January 30, 2025 • 34 mins
Bloomberg's Carol Massar and Tim Stenovec discuss the latest Big Tech earnings featuring Apple and Intel. They speak with:
- Bloomberg News Technology Reporter Jackie Davalos
- Angelo Zino, Senior Equity Analyst at CFRA Research
- Bloomberg Technology Co-Host Caroline Hyde
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:08):
This is Bloomberg Business Week with Carol Masser and Tim
Stenovak on Bloomberg Radio.
Speaker 3 (00:16):
I want to get to some earnings because we're seeing
some stocks move here in the aftermarket. Intel shares they
are right now up about two percent. This is as
we got in terms of some of the big headlines
from Intel C's first quarter. Justin gross margin of thirty
six percent, that's below with the Street was forecasting of
about thirty nine point three percent. Go back to the
fourth quarter, the last quarter revenues that was a beat
(00:38):
fourteen point twenty six billion versus an estimate of thirteen
point eighty one billion. And again talking about first quarter revenue,
some forecasts here a bit of a range eleven point
seven billion to twelve point seven billion, and that Tim
compares with the street estimate of twelve point eighty five billion.
But again right now we're seeing Intel up about two percent.
I know they also talked about in terms of some
(00:58):
spending right and I think basically saying they will not
be spending speculatively. So I feel like some of that
plays to maybe some of the commentary we've had about
the AI spend maybe a rethink this past week.
Speaker 2 (01:11):
Reminder too, they're also looking for a new CEO at
this point to take up for patkel Singer who left
at the end of last year. For more, let's go
to Jackie Doavolos. She's in our San Francisco bureau. She's
been following this company and these numbers closely. Jackie, how
is the turnaround going?
Speaker 4 (01:26):
Well, that's the question everyone wants to know. The key
uncertainty here is who's taking over the company. You had
some guidance from the CFO as to how the next
quarter is going to look like, but not so much
guidance on who's going to be taking the reins. And
I think that's the big point of uncertainty. And if
you look at shares, it's kind of a tepid response
(01:47):
considering how much uncertainty is swirling around the company right now.
But to your point, Carol, I think some of that
optimism is coming in through the comments around spend. As
you know, the former CEO, Pat gal Singer was ousted
just last month, and big part of the reason for
that was this ordinate amount of spending that the board
(02:09):
perceived to be a drag on the company's performance. Now,
we might not know who might be taking over, but
what we do know is that next quarter they're looking
at revenue of about eleven point seven to twelve point
seven billion dollars. That's below estimates, but perhaps some of
that optimism from the fact that they beat pretty well
on their revenue figures for the fourth quarter is coming through.
Speaker 3 (02:31):
Yeah, it's interesting just looking through to some of the
reporting from Ouroni and King of course, who follows the
chips sector, and saying that you know, again, what you
guys were just talking about investors in analyst waiting for
the appointment of a new leader who will determine Intel's future.
I mean, it's a big question. The company's outsource manufacturing
push will not see meaningful revenue from silicon customers until
(02:52):
twenty twenty seven. For now, the bulk of outside sales
will come from packing works. So we're getting a little
bit more in terms of the business here, Tim. But again,
the stock, as Jackie mentioned, just pulling it up again
here in the aftermarket, and the stock right now just
up about one point two percent here. But it's not
selling off, which is interesting.
Speaker 2 (03:08):
I mean, there's been a lot of selling off of
the last few years with Intel to you know, when
you zoom out, of course, Jackie, the data center business
certainly facing competition from Nvidia and AMD their core business
PC processors. How is demand there, how's competition there?
Speaker 4 (03:26):
Well, we got some comments from the CFO who said
that competitive dynamics is a big reason why we're seeing
a bit of a weaker forecast. He also cited the
macro uncertainties and of course seasonal weakness. But when we
go back to those competitive dynamics, who is the competition
and tim You're absolutely right, those AI accelerators are the
(03:48):
big question for investors. Can they get in here and compete?
Obviously with the gold standard coming from Nvidia, it's going
to take a lot of work and investment to really
chip away there. But in the meantime they're also facing
competition from their bread and butter in that processing personal
computer processing unit. You have AMD really coming in, and
then of course on the outsourcing manufacturing site, Taiwan Semiconductors
(04:12):
is also a pretty big player now, so they're kind
of facing this competition from all ends. Even you know,
as we look at AI being this big opportunity for
pretty much every tech player out there. Intel has really
been struggling to make a name for themselves in the space.
