The Six Five team discusses Apple earnings.
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Transcript:.
Daniel Newman: Pat, Apple’s sales, they declined on a year over year basis. Is Tim Cook on the chopping block? Is this the Aetna? I’m kidding, I’m kidding. Sensational, right? Sensational.
Patrick Moorhead: It is fun to say, though, right?
Daniel Newman: They saw five and a half … Well, if he took my calls on earnings day, I wouldn’t be so upset about it. All the other CEOs call us. I mean-
Patrick Moorhead: Why doesn’t he call and write? What’s wrong about him?
Daniel Newman: Team Apple never calls, but they were down 5.5%. They missed by four billion dollars. Now, when you’re at 117 versus 121, I guess you could say that’s a small miss, but that’s substantial and it marks the first in a long, long time. I think it’s since the mid 20 teens was the last time they had a deceleration or a shrinking of revenue year on year. Their earnings also fell year on year.
iPhone revenue missed. Mac revenue missed. Other product revenue missed. Services revenue did beat just ever so slightly, and so did margin, by the way. So margin was okay. iPads were hot this quarter. Now, I have no idea what to attribute that to. Here’s what I would attribute to, bad analyst forecasting because not only did they hit it, they beat it by a ton. Where does that come from? I guess maybe iPads were a big Christmas present this year, a big holiday gift. You know what I mean? That’s the only thing I can attribute it to, but otherwise, it was a total stinker.
Now, let’s just be candid. I think the quarter before they were a lot better than everyone had expected. So they came into last quarter warning that this was going to be weak in their earning. I think no one believed them because the quarter before they warned. I think it’s like you said Pat about you Google, you were just surprised it took this long to get bad. The difficulties of the economy are actually finally starting to show, and that’s where I started this whole conversation about something had to break.
Candidly, as much as I like to sometimes pick on Apple, I don’t know that this is anything really to do with Apple. China, of course, is always going to be a factor in the fact that China has not completely opened up. Shopping has not returned to normal. By the way, doesn’t only affect Apple, but it disproportionately affects Apple. Getting back to that particular market in full strength will be a big help to the company.
Let me talk about what Apple has going for it, Pat, and that’s going to be on services and advertising. Apple has shut down the advertising market to companies like Facebook and Meta. That’s what I said earlier. I think I said yesterday to Bloomberg, I said, “Yeah, it’s great that their policy, they’re going after Google,” I said, “but really, who they need to be looking at right now is Apple.” I said, “Apple for two reasons. One is its app store stuff is the most of any anti-competitive practices in the market today that I’ve seen is Apple and its app store,” but what they did to advertising to basically knee chop its biggest competition, especially Meta, to me only shows that these moves towards content, these moves towards services, I just feel like there’s a wolf in sheep’s clothing here in terms of Apple and what it plans to do with advertising.
Cook alluded to it when he talked about the captive iPhone audience that’s going to be able to be delivered services to and the long-term opportunity that that creates because everybody looks at the iPhone number. iPhone number’s bad, Apple bad, Apple bad, Apple sell. That’s not Apple’s future. I mean, there’s always going to be iPhones and they already have such a strong position in that market, Pat, but those services and every dollar that it can add in terms of spend per user is going to be monumental, and the company just continues to turn the screws there.
So not a great result for Apple. I don’t think it’s necessarily indicative that Apple has any long-term worries that are going to be more substantial than whatever the macro environment puts on it, but I will say, Pat, that it’s fun to see them fall every once in a while because it felt like maybe they were above any pain where the rest of tech hasn’t been able to rise above, but long term, Apple is a bellwether and, ultimately, we always want the economy to do well.
Patrick Moorhead: Yeah, it’s funny, Tim Cook led with disruptions in its China factory where they were allowing their workers to get beat with metal poles, which just doesn’t seem very aligned with the brand, but the thing that I focused on here was that Mac number, off 29%. That I don’t think was unit-related because both Canalis and IDC had them down 1%. Then I see the deals they’re doing with Best Buy where they’re getting $100, $200, $300 off.
The two big consumer brands out there on the premium side are Apple and Surface. Surface was down 39, Mac was down 29%, and both these companies were taking just gigantic swings at prices. I am wondering if the huge price cuts will make an overall brand impact. I doubt if it’s in the short term, but if Apple keeps cutting prices on its Macs, it very well could see some brand dilution, which, by the way, if you look at the value of the entire company, brand is, I would say, its largest value.
Its products are good. In some areas they’re even better. I don’t give them a ton of credit on the Mac side. I do give them a ton of credit though on the watch side, and their AirPods are the best product out there, but when it comes to phones and Max, they’re really not that differentiated aside from maybe the benchmark performance that the Macs get today.
So interesting market, interesting to see Apple. Apple is never done. They’re never dead. Competitors don’t have Apple right where they want, but I am very intrigued though about what Microsoft has up its sleeve. Quite frankly, Google related to these LLMs and their capability, this is not an area that Apple is strong at, right? Apple is strong on the client side and they pretty much get zero respect for anything that’s done in the cloud.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
