00:08:28 · Mark Gurman, Tim Stenovec
[00:08:28] S1: Well, let me give the backdrop. No regular iPhone 18. The iPhone 18 Pro is the most minor year-over-year upgrade we've seen in a long time. Nobody can find an iPhone Duo. No iPhone Air 2. All the major fall products, the MacBook Pro with Touch, the Home View, the HomePod Mini, the Apple TV, the OLED iPad, none of them launched until the holiday quarter. Yet they still beat And they beat because of the iPhone 18 Pro. Likely also from continued demand for the iPhone 17 Pro Max and all the carrier deals you saw earlier in the quarter. So this is a phenomenal report for Apple. The big news, which I think will be less phenomenal, is the guidance for the December quarter. Given the backdrop of everything I explained, it all comes down to how the iPhone Duo is going to perform. And so far, the iPhone Duo supply is very difficult to understand. New pre-orders didn't come, aren't launching until the end of January for many buyers. You can't get them at retail stores right now unless you're an AI bot. So I'll be interested to see the commentary there and what the numbers actually turn out to be. The other piece here is Greater China and services, both either a big fall or a strong deceleration. [00:09:40] S2: Okay, so yeah, a big miss when it comes to China. We'll get to that in just a minute. First, though, I want you to help us with the math. When we do get that guidance about halfway through the call, as you remind everybody on the live blog, Mark, that we're going to get, how do we know the share of Duo in there based on the number that we get?
00:09:40 · Tim Stenovec, Mark Gurman, Carol Massar
[00:09:40] S2: Okay, so yeah, a big miss when it comes to China. We'll get to that in just a minute. First, though, I want you to help us with the math. When we do get that guidance about halfway through the call, as you remind everybody on the live blog, Mark, that we're going to get, how do we know the share of Duo in there based on the number that we get? [00:09:58] S1: Oh, we have no idea. And they're not going to tell us. So it's going to be difficult to discern. [00:10:04] S2: But a bigger number will... It's a $ 2, 000 phone. So a bigger number. [00:10:08] S1: Yeah, a bigger number will mean that there's quite a big uptake for the iPhone Duo. But they don't register revenue, or at least they traditionally have not registered revenue until the consumer actually receives the device. An order being placed doesn't mean we're going to add that to the numbers. It has to be the person has received the phone, has kept the phone, etc. The good news for Apple could be that we're going to see a very strong tailwind because of the supply chain shortages and give them positive numbers into Q2, Q3, Q4 of next year, given how hard this phone is going to be to get for quite a while now. [00:10:40] S0: Will that ultimately hurt them? You know, it's great to have pent up demand, right? It makes for a great story, great headlines.
00:10:40 · Carol Massar, Mark Gurman, Tim Stenovec
[00:10:40] S0: Will that ultimately hurt them? You know, it's great to have pent up demand, right? It makes for a great story, great headlines. [00:10:47] S1: I don't think it'll hurt them. I think what Apple is trying to do anyways, especially under Ternus, is create more consistent revenue across the year. For a long time, Apple has pushed everything into the very back part of the year and now spreading things across, whether that was the intention or not for the duo, is them hitting a goal they've had for quite some time. [00:11:07] S2: Um, Mark, I, I'm, I'm wondering about the, I mean, like a week ago, one of the most read stories in the terminal sitting here was the story you were writing about, um, the crack screens on the duo. Has that issue gone away? Do we expect it to be addressed at all? I imagine an analyst will, or two will ask about this.
00:11:07 · Tim Stenovec, Mark Gurman, Carol Massar
[00:11:07] S2: Um, Mark, I, I'm, I'm wondering about the, I mean, like a week ago, one of the most read stories in the terminal sitting here was the story you were writing about, um, the crack screens on the duo. Has that issue gone away? Do we expect it to be addressed at all? I imagine an analyst will, or two will ask about this. [00:11:27] S1: We've seen a dramatic slowdown in people reporting the cracks. The cracks were reported from the first units that were sold and There does not appear to be any consistency on which units are impacted, whether that's a color, whether that's if you bought it online or in the retail store, whether it was manufactured in China or India or what have you. I'm sure they'll get a question about it, but it is completely died down, which tells me this was an early batch defect. It was a real issue. There were some influencers online trying to gaslight people into believing this was not an issue. But the fact of the matter is, for a small percentage of iPhone Duo buyers, you open the phone the right way and it cracked. And that's a real problem. But it clearly was an isolated problem. [00:12:11] S0: Mark, one of the things I jumped out ahead of the earnings, as Tim and I were reading through the blog, your comments about how this is going to be the first for Apple with new CEO John Ternus in charge and, you know, what we might hear from him on the call. He's a product guy. So I'm just curious what you're going to be listening out for.
00:12:11 · Carol Massar, Mark Gurman
[00:12:11] S0: Mark, one of the things I jumped out ahead of the earnings, as Tim and I were reading through the blog, your comments about how this is going to be the first for Apple with new CEO John Ternus in charge and, you know, what we might hear from him on the call. He's a product guy. So I'm just curious what you're going to be listening out for. [00:12:29] S1: Yeah, he gets all this credit for being a product person, but at the end of the day, Apple is a product company and nothing has changed here. All the initiatives that you see introduced over the past several weeks, these were all in the works for half a decade under Tim Cook. Obviously, Ternus was extremely deep in the thick of things, but the reality is that nothing is changing a ton at Apple anymore. Because of this, at least for now, I have reported, though, he wants the company to run faster, wants to run leaner. There have been a lot of under the radar layoffs and less under the radar layoffs at Apple. There's been cost cutting and I expect more cost cutting to happen. And so the guidance definitely is going to be the most interesting part here. Why are they looking at all these layoffs? Why are they looking at the cost cutting? What does that mean for revenue and what they're expecting there?
00:12:29 · Mark Gurman, Tim Stenovec
[00:12:29] S1: Yeah, he gets all this credit for being a product person, but at the end of the day, Apple is a product company and nothing has changed here. All the initiatives that you see introduced over the past several weeks, these were all in the works for half a decade under Tim Cook. Obviously, Ternus was extremely deep in the thick of things, but the reality is that nothing is changing a ton at Apple anymore. Because of this, at least for now, I have reported, though, he wants the company to run faster, wants to run leaner. There have been a lot of under the radar layoffs and less under the radar layoffs at Apple. There's been cost cutting and I expect more cost cutting to happen. And so the guidance definitely is going to be the most interesting part here. Why are they looking at all these layoffs? Why are they looking at the cost cutting? What does that mean for revenue and what they're expecting there? [00:13:13] S2: Hey, Mark, let's go to the AI story here. Apple's up roughly 25%. What AI story? Okay, so, well, that's the point. So Apple's up roughly 25%. It's best performing Mag 7 going into today's print, beating by far Microsoft down up 10%. So not only is it beating the greater index, but it's like the only one that's beating the greater index, right? So... Apple has been punished in the past and criticized for not having an AI strategy. But what that means is it does have a free cash flow position that is enviable if you are spending a lot of your cash right now, like some of these hyperscalers are. Am I looking at this incorrectly?