Speaker 3 (04:29):
Just to rehash, Intel shares folks in the aftermarket up
about one point three percent. Going to the first quarter
forecast seeing revenue of eleven point seven billion to twelve
point seven billion. The estimate on the street is twelve
point eighty five billion, so above that. Also in terms
of forecasts, he's an adjusted EPs of just flat. Estimate
(04:50):
is for eight cents. He's a justin gross margin of
thirty six percent. That's a miss too. Estimate is thirty
nine point three percent. Go back to the fourth quarter
and their current quarter sales and profit forcat asked falling
short of analyst projections. But if we go back to
the fourth quarter fourteen point two six billion, that's the
revenue that's down seven point four percent year over year.
The estimate on the street was thirteen point eight billion.
(05:12):
But again the key thing as we're talking about, you know,
not yet having any update on a permanent CEO. The
interim co CEO David Sisner saying our first quarter one
or quarter one outlook, I should say, reflects seasonal weakness
magnified by macro uncertainties. Further inventory digestion, and competitive dynamics.
Jackie sounds like a super full plate. We know it's
(05:34):
been a full plate for Intel, but it still is.
It's a reminder at least that it still is.
Speaker 4 (05:39):
One hundred percent. And as we look to the conference
call with analysts, the big question is going to be
not just an update for leadership, but also in this interim,
what's the game plan here, because now that you're seeing
kind of spend really being scrutinized after the deep Seek
drama earlier this week, it's sort of effect those who
(06:01):
might have been perhaps exempt from that kind of scrutiny
before these open you know, AI, other AI developer kind
of players out there, and so obviously this is nothing
new for Intel, but of course I think that might
be you know, some of the guidance that they want
this this conservative spend, What does that mean, How does
(06:21):
it look like in practice at a time when it
is going to take investment to really kind of break
into this AI space. Another thing that we'll be looking
out for in the conference call, it's just any more
guidance around what the company plans to do to perhaps
offset some of the weaknesses in its bread and butter
business in these personal computers. You know, what, what does
(06:42):
it plan to do about this kind of new competition
coming from Taiwan Semiconductors. I think That's what I'm going
to be looking out for in the upcoming call.
Speaker 2 (06:51):
I think what still surprises me, Jackie is this is
a company that has no full time CEO, and you
had Pat Gelslinger out earlier this week. We talked about
this with Ian King tweeting that he was buying shares
of Nvidia during the down during the decline of Nvidia
on Monday, he wrote about that on LinkedIn, and it
was surprising to see that I'm not, you know, here
(07:12):
to talk about Gelsinger. What I am wondering from you
about is what are analysts saying about the type of
leader who could come in and turn this company around? Like,
who are the names? Do we have names that are
being thrown around at this point? Do we have a timeline,
what do we know?
Speaker 4 (07:28):
I don't think there's too much that we do know
other than you know, the big point of scrutiny has
been spend and if you're going to bring in a
leader that can kind of articulate a new vision for
the company still kind of, you know, bring it something
that's forward looking, that is not going to be predicated
(07:50):
on a plan that is going to take, you know,
five to ten years to pan out, because I think
what investors want to see is what can we do
with what we have now? And you know, obviously a
pet Elsinger didn't get to live out his full five
year plan, but you know, he did put in in
place a solid foundation that I think a new CEO
can can work with. So some of the notes that
(08:11):
we've been seeing from the street include, you know, what
can be done with what foundation currently exists?
Speaker 3 (08:18):
Because it's not nothing.
Speaker 4 (08:19):
You know, some solid investments have been made, some good
inroads have been made, but I think it's just a
matter of kind of that conservative spend how far can
that take them?
Speaker 3 (08:28):
Hey, all right, Jackie, thank you so much. Jackie Devallas,
Bloomberg News Tech reporter joining us with the latest on Intel.
Keeping a watch on it as it moves up just
a little bit in the aftermarket. Do you want to
mention KLA Corp. Semiconductor manufacturing equipment company up about four
and a half percent in the aftermarket following its earnings,
looking at what the company has to say, second quarter
(08:49):
adjusted gross margins sixty one point seven percent, slightly better
than the street expected third quarter adjusted gross margin, so
looking towards the current quarter sixty one to sixty three percent.
