As for how long the supply constraints will last, I won’t give a specific forecast today. We’ll look at it from quarter to quarter. As expected, we will try our best to solve all the problems we encounter.
Maastri: in terms of cost, the gross profit margin in the second quarter was 43.3%. We did a good job in cost reduction this quarter. As you can see, we mentioned in the performance guidelines that this value will be between 41.5% and 42.5%. Obviously, we will be quite satisfied with such achievements.
Analyst: first of all, congratulations to Apple’s global team for its very strong performance. The world is facing unprecedented challenges, whether it is the new crown, Delta (delta) variant, or China’s floods and supply chain challenges. Has R & d been impacted? When everything is progressing slowly, can you motivate everyone to be dynamic and release new products in an orderly manner despite working at home?
Cook: our company is very adaptable. Our employees are doing double jobs. We can’t be more satisfied with it. We released the latest progress in software at WWDC and related software products in the autumn. In the past year, a year and a half, we also released many other new products, which is great!
Analyst: what are your new discoveries in the life cycle of the iPhone? Such as user preferences, pricing, subscription services, etc. Can you talk about the differences in different regions?
Cook: if you look at our data in the third fiscal quarter, the growth of our replacement users has reached a double-digit percentage, and so has the upgraded users.
In fact, this year has the highest upgrade rate in the third quarter of all years, so we are very satisfied with both.
As Luca mentioned earlier, the performance of the iPhone is very good globally. 5g penetration is actually very low, so we are quite optimistic about the future of iPhone.
Analyst: the situation in China has increased by 58%. Where is the driving force for growth? What do Chinese consumers say? Will this trend continue?
Cook: this quarter, Greater China has reached an all-time high. We are very proud. We also try our best to serve users in this region. They have a very enthusiastic response to iPhone 12 pro and iPhone 12 Pro max.
If you look at the balance sheet of our products, we also set a record in wearable devices, home accessories and services on Mac. In fact, the strong performance is all-round. We found that a large number of new users joined in. For example, MAC and iPad, two-thirds of users bought for the first time this quarter. For Apple watches, this figure reached 85%. So we can’t be happier.
Analyst: does 85% refer to Chinese users or global users.
Cook: China, I was just talking about the Chinese market.
Maastri: globally, that’s 75%.
Analyst: I would like to ask about the performance guidelines, especially the gross profit margin in the next quarter, which said it would drop by 1%. What are the influencing factors? Because from a historical point of view, the third quarter is generally a quarter with flat or rising gross profit margin.

Maastri: I still have to look back at the second quarter. The gross profit margin was 43.3%. I mentioned that in addition to continuous cost reduction, the proportion of our services is still quite high, especially advertising, which rebounded greatly compared with the closure of the city last year. In the future, we expect the product portfolio to be different, so we expect the gross profit margin to be different.
In addition, the gross profit margin of this year is much higher than that of last year, which was only 38.3%. As a result, the gross profit margin actually increased by 400 basis points year-on-year.
Analyst: I also want to ask a question about services. You mentioned the growth rate of 33%. If compared with the past four quarters, what factors have brought about the growth? Is the average income of unit users increased? Or is the number of users increasing? Which factor is more prominent? As time goes on, what do you think will be the trend of these factors?
Maastri: there are multiple factors at work.
First of all, the user group continues to grow and has been hitting a record high, which obviously brings us new opportunities.
In addition, more and more people join our ecosystem, whether free product users or users willing to pay for some services, and the proportion of paying users is increasing. This quarter, the growth rate of this area reached double-digit percentage again, which is obviously helpful to the growth of revenue.
We have been continuously improving the quality and quantity of services. In the past few years, we have launched many new services, such as Apple TV +, apple fitness +, apple arcade game subscription service, apple news +, apple credit card, etc.
These are the businesses we are expanding, so the revenue growth brought by these has further brought growth. You also mentioned that in the past four quarters, our growth rate has remained at more than 20%, which is obviously very gratifying.
More questions and answers, continuous updates