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- [00:00]
Host 1
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Mark Gurman
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Mark Gurman
Radio News.
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News Announcer
This is a breaking news update from Bloomberg.
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Host 2
Instant reaction and analysis from our 3,000.
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News Announcer
Journalists and analysts around the world.
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Host 1
Just want to get to Apple. Let's get to it. First quarter revenue 143.76 billion. Yes, a big beat. 138.4 billion was what the street was expecting. First quarter EPS also a big beat. Two $2.84 a share. The street estimate was for $2.68 a share. Greater China They've been struggling their revenue in Greater China $25.53 billion folks. That is a beat. $21.82 billion was what the street was expecting. That's a new all time EPS record though overall and the installed base now has more than two and a half billion active devices. Well, got to say investors like in this report in the aftermarket stocks still up about 2 the post market trade. Hey, let's see what Bloomberg News Managing Editor for Global Tech Consumer Tech thinks about this. He is Mark Gurman knows everything about this company. Lots of exclusives. This feels pretty good.
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Mark Gurman
Tim Cook gets to keep his job at least for now. This is a massive, massive, massive quarter. This is a home run. Their greatest quarter ever by orders of magnitude. It's a gigantic beat on overall revenue. China is back. You have a Big beat on the iPhone in particular. $85 billion quarter is just insane. The installed base, two and a half billion. The numbers are just beyond excellent. We can ignore the fact they missed on wearables, home and accessories. We can ignore the fact they missed on Mac. We could ignore the fact that they barely crossed expectations on services. I guess none of that matters when the iPhone is selling so well.
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Host 2
Yeah.
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Mark Gurman
But still there's the big existential question of what's. It's an important question because of AI. And Apple absolutely needs to figure out its AI strategy. There needs to be an AI reckoning of some sort there. But they just bought themselves a very long time with this just insanely great quarter.
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Host 2
So let's talk about a couple of the areas that, that you highlighted there. One is China and another one is the sort of the concerns that people had about memory chips in this quarter and the rising prices of memory chips. How was Apple able to navigate this so it didn't hit its margins like people thought it would?
- [03:57]
Mark Gurman
They buy components and memory components, quarters and months in advance, sometimes years in advance. They have these deals struck. So they're working off of, of numbers and pricing and materials here that really give them extensive pricing power over competitors. So we'll hear more about that on the call today. But seems like they're fine.
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Host 1
Mark, I love this. I mean, I'm looking at our live blog, so you must have like kicked this out before you jumped on air with us. But you did mention that the significant things on the call, you, you've already talked about the AI strategy succession. You've kind of said maybe that's off the table for now because this was such a blowout quarter. You talk about the long term viability of the business if it doesn't get its AI act together. It's hard to even think about that when you see the numbers here and just what a big company this is and how significant is. I feel like in so many different people's, like I have an Apple household. I think Tim has an Apple household. Is that, is that really the long term viability if they don't get AI.
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Host 2
To call me Tim Apple.
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Host 1
In fact, they do that.
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Mark Gurman
Yes. I said long term. Right. And talking really. And I'm talking really long. Okay. The little, the little, the really long term here. Right. Like at some point there is going to be a need to fulfill these AI desires and you know, they're going to have to figure that out.
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Host 1
Well, of our BI team, he talked with Tim and I just moments ago and he talked about, you know, how they're working with Google when it comes to AI relying on them right now for their models. And so they're not doing the big I spend. That makes sense for now too. So do you agree that that's kind of a smart strategy now and kind of waiting it out a little bit, but at some point they've got to kind of do their own thing.
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Mark Gurman
It's not that they're waiting it out, it's that they have no choice. They have nothing internal. So it's not that they're waiting it out, it's that they need to do it. And so they're partnering the best partner they can that's going to offer them the best pricing power, which for now is Google. They initially wanted to work with Anthropic, but from a pricing standpoint that didn't work out. They couldn't work with open AI because they're, you know, hardcore competitors at this point. So Google is all who was left. And obviously the judge didn't break up the search deal there. So it made sense and it aligned pretty nicely for them.