Also talking about third quarter revenue, they're looking for two
point eighty five to three point fifteen million billion, excuse me,
and that is better than the street expected. So that
(09:09):
explains where you're seeing this stock up. Do not go anywhere.
Apple to come in just a moment. The earnings continuing
to come out. We are awaiting Apple, which is set
to report in just about seven minutes at the bottom
of the hour four to thirty pm Wall Street time,
So as soon as they cross, we will bring them
(09:31):
to you. A reminder of the company. We'll report for
the quarter despite some head wind stepping from China, the
slow rollout of in house AI future features. So there's
a lot coming at us when it comes to Apple
in particular, a lot coming at us when it comes
to the whole tech sector. This week, Angela Zino is
senior equeritly alyist over at CFRAA. He joins us from
New York City. Angelo, I do want to start with
(09:54):
Intel because they just came out certainly a big part
of the semi second, but they're also going through, of course,
some changes, waiting for a new CEO, new leader, a
new way forward. Initial thoughts on Intel.
Speaker 5 (10:09):
Yeah, now, thanks for having me.
Speaker 6 (10:11):
So, you know, you kind of look at the results overall,
and I would say they were okay. I mean, as
far as the results were concerned, I think earnings about
thirteen cents, sales were down seven percent, roughly kind of
in line where we were expecting. I think as far
as the guidance is concerned, it was definitely on the
lighter side of things, but you know, nothing abysmal, nothing
(10:31):
like we've seen in past quarters where they've kind of
missed by a much wider margin. So as far as
kind of the results are concerned, I think it was
perfectly fine, you know, within kind of you know, segments wise.
I think the client computing group, which is kind of
more their their PC business was down about nine percent,
and when you kind of look at their data center
business down about three percent. Again, I mean, it was
(10:53):
kind of where we had expected largely. So yeah, I
mean I think it's one of those situations where this
company is kind of just kind of going through the motions,
and we're just kind of waiting to see kind of
who that next CEO is going to be and what
they have to say on the call as far as
kind of cost cutting this concern here in the intermediate term, I.
Speaker 2 (11:13):
Could have asked you the same question I'm going to
ask you Angelo anytime over the last three years, where
is Intel in its turnaround?
Speaker 6 (11:22):
You know, it's it's a it's a tough one because, yeah,
there they continue to have to kind of restart in
terms of you know, where they're at, I mean you
and and it's typically because of the fact that they
haven't really kind of given you know, the existing leadership team,
you know, enough time to kind of you know, watch
their vision to really come to fruition.
Speaker 5 (11:43):
I think right now where we're looking at is you know,
you need you need a new CEO.
Speaker 6 (11:47):
I think when you kind of look at their core business,
it's really kind of under attack. Right on the PC
side of things. You hear things like you know, ARM
looking to take half the half the market. On that
side of things, you got got the kind of greater
competitive pressure.
Speaker 5 (12:00):
Going on there.
Speaker 6 (12:01):
You kind of look on the data center side of things,
they don't have the right offerings there. I mean, CPUs
are kind of a thing of the past at this
point in time, and you've got you know these you know,
these hyperscalers out there kind of rolling out their own
CPU offerings. So it is it is a very difficult
time for Intel at this point in time. There's really
kind of no direction. You need that direction. So the
(12:24):
faster you get a CEO.
Speaker 5 (12:26):
The better.
Speaker 6 (12:27):
Again, this is kind of almost a race to the bottom,
it seems like right now in terms of kind of
continue to continuing to course as their revenue trajectory continues
to go down. I think really kind of if I'm
looking at this company, it's all about how they can
execute on the foundry side of things right now. If
you're thinking about a turnaround going into the second half
(12:47):
of the year, I mean, you've got eighteen A that's
that's kind of been long awaited and hyped up panther Laics,
it's supposed to ramp here in the second half of
the year. We want to see kind of what kind
of customers like, you know, start ramping on that side
of things. You're not going to have a major hyperscaler
out there all of a sudden just give business to Intel,
they need to kind of execute on that side of things.
(13:07):
So that's where we're at right now. I think they
need to start show some sort of promise on the
foundry side of things, and hopefully they can kind of
gain some momentum from there.
