Apple today held its third earnings call of 2023, covering the second calendar quarter of the year. During the call, Apple CEO Tim Cook and Apple CFO Luca Maestri shared tidbits on recent product sales, services results, future plans, and revenue impacts.
We've highlighted the most interesting parts of the call below for those who weren't able to listen.
AI
Apple CEO Tim Cook was asked about Apple's approach to AI, and he said that AI and machine learning are "core fundamental technologies integral to virtually every product" that Apple builds, which is the same answer that Cook has given before on the topic.
It is "absolutely critical" to Apple, with Cook confirming that Apple has been investigating AI (including generative AI) "for years."
"We will continue to responsibly advance our products with these technologies," Cook said, adding that Apple tends to "announce things as they come to market."
Vision Pro
Cook said that Apple is "very excited" about Vision Pro. "Everyone who has gone through the demos have been blown away," said Cook. "We're looking forward to shipping it next year.
Services Revenue
Apple set an all-time revenue record in Services during the quarter, which it says was driven by more than a billion paid subscriptions. Services revenue was $21.2 billion, up from $19.6 billion in the year-ago quarter.
Subscriptions have grown 150 million in the past year, and have more than doubled over the last three years.
All-time revenue records were set in cloud, video, AppleCare, and payments, with June quarter revenue records for the App Store, advertising, and Apple Music.
iPhone, iPad, and Mac Sales
iPhone, iPad, and Mac revenue dropped during the quarter across all three categories. iPhone revenue was $39.7 billion, down from $40.7 billion in 2022, while iPad revenue was $5.8 billion, down from $7.2 billion in the year-ago quarter. Apple CFO Luca Maestri said that the drop in iPad sales was due to a tough compare as last year, Apple had introduced a new iPad Air during the quarter.
Mac revenue was $6.8 billion, down from $7.4 billion. Almost half of Mac buyers in the quarter were new to the product.
Wearables
Apple saw growth in the Wearables, Home and Accessories category, which brought in $8.3 billion, up two percent from $8.1 billion in the year-ago quarter. Two thirds of new Apple Watch customers during the quarter were new to the product.
Wearables are nearly the size of a Fortune 100 company, earning $40 billion in the last 12 months.
R&D
Apple's research and development spending is growing slower than it has in prior years, which Luca Maestri said is due to Apple being more careful about controlling spending during the "uncertain period" across the last few quarters. Apple has successfully decelerated some of its expense growth by slowing hiring, and plans to continue to "manage deliberately." Even amid the slowdown, Maestri said that R&D costs are continuing to grow faster than the rest of the company.
"Our focus continues to be on innovation and product development," he said.
Next Quarter
For the September quarter, Apple said that year-over-year performance will be similar to the June quarter provided the macro outlook doesn't worsen, with a year-over-year revenue impact of more than two percent. iPhone and Services revenue is expected to be up compared to June, but Mac and iPad revenue will drop double digits due to difficult compares.
Rumors have suggested that we won't see notable updates to iPads or Macs, with Apple having no plans to refresh the iPad Pro or the higher-selling Mac models until 2024. Apple will not have new products to offer this fall to attract iPad and Mac buyers.
Apple is, however, expecting gross margin of 44 to 45 percent, which Luca Maestri attributed to a strong product mix, cost savings, and Services.
Read More
A more complete picture of Apple's earnings on a per-category basis can be found in our full live blog.
