Transcript: Apple CEO Tim Cook on the company’s 2018 Q1 earnings

Transcript: Apple CEO Tim Cook on the company’s 2018 Q1 earnings

Apple CEO Tim Cook and CFO Luca Maestri spoke with analysts during the company’s Q1 2018 earnings call. Here’s our ongoing live transcript of their remarks! If you want more info on Apple’s results, we recommend checking out the awesome charts from Six Colors.

Cook’s opening remarks

Tim Cook

Before we dive into the quarter, I’d like to take a moment to talk about a significant milestone we recently crossed. Apple’s active installed base reached 1.3 billion devices in January and is at an-all time high for all of our major products. 1.3 billion devices represents an astonishing 30% growth in just two years. It speaks to the strength and reliability of our products in our ecosystem, as well as the loyalty, satisfaction, and engagement of our customers. It’s also fueling tremendous growth in our services business, which I’ll talk about a little later in the call.

Turning to the December quarter, we’re thrilled to report Apple’s biggest quarter ever which set new all-time records in both revenue and earnings. We generated revenue of 88.3 billion dollars which is above the high end of our guidance range, and it is up almost 10 billion dollars or 13% over the previous all-time record we set a year ago. It’s also our fifth consecutive quarter of accelerating revenue growth with double-digit growth in each of our geographic segments around the world. What makes this even more remarkable is that the quarter we’re reporting today was 13 weeks long, while the year ago quarter was 14 weeks. When we look at the average revenue per week and the December quarter this year compared to last year, our growth was a stunning 21%. Our growth was broad based and a key driver was iPhone which generated its highest revenue ever. iPhone X was the best-selling smartphone in the world in the December quarter according to Canalis and it has been our top-selling phone every week since it launched. iPhone 8 and iPhone 8 Plus rounded out the top three iPhones in the quarter. In fact, revenue for our newly launched iPhone’s was the highest of any lineup in our history, driving total Apple revenue above our guidance range.

I want to take a moment to recognize the tremendous amount of work that went into creating iPhone X. Our teams carried out an extremely complex launch from both an engineering and operations perspective, executing an outstanding product ramp that required years of research and development. One that introduced innovative features like an edge-to-edge Super Retina Display and the True Depth camera which enables Face ID. Our customers love these new features and the new gestures, like simply swiping up from the bottom, which make using iPhone even more intuitive and enjoyable. Our team has put the technology of tomorrow in our customers hands today, set the standard for the next decade of smartphones, and we are very proud of their achievements. It was another very strong quarter for services with revenue of 8.5 billion dollars up 18% over last year and we’re on pace to achieve our goal of doubling our 2016 services revenue by 2020.

The number of paid subscriptions across our services offerings passed 240 million by the end of the December quarter. That’s an increase of 30 million in the last 90 days alone, which is the largest quarterly growth ever. We had an all-time record quarter for the App Store with our best holiday season ever. We’re seeing great excitement around Augmented Reality with customers now enjoying over 2000 ARKit enabled apps spanning every category in the App Store. In December when Pokemon Go released its new augmented reality features built with ARKit, it jumped the top of the App Store charts. Last week on a stop in Toronto I met developers who are hard at work on creative applications using ARKit — from art appreciation to e-commerce — and I was very impressed with what I saw. Just four months after ARKit launched to the public, we’ve already released ARKit 1.5 in beta to developers around the world and the response has been tremendous. Augmented reality is going to revolutionize many of the experiences we have with mobile devices and with ARKit we’re giving developers the most advanced tools on the market to create apps for the most advanced operating system running on the most advanced hardware. This is something only Apple can do.

In addition to the App Store, several other services had their biggest quarter ever, including Apple Music, iCloud, and Apple Pay all of which saw growth in both active users and revenue. Apple Pay has reached an important milestone in the U.S. as a result of 50% year-over-year growth in merchant adoption, it’s now accepted at more than half of all American retail locations, which includes more than two-thirds of the country’s top 100 retailers. Now available in 20 markets, global Apple Pay purchase volume more than tripled year-over-year, and we’re delighted to be expanding to Brazil in the coming months. Today, you can use Apple Pay to take the subway in Gwangju China, see a concert at London’s Wembley Stadium, or buy a souvenir in Yosemite National Park. In the U.S., we launched Apple Pay Cash in December and it’s off to a terrific start. Millions of people are already using it to send and receive money with friends and family quickly, easily, and securely to split a bill, pay someone back, or send a last minute gift right from the Messages app.

It was our best quarter ever for the Apple Watch with over 50% growth in revenue and units for the fourth quarter in a row and strong double-digit growth in every geographic segment. Sales of Apple Watch Series 3 models were also more than twice the volume of Series 2 a year ago. Apple Watch is the most popular smartwatch in the world and gained market share during the quarter based on the latest estimates from IDC.

It was the third consecutive quarter of growth for iPad revenue thanks to the strength of both iPad and iPad Pro. Based on the latest data from IDC, we gained share in nearly every market we track with strong outperformance in emerging markets. Worldwide, almost half of our iPad sales were to first-time tablet buyers are those switching to Apple. And that’s true in some of our most developed markets, including Japan and France. In China, new and switching users made up over 70% of all iPad sales.

For Mac, we launched the all-new Mac Pro in mid-December. It’s an entirely new product line designed for our pro users who love the all-in-one design of iMac and require workstation-class performance. It’s the fastest most powerful Mac ever, delivering incredible computational power for simulation and real-time 3D rendering, immersive VR, and complex photography, audio, and video projects. Worldwide, 60% of our Mac sales were to first-time buyers and switchers. And in China that number was almost 90%.

We’re transcribing the call live so be sure to check back for updates!

Transcript: Apple CEO Tim Cook on the company’s 2018 Q1 earnings

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