Speaker 2 (13:16):
I got to tell you, I get these emails on
the terminal when stories are read at like a high rate,
those read spikes. People want to know about Apple. It
says that to Apple that our live blog on Apple
Carol is already hitting a red spike before those numbers
come out. We're expecting those numbers in just about two minutes. Angelo, China,
(13:40):
is that the biggest concern? We saw some downgrades the
early part of this year.
Speaker 6 (13:45):
Yeah, I mean it seems like, you know, when you
kind of look here over the last couple of years,
January just hasn't been a good month for Apple, and
you know, you can kind of say maybe a part
of that is seasonality and what have you. I think
obviously the other issue is you kind of look over
the last two three years, the competitive pressures have.
Speaker 5 (14:01):
Definitely escalated out in China.
Speaker 6 (14:03):
I mean, Huawei has become you know, a real threat
again at the high end of the market, and you know,
we kind of want to know what's going on with China.
It's somewhat of a black box at this point in time,
and you kind of look at some of the sell
through numbers that have been posted, you know, specifically by
the Chinese government here late in the year.
Speaker 5 (14:22):
The numbers don't look good.
Speaker 6 (14:23):
And I think most people realize that most investors are
kind of going into these numbers knowing that China or
expecting that China is not going to be good. The
question is how bad is it? You know, we are
we kind of going to have to deal with some
sort of excess inventoryous situation where they're going to start
discounting more than we expect and it's going to, you know,
look like an ugly March Quarter in terms of the guidance,
(14:44):
I think that's at this point what we're looking at.
But in terms of the biggest risk kind of going
into the print here and as far as the March
Quarter is concerned, it's absolutely China. And we also know
as far as the March Quarter guidance is concerned, it's
going to be someone on the weaker side of things
because of the four X uncertainties, you.
Speaker 3 (14:58):
Know, Angela. We're just about forty seconds away from those
Apple earnings. Stocks down about five percent. We know it's
been lagging some of it's tech brethren. If you will,
question is kind of what's next for Apple? What could
they say today that might give some indication of what's next.
They've started to give some clues. Just got about twenty
seconds here.
Speaker 6 (15:18):
I think the hope is that you get a better
than fear type number really on China. I think that's
kind of the big thing. And then of course on
the services side of things, you want to make sure
that that's running on all cylinders. We're going to hopefully
continue to get double digit growth. And I think if
you can kind of get you know, those two kind
of things running, I think that should be enough as
far as kind of where the stock is at and
(15:38):
the pullback that we've seen.
Speaker 3 (15:40):
All right, folks, we're talking with Angelo's, you know, senior
equity analyst over at CFR Research. He's going to stay
with us as we get ready for those Apple earnings
and they are crossing. So let's go through some of
the numbers. First quarter revenue one hundred and twenty four
point three billion. That is just a hair better than
what the street was expecting. One hundred and twenty four
point one billion is what the street was looking for.
(16:01):
Products revenue ninety seven point ninety six billion, that's up
about one point six percent year over year. Ten that's
a little bit light. Ninety eight point zero two billion.
You break it down. iPhone, the all important iPhone number,
sixty nine point fourteen billion, that is down year over year.
Estimate was for seventy one point zero four billion.
Speaker 2 (16:20):
And then you keep going down at China revenue, big
miss there, estimates for twenty one point six billion dollars
that came in at eighteen point five to one billion dollars. Wearables,
home and accessories coming in just shy of estimates. MAC
revenue coming in above estimates, iPad revenue coming in above estimates.
First quarter products revenue coming in shi of estimates. But Carol,
(16:40):
what we're talking about right now, iPhone revenue coming in
light sixty nine point one four billion versus estimates of
seventy one billion, and that China number significantly lower than
analysts one to see coming in at eighteen point five
to one billion.
Speaker 3 (16:52):
Apple also maintaining its cash dividend of twenty five cents
a share. I should say the stock has been bouncing
around in the aftermarket. We've seen it up about one percent.
Right now, it's just up about six tenths of a
percent of half a percent. Angelo Zeno come on in
initial thoughts on the first headlines off of this earnings release.
