Apple today released the company’s second-quarter results for fiscal 2022

Apple today released the company’s second-quarter results for fiscal 2022. The report shows that Apple’s total net revenue in the second quarter was $97.278 billion, an increase of 9% compared with $89.584 billion in the same period last year; net profit was $25.010 billion, an increase of 6% compared with $23.630 billion in the same period last year. Apple's second-quarter revenue in Greater China was US$18.343 billion, an increase of 3% compared with US$17.728 billion in the same period last year. Apple's second-quarter diluted earnings per share and revenue beat Wall Street analysts' expectations, pushing its shares up more than 1% after hours. 

Apple's board of directors has approved a 5% increase in its quarterly dividend, which will pay a cash dividend of $0.23 per share to the company's common stockholders, which will be paid on May 12, 2022, to the company's shareholders through the close of business on May 9, 2022. Issued by registered shareholders. In addition, Apple's board of directors has approved an expansion of the existing share repurchase program by $90 billion.

Following the earnings release, Apple management held a conference call with CEO Tim Cook, CFO Luca Maestri, and Investor Relations (Senior) Director Tejas Gala and answered analyst questions.

The following is the main content of the analyst Q&A session of the conference call:

Morgan Stanley analyst Katy Huberty: I would like to ask two questions about the macro environment for the company's development. One is the continuation of stock market volatility, rising interest rates, and high inflation. Has it affected consumers' ability to spend? How does the company understand the current shock to demand, especially at the product level? What are the indicators of concern, is it the changes in the company's internal business, or external, macroeconomic indicators?

Tim Cook: We pay close attention to product sales on a daily basis. From an inflation perspective, the impact on gross margins and operating expenses in the fiscal second quarter is very clear, and the company's outlook for the fiscal third quarter also takes this into account, and we, like everyone, feel to some extent inflation.

Katy Huberty: So how big is the impact on the company's consumer business? Does it affect the consumer's spending power?

Tim Cook: We have been paying attention to this issue, but frankly, the most important focus of our work right now is the supply side.

Katy Huberty: And a related question. How big are the impact of China's epidemic on the supply side and market demand? Which of the company's products are most affected?

Tim Cook: That's a good question, in our just-concluded fiscal second quarter, the outbreak in China hasn't started yet. Although there was a shortage of supply in the second fiscal quarter, the situation was much less severe than that in the first fiscal quarter. I also mentioned in previous earnings conferences that the tight supply situation at that time was the shortage of chips in the whole industry, especially the shortage of chips in the industry. Caused by the shortage of traditional process chips. However, looking ahead, we believe that there are two reasons for the tight supply, one is the damage caused by the epidemic, and the other is that the shortage of chips across the industry will continue. The most important factor is the supply chain in Shanghai. The good news is that it has been affected. The factories responsible for the final assembly of products have now resumed work. The $4 billion to $8 billion I mentioned also reflects the resumption of factories to varying degrees. It is also encouraging that the number of reported Covid-19 infections in Shanghai has been falling over the past few days, giving the reason for optimism.

Evercore analyst Amit Daryanani: I also have two questions. Can you ask management to talk about the growth in different regions, for example, the Americas market has 19-20% growth, but the European and Chinese markets have less growth. I know there are macro reasons for this, including the impact of the Russian-Ukrainian conflict on the European market, and the impact of consumer spending in the Chinese market. Could you ask the management to talk about it?

Luca Mastri: You're right, the Americas grew very strongly, at 19 percent, and the product lines are doing very well, and we're very pleased with that. The European business also performed well, with an increase of 5%, which was achieved when the company suspended sales in the Russian market in March. Other European countries, including Western Europe, performed very well, basically in line with our expectations. America's business outperformed expectations. The Chinese market also set a new local sales record for the company in the second fiscal quarter. It should be reminded that the release time of the iPhone this fiscal year is different from that of the previous fiscal year - the release of this fiscal year is a quarter earlier than the previous one - some channels did not do well in the second quarter of the previous fiscal year The preparation also had a certain impact on the sales situation at that time. Japan and the entire Asia-Pacific business are greatly affected by the exchange rate. If the exchange rate is not included, the growth of the Japanese business should reach the overall growth level of the company. The appreciation of the US dollar against the major currencies in the Asia-Pacific region also affects the Asia-Pacific business. The impact of different iPhone release times. Again, tight supply has also had a negative impact on this quarter's performance. Overall, the company's global business growth is satisfactory.

Amit Daryanani: What percentage of the $4 billion to $8 billion loss due to tight supply that you just mentioned can be made up by demand from new product launches later in the fiscal year? Which of the company's products are most affected by tight supply?

Tim Cook: Most of the company's products will be affected by tight supply. As for whether the loss can be made up, we think some can, but some can't because some consumer demand is emergency, this ratio is also difficult to calculate, This issue will also be discussed internally to forecast demand, but we are not going to publish the results of that discussion.

Raymond James analyst Chris Kayso: I also have a question about tight supply. The loss of $4 billion to $8 billion mentioned by management also reflects the resumption of work in some factories. I know that the company will launch more new products in the second half of the year, and this loss figure will be more difficult to predict, so please ask as the situation in China improves. , Will the tight supply in the second half of the year appear more in product parts?

Tim Cook: It's really hard to make predictions about products that haven't been released yet, and I try not to make such predictions. Through cooperation with the local government, most of the assembly plants in Shanghai have resumed work. This is good news. We are also planning to gradually increase the production capacity of these plants. Taking these factors into account, we expect that there will be a 40 to 40 $8 billion impact. The impact of the epidemic is really hard to predict.

Chris Kayso: There's also a question about how companies are dealing with inflation. We know that inflation has caused the cost of some components to rise, and there are many reasons for the increase in the cost of the semiconductor part, including the cost increase brought about by the new process, whether it is possible for the company to successfully deal with it without raising the price of Apple products and without affecting the gross profit margin. Pressure from inflation?

Tim Cook: Some of the things you mentioned are already reflected in the second-quarter report, and some of our thoughts on the third quarter are also reflected in the outlook. The price trend of parts and components is also different, and some are also declining. We are still concerned about the overall cost situation. In the challenging environment, our current response is still reasonable.

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