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Host 2
Okay, do we know yet how Apple was able to beat expectations in China once again for the first quarter? The most recent quarter, greater China revenue came in at $25.53 billion. 21.82 was the estimate. You said it minutes ago. It is back in China. You're holding up an iPhone right now. That's what they did.
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Mark Gurman
I'm answering your question. I'm answering your question.
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Host 2
It was the iPhone 7 color orange. Oh, it's the color orange. It's that easy.
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Mark Gurman
Is the Pro Max? No, it's design. People buy the new designs. The first new design in half a decade. It got it done. That's why you do new designs, because you're trying to bring in new customers for upgrades. But that's the way to do it.
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Host 2
Didn't they know that?
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Mark Gurman
Of course they know that. But it takes time to do these new designs and you kind of want to get it right and then you can't do it too often because if you do it too often, it doesn't have the power that it, that it has. If you do it only every so often.
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Host 1
Hey, I want to roll into this a story you've got on the Bloomberg that you put out today. And this has to do with Apple buying the Israeli AI startup that interprets facial movement. Q AI is this important.
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Mark Gurman
I think it's going to enable some features for future AirPods, smart glasses and mixed reality headsets and all that. But it's not fundamental to the overall AI strategy, which I think they're still trying to figure out. Also just one piece of the puzzle.
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Host 2
Okay, Mark, another story that you reported on this week, Apple's Tim Cook calls for a de escalation after Alex Preddy's shooting in Minneapolis. There's this thread that Tim Cook is trying to. A needle that Tim Cook is trying to thread. He was at the White House on Saturday.
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Mark Gurman
Do a very good job. Why not the needle? Well, I think his statement was kind of worthless in some respects. I think that he spent. I don't know if it's at a statement talking about how the president, the one who's overseeing the policies that led to the sit Minneapolis has his ears wide open to listen to feedback. I mean, I'm not sure that's what his employees, who are sort of revolting internally about this, were looking for. I think they were looking for Tim Cook to take some sort of stand here. And he really didn't. You know, from, from his perspective is he's scared to upset Trump and get tariffs and other policies slapped onto Apple's business. So you'll see him continue to do what he's doing because this is not about taking a stand at this point for him. This is about protecting underlying business. And the results speak for themselves. Underlying business seems pretty well protected.
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Host 1
Great stuff as always. And we'll be looking for your reporting. He is Mark Gurman. Thank you, Mark. Managing editor for Global Consumer Tech for Bloomberg News out there, out there on the West Coast.
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Host 2
Let's bring in Ed Ludlow. He's the co host of Bloomberg Tech on Bloomberg tv. He joins us from our San Francisco bureau. Ed, the story from Mark Gurman is out. Sales trouncing estimates after iPhone fuels record quarter. Tim Cook called the demand, quote, unprecedented. Is this all about the iPhone doing well around the world?
- [09:17]
Ed Ludlow
Yeah, all about the iPhone. And in some ways it's like an issue of chronology and timing, right? Think about when Apple announces the iPhone 17 generation and we're all there in Cupertino for it. And then it goes on sale and you have the holiday quarter. So, you know, actually it goes a little bit beyond that. You know, this is where the Bloomberg terminal comes in useful. So that is a big beat. You can just see it looking at the headline on a dollar basis. But not only is it 9% above consensus, even the top end of the most bullish ranges on how this iPhone would do were only about $81 billion. I think it came in above $85 billion. So they've done something. Either the phone has got traction or they've done something smart with the timing of it and it sold well. The bit that's missing, of course is that that commentary does not have anything specific to do with Greater China. We know the numbers in Greater China are really good, but how did this iPhone do that?
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Host 1
Yeah. Like is it just, whoa, just a good quarter or was it luck? Or was it really strategy? Right. Of understanding.
