Apple telegraphed that things are getting better after a tough quarter — here’s how to interpret its remarks

Published

2 years ago

February 3, 2023

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Apple reported a tough December quarter on Thursday, including the company’s biggest quarterly revenue decline since 2016, along with sales drops in its iPhone, Mac and wearables businesses.

At first, investors didn’t like the results, with Apple shares dropping as much as 4% in extended trading.

But the stock had a brief rally after Chief Financial Officer Luca Maestri started to give data points on a call with analysts, suggesting Apple’s performance will get better during the current quarter even if overall sales will still be down from last year.

The tech giant hasn’t provided guidance since the start of the pandemic. But its data points — or “directional insights,” as management calls it — allow analysts covering the stock to get a sense of how the company is doing and update their models.

Here’s how Apple’s forward-looking statements on Thursday break down.

“For iPhone, we expect our March quarter year-over-year revenue performance to accelerate relative to the December quarter year-over-year revenue performance,” Maestri said. “This represents an acceleration in our underlying year-over-year business performance, as the December quarter benefited from an extra week.”

The iPhone is Apple’s biggest product segment by far, amounting for 56% of sales in the most recent quarter. Apple said on Thursday that iPhone sales had declined over 8% year over year. But Maestri’s comment suggests they won’t continue to fall as quickly in the March quarter.

Management said one reason for the drop in November and December was that it couldn’t make enough high-end iPhones because of Covid restrictions at Chinese factories, and that production had recovered.

Still, there’s a risk that customers who couldn’t find a new phone during the holiday season will just give up, rather than buying one in the current quarter. Apple CEO Tim Cook said it was “very hard to estimate” this possibility when analysts asked on the call.

Before Thursday, analysts had expected Apple to guide to about $98 billion in sales in the company’s fiscal second quarter.

On Thursday, Apple said that revenue had declined 5.49%. Last year, in the March quarter, Apple reported $97.28 billion in sales. A similar decline in the March quarter this year would put sales around $92 billion.

So on the surface, this should’ve been a disappointment.

But as Apple explained, a drop of 5.49% would actually be an improvement from the December quarter, because Apple’s results in that quarter were artificially boosted by the fact that there was an extra week. In other words, December 2022’s year-over-year revenue performance was even worse than it looked.

In addition, Covid lockdowns at factories in China were a big factor in the shortfall, but Apple said on Thursday that its production was back to a level it was comfortable with, suggesting that supply won’t be as big a drag on the March quarter as it was in December.

“For Services, we expect revenue to grow year-over-year while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming,” Maestri said.

Services revenue was one of the few pleasant surprises for Apple on Thursday, as its $20.77 billion in sales beat Wall Street consensus expectations. The segment includes App Store, warranties, iCloud, and Apple Music, among other things.

Last year, Apple reported $19.82 billion in services revenue in the March quarter, so the company is suggesting an increase from there, even though executives said it remains a tough environment with decreased gaming and advertising sales.

“For Mac and iPad, we expect revenue for both product categories to decline double digits year-over-year because of challenging compares and macroeconomic headwinds,” Maestri said.

This represents a significant shift for the iPad, which was Apple’s fastest growing hardware business during the December quarter, spiking nearly 30% on a year-over-year basis to $9.4 billion in sales. Now Apple is suggesting the business will go from 30% growth to more than a 10% decline.

In contrast, the Mac business declined nearly 29% during the December quarter, but Cook told analysts it was partially because of when the company released new laptops, and Apple announced new Mac desktops and laptops in January. Mac sales will be down at least 10% in the March quarter, based on these comments, but will likely improve.

“We expect gross margin to be between 43.5% and 44.5%. We expect OpEx to be between $13.7 billion and $14.9 billion,” Maestri said.

Apple’s margins remain significantly higher than they were before the pandemic. For example, in the quarter ending in December 2019, the last full quarter before the Covid pandemic was declared, Apple reported a gross margin of 38.4%.

“We’re doing a lot of work on the cost structure and that is paying off,” Maestri said.

Cook told CNBC’s Steve Kovach on Thursday that Apple had actually come in under its operating expenses goal for the December quarter.

“We’re being prudent and deliberate. If you look at our OpEx guidance, what we said we were going to do this quarter, we came in half of a billion dollars underneath it,” Cook said. “So we are squeezing costs out.”

Technology

How quantum could supercharge Google’s AI ambitions

Published

19 hours ago

April 18, 2025

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How quantum could supercharge Google’s AI ambitions

Inside a secretive set of buildings in Santa Barbara, California, scientists at Alphabet are working on one of the company’s most ambitious bets yet. They’re attempting to develop the world’s most advanced quantum computers.

“In the future, quantum and AI, they could really complement each other back and forth,” said Julian Kelly, director of hardware at Google Quantum AI.

Google has been viewed by many as late to the generative AI boom, because OpenAI broke into the mainstream first with ChatGPT in late 2022.

Late last year, Google made clear that it wouldn’t be caught on the backfoot again. The company unveiled a breakthrough quantum computing chip called Willow, which it says can solve a benchmark problem unimaginably faster than what’s possible with a classical computer, and demonstrated that adding more quantum bits to the chip reduced errors exponentially.

“That’s a milestone for the field,” said John Preskill, director of the Caltech Institute for Quantum Information and Matter. “We’ve been wanting to see that for quite a while.”

Willow may now give Google a chance to take the lead in the next technological era. It also could be a way to turn research into a commercial opportunity, especially as AI hits a data wall. Leading AI models are running out of high-quality data to train on after already scraping much of the data on the internet.

