Apple Inc. (NASDAQ:AAPL) Q3 2023 Earnings Call Transcript

Luca Maestri: Yes, Michael, you’re correct. I mean clearly, we’ve seen an improvement in the June quarter, and we expect further improvement in the September quarter. In June, the performance was across the board. Tim and I mentioned we set records really across the board. We had all-time records in cloud, in video, in AppleCare, in payments and June quarter records in App Store, advertising and Music. So we saw improvement in all our Services categories. We think the situation will continue to improve as we go through September. And that’s very positive because not only good for the financial results, but obviously, it shows a high level of engagement of our customers in the ecosystem, which is very important for us. And it’s really the sum of all the things that I mentioned in my prepared remarks.

It goes from the fact that our installed base continues to grow, so we’ve got a larger pool of customers, to the fact that our customers are more engaged as we have more transacting accounts and paid accounts on the ecosystem. And the subscriptions business is very healthy with growth of 150 million paid subscriptions just in the last 12 months. It’s almost double to what we had 3 years ago. And of course, we are providing more and more content to our users. And so the combination of all these things gives us good confidence for September.

Michael Ng: Great. And just as a related follow-up, it’s about the hardware installed base and Services ARPU. I was curious when you talked about the Services strength, you talked about the 2 billion-plus installed base. When you think about the opportunity to increase the Services ARPU, do you really think about it internally on a per-active-iPhone user basis or on a per-device basis? Said differently, I’m just curious where you think about — whether you think there’s an incremental opportunity for those users that have multiple devices. Do you really see a big Services ARPU uplift in that respect?

Luca Maestri: Well, we know that customers that own more than one device are typically more engaged in our ecosystem. And so obviously, they tend to also spend more on the Services front. I would say the biggest opportunity is that we know that there’s a lot of customers that we have that are very familiar with our ecosystem. They are engaged in the ecosystem. But still today, they’re using only the portion of the ecosystem that is free. And so we think that by offering better content and more content over time, we’re going to be able to attract more of them as paid customers.

Operator: Our next question is from Amit Daryanani with Evercore.

Amit Daryanani: I have 2 as well. I guess, Luca, maybe if you can talk about Wearables a bit. The growth over there, I think, in constant currency was fairly impressive at plus 6%. Can you just touch on maybe what’s driving that? And then how do we think about the Wearables segment heading into the September quarter? I know you talked about a bunch of other ones, but how do we think about Wearables into September as well?

Luca Maestri: Sorry, Amit, I didn’t get the — what are you referring to?

Amit Daryanani: Yes. Sorry. I was hoping you could talk a bit about the Wearables segment because the growth over there was fairly impressive. And then how do you think about it into September as well?

Luca Maestri: Yes. On the Wearables front, we had really good performance in Greater China. And that’s, again, very important for us. It was a June quarter record for Greater China. Very important for us because, again, it shows that the engagement with the ecosystem in a market that is so important for us like China continues to grow. It means that there’s more and more customers that are owning more than the iPhone. Also, we continue to grow the installed base of the category very quickly because, as I mentioned, 2/3 of every buyer of Apple Watch during the course of the June quarter was new to the product. And so that is all additive to the installed base. So it’s just great to see that the AirPods continue to be a great success in the marketplace for us.