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Ed Ludlow
I'm super cautious because sometimes we've relied on third party data, like I won't name it, it would be a bit unfair. But there are various third party data sets that say, say, oh no, Apple's doing really badly.
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Host 2
Everyone knows who you're talking about. It's okay, okay.
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Ed Ludlow
I'll stick to my guns. And you know, and then Apple comes around with earnings. And the opposite has been true on more than one occasion. But this occasion, like the third party data, this sort of incremental and anecdotal of people queuing up for the iPhone 17 in all markets, but like Greater China, it was kind of there. So, so that's interesting. Where else do you want to go? I mean, you know, this is Apple. There's anything we want to go to AI because.
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Mark Gurman
Yes.
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Ed Ludlow
You want to ask me about the thing that they have nothing to say about.
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Host 2
Sure. Every analyst is really pointed to that. I mean we can, we can talk about the relationship that Apple has with, with Google and for Gemini. We could talk about all the money going to OpenAI, potentially from, from Amazon and other companies, about a potential $100 billion fundraising round. We could talk about Apple relying on third parties rather than building its own. Is there a risk in doing that?
- [11:33]
Ed Ludlow
I go back to basics and you know, I'll kind of rely on Bloomberg's Mark Gurman who is one of the world's leading journalists when it comes to covering not just Apple, but consumer electronics. And in the context of this earnings print, what he's written is probably true, that Apple has done enough to mask over or allay the concerns that investors have about a lack of progress in AI as a product. You know, the reporting is quite clear and it's been announced now officially, Right. That at least on the interim, Apple's AI generation of Siri will be underpinned. It underpinned by Gemini and Mark's reported a lot about the financials around that. Right. It's a 1 billion per annum agreement. We don't, we, we don't and we won't get this sort of announcement like here it is. Here's the date it's coming, and this is what it can do until it's here. You know, that's not how Apple operates.
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Host 1
Yeah, it's just, you know, I mean, it's pretty like, where do you go? Where do you go? You know, here we are looking. I mean, the stock isn't up as much as it was earlier. We were talking about, you know, more than a 2% gain. I think at its highs here in the aftermarket, it's just up about 3/4 of 1 percentage point. What is it that they need to do? Maybe on the call, is it AI, is it that this is sustainable? This is a strategy, this is, you know, we figured out China, like what is it?
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Ed Ludlow
Well, you know, forgive me, I was blogging, I didn't hear what you guys were talking about just before, but in this very limited earnings release and statement, you guys maybe went over the risk factors and forward looking.
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Host 2
Yeah, we talked about that. We talked about that. You know, I talked about how you started pointing that out back in May of last year, a middle May of last year.
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Ed Ludlow
I was sat next to the you2 in New York studio, do you remember? And we were like, oh, that's interesting. They've never said that before.
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Host 2
But that was your first report post Liberation Day.
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Ed Ludlow
Right. The, the only observation I'll make in line with that is that this release also says nothing about the environment for memory chips. And yeah, you know, like memory chip prices are very high, but their margin was pretty good. Right, and their margins were pretty good. And there's a scarcity and the principal difference is like this, this is why it's so fun to cover hardware companies. And it's a privilege to be a technology journalist when you get access to all these companies and, and speak to the CEOs, if you're a very big company, you have leverage with your supply base. If a supplier has to choose. I've got this number of things and I can only send them here or I can send them there, I can split. It helps to be Apple is what I'm saying. And there are companies that I've covered whose CEOs, you know, will privately just agonize over how difficult, difficult it is to convince suppliers to give them the things they need. So on the call that that will come up, you know, the sell side are likely to ask about it.
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Host 2
But you know, there are, there are high prices and then there's Apple dealing with high prices. And when I asked Mark this question about how they were able to successfully navigate these higher memory Prices. He said, well one, they're Apple and two, they buy so far in advance and they buy the components too that go in. So at a certain point Ed, it'll hit them, right?