“One of the potential applications that you can think of for a quantum computer is generating new and novel data,” said Kelly.

He uses the example of AlphaFold, an AI model developed by Google DeepMind that helps scientists study protein structures. Its creators won the 2024 Nobel Prize in Chemistry.

“[AlphaFold] trains on data that’s informed by quantum mechanics, but that’s actually not that common,” said Kelly. “So a thing that a quantum computer could do is generate data that AI could then be trained on in order to give it a little more information about how quantum mechanics works.”

Kelly has said that he believes Google is only about five years away from a breakout, practical application that can only be solved on a quantum computer. But for Google to win the next big platform shift, it would have to turn a breakthrough into a business.

Watch the video to learn more.

Technology

Nintendo Switch 2 retail preorder to begin April 24 following tariff delays

Published

19 hours ago

April 18, 2025

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Nintendo Switch 2 retail preorder to begin April 24 following tariff delays

An attendee wearing a Super Mario costume uses a Nintendo Switch 2 game console while playing a video game during the Nintendo Switch 2 Experience at the ExCeL London international exhibition and convention centre in London, Britain, April 11, 2025.

Isabel Infantes | Reuters

Nintendo on Friday announced that retail preorder for its Nintendo Switch 2 gaming system will begin on April 24 starting at $449.99.

Preorders for the hotly anticipated console were initially slated for April 9, but Nintendo delayed the date to assess the impact of the far-reaching, aggressive “reciprocal” tariffs that President Donald Trump announced earlier this month.

Most electronics companies, including Nintendo, manufacture their products in Asia. Nintendo’s Switch 1 consoles were made in China and Vietnam, Reuters reported in 2019. Trump has imposed a 145% tariff rate on China and a 10% rate on Vietnam. The latter is down from 46%, after he instituted a 90-day pause to allow for negotiations.

Nintendo said Friday that the Switch 2 will cost $449.99 in the U.S., which is the same price the company first announced on April 2.

“We apologize for the retail pre-order delay, and hope this reduces some of the uncertainty our consumers may be experiencing,” Nintendo said in a statement. “We thank our customers for their patience, and we share their excitement to experience Nintendo Switch 2 starting June 5, 2025.”

The Nintendo Switch 2 and “Mario Kart World“ bundle will cost $499.99, the digital version “Mario Kart World” will cost $79.99 and the digital version of “Donkey Kong Bananza” will cost $69.99, Nintendo said. All of those prices remain unchanged from the company’s initial announcement.

However, accessories for the Nintendo Switch 2 will “experience price adjustments,” the company said, and other future changes in costs are possible for “any Nintendo product.”

It will cost gamers $10 more to by the dock set, $1 more to buy the controller strap and $5 more to buy most other accessories, for instance.

WATCH: Nintendo has ‘a lot of work to do’ to convince casual users to upgrade to Switch 2: Kantan Games

Technology

Etsy touts ‘shopping domestically’ as Trump tariffs threaten price increases for imports

Published

1 day ago

April 17, 2025

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Etsy touts 'shopping domestically' as Trump tariffs threaten price increases for imports

An employee walks past a quilt displaying Etsy Inc. signage at the company’s headquarters in the Brooklyn.

Victor J. Blue/Bloomberg via Getty Images

Etsy is trying to make it easier for shoppers to purchase products from local merchants and avoid the extra cost of imports as President Donald Trump’s sweeping tariffs raise concerns about soaring prices.

In a post to Etsy’s website on Thursday, CEO Josh Silverman said the company is “surfacing new ways for buyers to discover businesses in their countries” via shopping pages and by featuring local sellers on its website and app.

“While we continue to nurture and enable cross-border trade on Etsy, we understand that people are increasingly interested in shopping domestically,” Silverman said.

Etsy operates an online marketplace that connects buyers and sellers with mostly artisanal and handcrafted goods. The site, which had 5.6 million active sellers as of the end of December, competes with e-commerce juggernaut Amazon, as well as newer entrants that have ties to China like Temu, Shein and TikTok Shop.

By highlighting local sellers, Etsy could relieve some shoppers from having to pay higher prices induced by President Trump’s widespread tariffs on trade partners. Trump has imposed tariffs on most foreign countries, with China facing a rate of 145%, and other nations facing 10% rates after he instituted a 90-day pause to allow for negotiations. Trump also signed an executive order that will end the de minimis provision, a loophole for low-value shipments often used by online businesses, on May 2.

Temu and Shein have already announced they plan to raise prices late next week in response to the tariffs. Sellers on Amazon’s third-party marketplace, many of whom source their products from China, have said they’re considering raising prices.

Silverman said Etsy has provided guidance for its sellers to help them “run their businesses with as little disruption as possible” in the wake of tariffs and changes to the de minimis exemption.

Before Trump’s “Liberation Day” tariffs took effect, Silverman said on the company’s fourth-quarter earnings call in late February that he expects Etsy to benefit from the tariffs and de minimis restrictions because it “has much less dependence on products coming in from China.”

“We’re doing whatever work we can do to anticipate and prepare for come what may,” Silverman said at the time. “In general, though, I think Etsy will be more resilient than many of our competitors in these situations.”

Still, American shoppers may face higher prices on Etsy as U.S. businesses that source their products or components from China pass some of those costs on to consumers.

Etsy shares are down 17% this year, slightly more than the Nasdaq.

WATCH: Amazon CEO Andy Jassy says sellers will pass cost of tariffs on to consumers