Speaker 6 (17:14):
Yeah, I mean, I think this is kind of a
situation where, you know, execution was I think as good
as you could have asked for. I mean, as far
as the top line is concerned, roughly in line. I
think the expectation again was about you know, one hundred
and twenty four billion, so you're looking at what was
it maybe three point eight percent or close to four
percent growth, let's call it, as far as kind of
on a year of a year growth rate. And I mean,
(17:36):
I think Tim kind of highlighted the iPhone numbers were
definitely a disappointment and the China numbers, so it's definitely
a China iPhone problem as far as the quarter is concerned,
and why we missed. And again, the expectations going into
the quarter was it was going to be a challenge,
and the fact that they had been able to kind
of navigate and still meet the numbers despite those issues,
(17:59):
I think kind of helps maybe do you risk the
stock at least when you kind of look at the
numbers this quarter. I mean, we'll see what the March
quarter guidance is going to look like. But my guess
is you're going to continue to see the further weakness
on the China iPhone side of things.
Speaker 2 (18:13):
Angelo, how much of the iPhone miss can you attribute
to China? Is is the iPhone miss just a result
of China?
Speaker 6 (18:24):
It seems like it, to be honest with you, just
kind of giving just given the high level numbers that
I'm hearing from you, it just seems like the weakness is.
Speaker 5 (18:33):
Really kind of you know, all China.
Speaker 6 (18:35):
And you know, my guess is, you know, Western markets
probably held up much better what held up as as to.
Speaker 5 (18:41):
Be expected, and and you know, we kind.
Speaker 6 (18:43):
Of saw, you know, some pronounced weakness on the China
side of things, and again not a surprise because a
lot of the sell through numbers that had you know,
come out from China, you know, was looking you know,
essentially it was kind of pointing towards double digit declines
out of kind of the eye phone business. So that's
essentially what you've got. So it's it's pretty brutal, but
(19:05):
not necessarily a complete surprise given some of the indications
we got going into the numbers.
Speaker 3 (19:10):
All right, the three bright spots, iPad, MAC, and services.
The iPad and MAC. The year over year services is
at an all time record. What's interesting too, all time
revenue record too as well, one hundred and twenty four
point three billion and narrowly beating Wall Street estimates. Again,
a huge miss for China when it comes to Apple
eighteen point five billion versus twenty one point six billion
(19:31):
that Wall Street expected, and a big miss for the
iPhone sixty nine point one billion dollars versus seventy one
billion dollars expected. And you know, initial reaction Angelo in
terms of the share price. Initially we saw pop and
then we saw the stock move down just down to
here a hare at this point, you know, a lot
(19:51):
of when we talk about Apple is we are saying
what's the next big thing? Right and certainly if the
iPhone is you know, certainly shoring business a still a
very big business. But maybe some questions about China growth
going forward. But where do you want to see the
company move into? Where are the new opportunities in your
view for Apple.
Speaker 6 (20:12):
Yeah, I mean, listen, I think, you know, we need
to continue to see good growth on the services side
of things, and then to continue to innovate and come
out with new offerings on the services side of things.
And I think that business will naturally continue to grow
due to a number of factors. But you know, as
far as kind of what we're looking for here over
the next couple of quarters, I don't think you should
forget about Apple Intelligence. I think that's still a very
(20:34):
important part of this story. We've kind of seen the
first two trunches of Apple Intelligence really roll out. The
first trunch well, you know, was really a non event.
I actually think, you know, and I have the iPhone sixteen.
I actually really liked let a number of the other
upgrades on the second trunch out there. I mean, I
use kind of visual intelligence all the time. Not crazy
about gen moji's and what have you, but you know,
(20:55):
I think there were a number of decent features out there,
specifically on the visual intelligence ide thinks I think Grounds
was great. I think the chat, GPT and integration is
super helpful for someone that just kind of you know,
looking to do stuff, you know, on the fly on
their phone. So I just don't think the consumer is
well aware of it obviously, and we're still at a
point where you know, most of kind of the installed
(21:15):
base doesn't have access or even knows about Apple Apple
Intelligence at this point in time. We'll get kind of
the the third you know, trunch here in the coming months,
and I think that's really going to help in terms
of the serie integration and what Apple can kind of
demonstrate across kind of the app store and what have you.
And then you know, clearly, you know, we kind of
want to see how that reflects across the rest of
(21:38):
the ecosystem as they kind of throw this out internationally,
what kind of partnerships they can kind of announce out
in China. Does that make a difference in China in
terms of kind of helping the demand outlook, because I
do think a big problem with with Apple right now
in China is the fact that they don't have AI
capabilities where you know, obviously they're they're China peers do
(21:59):
don't have a full device out there where their peers do.
