The Talk Show: Live From WWDC
7:00pm Tuesday • California Theatre
Tickets Available • Fun Will Be Had

Linked List: May 2, 2024

Thursday, 2 May 2024

Annotating Tim Cook’s Remarks on the Q2 Analyst Call ★

From Six Colors’s transcript of Apple’s financial results conference call:

Keep in mind, as we described on the last call, in the March quarter a year ago, we were able to replenish iPhone channel inventory and fulfill significant pent-up demand from the December quarter COVID-related supply disruptions on the iPhone 14 Pro and 14 Pro Max. We estimate this one-time impact added close to $5 billion to the March quarter revenue last year. If we removed this from last year’s results, our March quarter total company revenue this year would have grown. Despite this impact, we were still able to deliver the records I described.

Excuses are cheap, but this really is a credible explanation.

We continue to feel very bullish about our opportunity in generative AI. We are making significant investments, and we’re looking forward to sharing some very exciting things with our customers soon. We believe in the transformative power and promise of AI, and we believe we have advantages that will differentiate us in this new era, including Apple’s unique combination of seamless hardware, software, and services integration, groundbreaking Apple Silicon with our industry-leading neural engines, and our unwavering focus on privacy, which underpins everything we create. [...]

Turning to Mac, March quarter revenue was $7.5 billion, up 4% from a year ago. We had an amazing launch in early March with the new 13- and 15-inch MacBook Air. The world’s most popular laptop is the best consumer laptop for AI, with breakthrough performance of the M3 chip and its even more powerful neural engine.

This doesn’t sound to me like a man about to announce iPad Pros with M4 chips. The present-tense “industry-leading neural engines” to me says Apple feels good about the AI capabilities of the devices already in our hands. What makes for a good “AI computer” are the very same things that make for a good computer, period.

However, we still saw growth on iPhone in some markets, including mainland China, and according to Kantar, during the quarter, the two best-selling smartphones in urban China were the iPhone 15 and iPhone 15 Pro Max.

It’s somewhat interesting to me that those are the two iPhone models: on the consumer side, the smaller-display iPhone 15; on the pro side, the big-display iPhone 15 Pro Max. The cheapest iPhone 15 model and the most expensive one.

Apple’s Regional Segments for Financial Reporting ★

My recent focus on the European Union’s DMA and the notion that, if the EU pushes too hard, Apple might pull back from sales in the EU, had me looking at how the company defines the “Europe” segment in its financial reporting. On the surface one might think that Apple’s “Europe” is just the EU plus the United Kingdom and Norway. But it’s actually much bigger than that: it’s all of Europe, Africa, the Middle East, and India. (Last I checked Africa is a pretty big continent, and India a pretty populous country.)

Today’s financial report for Q2 FY2024 got me wondering how exactly Apple defines its other regions. From their 2023 10-K (PDF):

The Company manages its business primarily on a geographic basis. The Company’s reportable segments consist of the Americas, Europe, Greater China, Japan and Rest of Asia Pacific. Americas includes both North and South America. Europe includes European countries, as well as India, the Middle East and Africa. Greater China includes China mainland, Hong Kong and Taiwan. Rest of Asia Pacific includes Australia and those Asian countries not included in the Company’s other reportable segments. Although the reportable segments provide similar hardware and software products and similar services, each one is managed separately to better align with the location of the Company’s customers and distribution partners and the unique market dynamics of each geographic region.

“Japan and Rest of Asia Pacific” are two segments, but that clause is one of those examples that exemplifies why the Oxford Comma ought to be house style everywhere — as written, sans comma, that could easily be misread as a single segment.

Apple Q2 2024 Results ★

Apple Newsroom:

Apple today announced financial results for its fiscal 2024 second quarter ended March 30, 2024. The Company posted quarterly revenue of $90.8 billion, down 4 percent year over year, and quarterly earnings per diluted share of $1.53.

Net sales year-over-year by product (from Apple’s consolidated statement):

	Percentage	Dollars
iPhone	-10%	-$5.4B
Mac	+4%	+$0.3B
iPad	-17%	-$1.1B
Wearables, etc.	-10%	-$0.8B
Services	+14%	+3.0B

And by region:

	Percentage	Dollars
Americas	-1%	-$0.5B
Europe	+1%	+$0.2B
Greater China	-8%	-$1.4B
Japan	-13%	-$0.9B
Rest of Asia Pacific	-17%	-$1.4B

Credit where credit is due: IDC’s projection that iPhone sales were down 10 percent year-over-year was spot-on.

And Tim Cook’s decade-ago decision to focus both the company and investors’ attention on Services looks ever more prescient. As it stands, a 4 percent overall drop in revenue makes for an ever-so-slightly bad quarter. If not for Services growth, however, this would’ve been a not-so-slightly bad quarter.