Krish Sankar: Thanks, Tim.
Suhasini Chandramouli: Thank you, Krish. We’ll now take our next question, please.
Operator: Our next question is from Ben Reitzes with Melius Research. Please go ahead.
Ben Reitzes: Hey. Thanks a lot. I appreciate the question. Tim, I appreciate all your commentary around China. It was great to kind of hear about the growth potential there, your optimism. I wanted to also ask about the supply chain and where is your priority? Do you have a priority to diversify your supply chain? How do you feel about Apple’s supply chain around the world? And in particular, what do you think about further investments in the U.S. as well?
Tim Cook: Our supply chain is truly global, and so we’re investing all over the world, including in the United States, we were very focused on advanced manufacturing for the U.S. and have worked on a number of different projects in the U.S., whether that’s our venture with Corning on the glass or Face ID module or semiconductors. And so all of these are our advanced manufacturing and I think exactly the kinds of things that the U.S. would be and are very, very good at. We also invested in other regions of the world and we’re continually optimizing the chain. And so we — the moment we learned something that didn’t work exactly right, we are tweaking it. And so we’re going to continue to do that. But at the end of day, it will still be a global supply chain.
Ben Reitzes: Got it. Thanks.
Tim Cook: Yeah.
Ben Reitzes: Next one for Luca. Just really quick on the extra week dynamic. There was also last year an issue with the iPhone production, where there was the COVID lockdowns in China. Is it possible to give some color around what that — I guess, having a normalized supply chain somewhat this year, what that benefit is this year and maybe contrast that with the 7 point hit from the extra week? Thanks a lot.
Luca Maestri: Yeah. Thanks for the question, Ben. I mentioned during the prepared remarks the extra week is 7 points of revenue. We did have disruptions, supply disruptions last year on the phone, on the 14 Pro and Pro Max in the December quarter a year ago. And when we normalize for those two factors, and I said it during the call, we still expect to grow on iPhone. So you take into account the, the loss of the extra week, you compare it with the supply disruptions that are not going to repeat, hopefully, this year. And when you normalize for those two things, we still expect to grow on iPhone.
Ben Reitzes: Thanks a lot everybody. Appreciate it, Luca.
Suhasini Chandramouli: Thank you, Ben. And we’ll take the last question now.
Operator: Our last question comes from Richard Kramer with Arete Research. Please go ahead.
Richard Kramer: Thank you very much. Tim, first off, if we look over the past two years, Apple sales are about $18 billion higher and R&D is up by about 8% — $8 billion or over a third higher. Can you give us a sense of some of the main components or drivers behind that increase in innovation spend? Is it Apple Silicon, is it new products like Vision Pro or is it content to support new services? I think that’s one of the top questions investors have. Thanks.
Tim Cook: Sure. It’s a number of things, Richard. It’s the — some things I can’t talk about, its Vision Pro, it’s AI and ML, it’s the silicon investment that we’re making, the transition with the Mac and other silicon. It’s sort of all of those things and — but I think you would find that the R&D expenditure in the aggregate looks very competitive versus others.
Luca Maestri: And I would add, Richard, on this front. Some of the investments that we’re making in R&D are also one of the drivers for the gross margin expansion. So I think it’s important to think about it that way.
Richard Kramer: That’s great. And Luca, you mentioned — or Tim mentioned college students choosing Mac. Then, you mentioned the record Services revenue. What other metrics do you think you could provide to help investors understand how Apple measures and increases customer lifetime value, especially when we see a lot of users entering the ecosystem with a relatively lower-priced products or even refurbished devices? So you’re growing your ecosystem, but how do you think about growing customer lifetime value over the long run?
Luca Maestri: Well, some of the metrics that I mentioned before, obviously, we look at the installed base of active devices. We see, we want to make sure that, the customers that we acquire remain with us and so we have good visibility over that, and we pay a lot of attention to the behavior of the installed base, both by product and by geography. And then, we look at the daily engagement in the ecosystem. So that’s why we pay a lot of attention on things like transacting accounts, paid accounts, we want to see if, in fact, we are able to move our customers from a free model to a paid model over time. That’s obviously very, very important for us. And so, on this, we keep track of all these things and that’s — and then what we do, because I think it’s really important is that over time, we add new services and that, obviously, like, for example, the progress that we’ve made in payments in recent years, very, very important because we’ve attracted more and more people that are actually now using additional features on our devices and we are able to monetize that, right.
So we take all that into account, we understand what happens when a customer joins us, when they buy a primary device versus a used device, we understand their behavior, in different markets and so on. So we have, I think, pretty good visibility. And I think the progress that we’re making in Services, we did $85 billion in the last 12 months. It’s — that’s a size of a Fortune 50 and significantly bigger than it was just a couple of years ago.
Richard Kramer: Absolutely. Thanks very much.
Suhasini Chandramouli: Thank you, Richard. A replay of today’s call will be available for two weeks on Apple Podcasts, as a webcast on apple.com/investor and via telephone. The number for the telephone replay is 866-583-1035. Please enter confirmation code 0106234 followed by the pound sign. These replays will be available by approximately 5 PM Pacific Time today. Members of the press with additional questions can contact Josh Rosenstock at 408-862-1142 and financial analysts can contact me, Suhasini Chandramouli, with additional questions at 408-974-3123. Thank you again for joining us today.
Operator: Once again, this does conclude today’s conference. We do appreciate your participation.