And hopefully, you know, we see something on the foldable
side of things here over the next kind of two years,
So you know, where I'd like to see them go
is kind of, you know, start evolving their ecosystem where
they could find some success, at least in China, because
at this point in time, you know, what they've got
in terms of their offering in China is just not
(22:20):
going to.
Speaker 3 (22:20):
Cut it all right, Going to leave it on that note,
Angela's you know, he's senior equity analyst at CFR Research
joining us in New York City. Do you want to
mention Tim Cook? In the earnings release and the statement
called it the company's best quarter ever at Apple. He
also said, through the power of Apple Silicon, we're unlocking
new possibilities for our users with Apple Intelligence, which makes
(22:42):
apps and experiences even better and more personal. We're excited
that Apple Intelligence will be available and even more languages
this April. So Tim is certainly choosing to highlight that
we should point out. Apple shares though after an initial
pop right after the earnings release here in the aftermarket,
are now pretty much flat.
Speaker 2 (23:00):
Yeah, no mention of China in that statement, which certainly
will be a focus of investors on that call when
it does begin in just a few minutes. It's certainly
a focus for Caroline High. She's a Bloomberg Technology co host.
She joins us here in the Bloomberg Interactive Brokers studio.
Two big misses today Caroline highphone revenue coming in about
two billion dollars shi of estimates, and then greater China
(23:20):
revenue coming in about three billion dollars shi of estimates.
Does Apple need to change its strategy in China? Or
do investors need to adjust their expectations about China?
Speaker 7 (23:30):
Do we need to get more comfortable with their selling
fewer phones but in a higher average selling price. And
I think that's perhaps where they're trying to educate people towards.
Speaker 2 (23:38):
Is that in China?
Speaker 5 (23:39):
Is that everywhere?
Speaker 1 (23:40):
Well, I mean it.
Speaker 7 (23:41):
Feels like everywhere, but we do still have the slightly
cheaper phones that are available in the US, but we
don't have the rampant sort of competition that you do
have with a Huawei and with some of the local
operators that are in China that are just managing to
produce far more sophisticateated phones and a much lower price point.
And also there's some national patriotic fervor that's going on
(24:02):
and wanting to buy your locally made phones. So they
have been educating us and I think counterpoint research. For example,
front run the fact that they're going to have had
a dismal general amount sold eighteen percent rejection they thought
in terms of phone sold, But if the average selling
price is picking up, you're not going to be hurting
quite so bad. But look, ultimately we've seen it's a
big miss. They're growing in every region outside of China,
(24:25):
and even the America's Japan was pretty good, but really
China has been that real weak point, and we have
to perhaps see that the company is just going to
try and retrain us to think about them as a
services company, as an Apple Intelligence company. And look, with
iPhones missing as well, maybe we have to start to
think is this really always going to be the juggernaut
we thought it was?
Speaker 3 (24:42):
What about Apple Intelligence? Right? We have certainly heard so
much from the company, Tim Cook singling it out also
on the release and in a statement, So how is
the world thinking about Apple Intelligence and its opportunities?
Speaker 1 (24:55):
I mean, what what that's far?
Speaker 7 (24:58):
I mean, of course I want to have fun in
a Gen Moji, but ultimately I'm going to be upgrading
my phone for that. No, I probably have gone ungraded
to an iPhone sixteen because my darn camera is broken
and I want to get a better camera, and I
want to get a slimmer phone. But I wouldn't have
gone for it for Apple Intelligence largely because look, I
can integrate Google and to upgrade there and have it
magicing my emails and making life a little bit more
(25:20):
sophisticated there, and compared to Samsung, it is not able
to innovate in the way that Samsung's adapted to Alphabet's
offering Open Ai. Though, I think the winning formula for
Apple Intelligence going forward is that it hasn't spent billions
on its own large language model. It's gone in bed
with open Ai, and open Ai is probably gonna have
to get a lot cheaper because of what's happening with Deeze.
Speaker 2 (25:40):
Caroline h Have you been watching Severance?
Speaker 4 (25:43):
No?
Speaker 1 (25:44):
I haven't.
Speaker 5 (25:44):
Okay, Well, I'm.
Speaker 1 (25:46):
Too busy on the jacket, holl the day of the Jackal.
Speaker 2 (25:48):
It's it's a huge investment by Apple, huge marketing, push
services revenue a bright spot for the company. Yes, coming
in at twenty six point three four billion dollars, it's
for twenty six point one billion. I bring up Severance
because that's part of the services category. This is a
high margin business for Apple, the services social TVs TVs.