- [14:44]
Ed Ludlow
Well it's not just that that memory prices are high. The reason that memory prices are high is that historically memory DRAM and NAND flash memory is, is a very cyclical up and down business boom and bust. You know, that's what Ian King would say. Boom and bust in King leads our semiconductor coverage right at Bloomberg. And it is correct that Apple supply chain teams are its secret sauce. You know, that was Tim Cook's whole thing. He was CEO. Like that's what he was good at. But the reason prices are high is because of scarcity of availability, you know, because there is such demand for equivalent chips that are going to data centers. And so like Mark's answer is appropriate. Apple has leverage and the ability of scale to say like okay, we have got ahead of this. And one would imagine that their supply chain team is sophisticated enough to have foreseen some of the things that we're now experiencing in that market.
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Host 2
So one, one, the first thing Mark said to us, I don't know you were blogging at and you were, you were looking at the results, was Tim Cook just bought himself time. Tim Cook gets to keep his job. I mean there's been a lot of questions about succession. Mark says that's one of two questions he would ask on the call. The other would be about AI. In your view was, was his job not not at risk. But you know, there are questions about who leads this company after Tim Cook.
- [16:13]
Ed Ludlow
I, I am not Bloomberg's Mark Gurman. Normal, right? Is that when Mark did that recent reporting and it's been, it's been over a period of time about which executives are now more at the forefront of Apple's future. He was crystal clear in that reporting that there is no suggestion that Tim Cook being replaced or stepping down or retiring is imminent. You know, that this was a longer term thing. What I would reflect on is the conversations that I have with people in industry and those that come on the show and talk about it is, you know, Tim Cook is, is the operator that that many people would want. In an environment like this where we still have trade and tariff considerations, the movement of goods between borders from point A to point B is quite difficult. And as we just talked about, you know, like specifically memory pricing, that's within his, you know, his, his range. This is not me speaking, this is how people would relate to me. Mark, when he goes on air and when he writes, and again I'm not speaking on his behalf, he would talk a lot more about the product, you know, fresh products, reiterated and renewed products in the product pipeline for the future. And right now I don't know that people are necessarily so worried about that. At least in my world they are worried about when they're going to get the software bit right. With AI.
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Host 1
You know, it's interesting you say AI, it's something we talked about just briefly with Mark Gurman. It's a story that he put out. Apple buys Israeli AI startup that interprets facial movements. He's like, you know, interesting will help in terms of, I guess product development, but not necessarily a big, big deal.
- [18:00]
Host 2
So Ed, we have time for one more question and we'd be really remiss if we didn't ask you your view on Amazon. This news coming just late in the day, switching gears a little bit still on Amazon in talks to invest $50 billion in open air, expand ties. This could be part of a 100 billion dollar funding round which would value OpenAI at more than $800 billion. When, when we're talking about a funding round of $100 billion, I mean we're talking about just the massive, massive scale. What does it mean that, that Amazon could invest this much money?
- [18:37]
Ed Ludlow
Well, Amazon probably can invest that much money. You know what we've seen is most of the hyperscalers that were wedded to one player have diversified. Anthropic and Microsoft deep in their interaction. Anthropic was very heavily aligned with Amazon. Google and Anthropic are very heavily aligned. Anthropic relies on TPU's. Amazon from a software perspective has tried to accommodate all the players on its bedrock platform, which is basically a workplace where you can either train or build on top of existing models. So the financials are there. Like if you have, if people are watching that are investors in those companies, phone me, explain the dilution to me, explain the post and pre money valuation. But Open Air needs capital. It is coming from multiple places apparently. And one would imagine based on the reporting that's been done by Bloomberg and others, this, this is a big large anchor round before a future IPO as well of some part of the Open Air entity.
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Host 2
The scale is just otherworldly. The amounts of money that we're talking about right now.
- [19:45]
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