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August 2 news, Thursday, US time,appleThe company held its third quarter earnings call for fiscal 2024. Apple reported its best third quarter results to date, with revenue exceeding expectations. Apple CEOTim Cook(Tim Cook) and Chief Financial Officer Luca Maestri (Luca Maestri) explained Apple's performance in detail,iPadSales volume, service business growth and artificial intelligence initiatives, etc.

iPhoneIs revenue really declining?

Cook emphasized that compared with the iPhone 14, the iPhone 15 showed better performance, and the installation base in the third fiscal quarter reached a historical high. Although overall revenue fell slightly to US$39.3 billion, a decrease of 1%, it actually increased annually when measured at a constant exchange rate. In countries such as the United Kingdom, Spain, Poland, Mexico, Indonesia and the Philippines, iPhone revenue hit new highs, and total global installations also hit a record high.

In the third fiscal quarter, multiple iPhone models remained on the list of best-selling smartphones worldwide. In particular, the iPhone became the most popular model in the United States, urban areas of China, the United Kingdom, Germany, Australia, and Japan. According to the latest report from 451 Research, the user satisfaction of the iPhone 15 series in the United States is as high as 98%.

Users generally appreciate the iPhone 15 series' ultra-long battery life, excellent camera performance, and extraordinary power and efficiency. Regarding the upcoming iPhone 16, Cook said the company is "very excited" about Apple intelligence and the new level of value it brings to users, and believes that this will become "another compelling reason to upgrade" for the iPhone.

Cook added: “We are pleased to introduce unprecedented new features to iPhone through iOS 18, which achieves comprehensive improvements in personalization, efficiency and intelligence. Highlights of this update include major innovations in the photo app, enhanced personalization of the home screen, satellite communication capabilities, and the introduction of Apple intelligence. With the cutting-edge technology of iPhone 15 Pro and Pro Max, Apple intelligence will bring a revolutionary user experience.”

Apple Smartphones are gradually being rolled out

Cook is full of expectations for the future of Apple's intelligence. He emphasized his deep belief in the potential of artificial intelligence and firmly believes that it will greatly enrich the lives of users. The company will continue to make significant investments in the field of artificial intelligence and is committed to fully unlocking its innovative potential.

This week, Apple officially launched Apple intelligence to developers, and some of the features were first unveiled on Monday. Cook said: "We are eager for developers to take this opportunity to elevate the application experience to a new level. With the initial release of the beta version, we are full of curiosity and look forward to witnessing how developers use Apple intelligence to create amazing results."

Cook predicts that Apple's smart features will be widely used in the field of application development, and its diverse functions will be adapted to various applications. He also revealed that the release of Apple's smart features will adopt a phased strategy, and some features are planned to be gradually launched this year. Initially, they may be limited to American English users, but will be gradually expanded to more languages ​​in the future. Apple has already contacted regulators in Europe and China, hoping to enable the service.

As for whether Apple's smart technology can help boost iPhone sales, Cook believes that "it is too early to draw a conclusion now." However, he revealed that Apple is increasing its investment in artificial intelligence and machine learning, and plans to increase related investment year by year.

In addition, the integration of ChatGPT and Siri is progressing steadily and is expected to be completed by the end of the year.

iPad revenue surges

Thanks to the M4 iPad Pro and M2 iPad Air launched in the third fiscal quarter, Apple's iPad sales increased significantly, with revenue increasing 24% year-on-year to US$7.2 billion, far exceeding US$5.8 billion in the same period last year.

The iPad installation base continues to rise, breaking records, and new users accounted for as much as half of the purchases this quarter. At the same time, customer satisfaction survey results in the US market reached 97%.

Cook emphasized that the new iPad Pro equipped with the M4 chip not only redefines the boundaries of energy saving and performance, but also becomes the core power of this extremely thin and light device. This chip allows video editors and musicians to enjoy the convenience brought by cutting-edge artificial intelligence technology in professional software such as Final Cut Pro and Logic Pro. It is particularly worth looking forward to that the iPad Pro and iPad Air equipped with Apple's M series chips will be fully integrated into Apple's powerful intelligent ecosystem, bringing users an unprecedented intelligent experience.

Outstanding performance of service business

Apple's service business showed strong growth, with revenue reaching $24.2 billion in the third fiscal quarter, up 14% from the same period last year, once again setting a new record.

Apple Chief Financial Officer Maestri pointed out that the continued prosperity of the service business is due to the steady growth of the active device installation base, which has laid a solid foundation for the future expansion of the Apple ecosystem. As users' participation in Apple services increases, the number of transaction accounts and paid accounts has reached historical peaks, with paid accounts achieving double-digit year-on-year growth.

It is worth mentioning that the number of paid subscriptions for Apple services has exceeded 1 billion, a milestone that has doubled compared to four years ago. Maestri also emphasized that Apple has performed well in improving service quality and expanding content libraries, and plans to continue toApple Service platforms such as TV+ and Apple Arcade inject fresh blood to enrich the user experience.

In addition, Apple's performance in areas such as advertising, cloud computing and payment services was also outstanding, setting new business records.

Still confident in China's long-term opportunities

Cook said that although Apple's sales in Greater China fell 6.5% year-on-year in the third fiscal quarter, the actual decline was less than 3% calculated at a fixed exchange rate. More than half of the decline was attributed to exchange rate fluctuations. This was a significant improvement compared to the first half of this fiscal year, and the growth momentum is accelerating.

Focusing on the performance of iPhone in Greater China, its installation volume hit a new high, and the number of mobile phone upgrades in the mainland market also reached a new peak in the third fiscal quarter, sending a strong market signal. Survey data shows that iPhone's market share in Chinese cities ranks among the top three. Compared with the same period last year, the market performance of the iPhone 15 series in the same period after its launch was better than that of the iPhone 14 series, demonstrating the continued appeal of the product.

In addition, Apple is particularly concerned about the growth of new customers. In the field of Mac and iPad, the proportion of new customers in the Chinese mainland market has increased rapidly, most of whom are first-time users of Apple products, including new products such as smart watches, which are also warmly welcomed. It is worth mentioning that iPad has resumed its growth in Greater China, in line with the global market performance.

To sum up, we remain confident in the long-term development opportunities in the Chinese market.

Digital Markets Act

Maestri said Apple will continue to discuss its Digital Markets Act (DMA) compliance with the European Commission. Apple has seen "high acceptance" from developers for the changes, and overall, the services business and the App Store are performing "quite well so far."

Maestri reiterated that the App Store contributes 7% of Apple's total revenue in the EU.

Cook said Apple is working to understand the regulatory requirements it needs to comply with before introducing Apple smart features in the European Union. When iOS 18, iPadOS 18, and macOS Sequoia are released, Apple smart features will not be launched in the European Union.

Future Outlook

Apple optimistically predicts that its revenue growth rate in the fourth quarter will maintain a similar pace as in the third quarter. As for the service business, Apple expects strong double-digit revenue growth in the fourth quarter, with a gross margin of between 45.5% and 46.6%. Apple expects operating costs to be between $14.2 billion and $14.4 billion.

Apple CFO Maestri pointed out that the Mac product line will face a significant challenge in the fourth quarter compared to a year ago, that is, the 15-inch MacBook Air released last fall had a huge impact on the overall quarterly performance. There are rumors that Apple may launch a new M4 MacBook Pro before the end of the year, but Maestri hinted that if the company expects Mac revenue to decline, the launch of this new product may be affected or adjusted.

(Small)