(26:11):
But the services category. Yeah, does does services growth and
strength ever offset weakness in China or for MyPhone? Well?
Speaker 7 (26:21):
I think it's interesting. Then the new COFO who has
just taken on the role. He's a long time Apple executive,
but he's just taken on the role in January, is
really talking up about sort of the installed base, because
that's where they want you to think the amount of
max iPads phones that we all own. They say that
we now have an installed base of active devices that
reached an all time high across all products and geographic segments.
(26:43):
Suddenly the services bigot wheel just flies. And then when
you're getting into payments, when you're getting into interoperability, of course,
services just becomes ever more necessary.
Speaker 2 (26:52):
For I mean, I probably pay Apple more each year
between between the memory.
Speaker 1 (26:59):
Yeah, what about the app store?
Speaker 7 (27:01):
I do wonder with some regulatory perspective, we heard it
from Microsoft yesterday, Well was it Meta yesterday talk.
Speaker 1 (27:07):
Singling out EU.
Speaker 7 (27:08):
But how much are they going to have to change
the business model when it comes to the revenue They
can just skim away from an app store when it
think about how it's treating its own consumers and whether
we're being fairly treated across the world.
Speaker 3 (27:18):
I mean, what do you want to know and what
do you want to hear from them?
Speaker 1 (27:20):
On the car?
Speaker 3 (27:20):
Is it just China or is it other things?
Speaker 1 (27:23):
I think, what is your next big innovation? Is it
about the home?
Speaker 7 (27:26):
Because look, the Vision Pro looks cute, but are we
all spending thousands on it? No, it hasn't been the
R and D winner for them this yet, but it
might have spin offs when they can tell about how
much they've iterated there to bring it to what they're
going to do with the home, the video screens, the robotics.
We're going to see how they can become evanmore integrale.
We need another winning product. It wasn't cars, the Vision Pro,
(27:47):
not yet, But what about twenty twenty five is some
new unleashed hardware.
Speaker 3 (27:51):
I'm amazer not more entrenched in the home. I mean,
I know in my home it's such an Apple household,
but it's not.
Speaker 1 (27:57):
We're a Google home household.
Speaker 3 (27:59):
We are too. We are too, and so I'm kind
of amazed that they have kind of waited so long
to get into the home market.
Speaker 2 (28:04):
Yeah, it would be certainly that would be an interesting
product category from them. What about something more akin to
metas glasses that we spoke about yesterday, and if they
were to come out with something that is less vision
pro oculous and more sort of like low profile Rabia,
because that.
Speaker 1 (28:19):
Was the irritation for many.
Speaker 7 (28:20):
Was it the fact that you've basically got a huge battery,
we connected to you and it just.
Speaker 1 (28:24):
So harding around.
Speaker 7 (28:27):
The tried and tested formula of Apple is let everyone
else play and then you come in and win the
day with something beautiful sneak and everyone jumps on board.
So maybe that is the winning formula for the home
and when it will be for glasses and they'll start
to dabble in.
Speaker 1 (28:39):
I mean, Tim Cook's got nice pair of glasses.
Speaker 7 (28:41):
I wonder if he wants to start making them and
we suit you down to the ground, Tim, But I
do think that they do. They're always going to be
slightly slower off the mark. Then come and bring in
what it. They haven't got a foldable phone yet. Look,
Samsung has plenty on the market. Everyone's been wanting to
get a smaller form factor. They're just waiting until they
can perfect. So you don't get a crease in it.
(29:01):
So I do wonder whether it's gonna take a little
bit of time.
Speaker 3 (29:03):
You know, we have talked with Mark I guess about
just how the overall market here in the United States
is so overweighted to some of these big tech companies.
And I am curious though they are important, right when
you look at kind of the numbers that they bring in,
how twenty four million, I mean, it's just extraordinary, even
when we say right, maybe right, it's extraordinary. So how
are you thinking about this week of some of these
(29:25):
big tech names and the results that we've had.
Speaker 7 (29:28):
Thing they've done all right, considering Monday and the deep
seeky whiplash that we had, and I thought the spend.
Speaker 1 (29:35):
Would be so much more under consideration.
Speaker 7 (29:37):
But I think Satia, even though Microsoft saw a big
hit today, Satia managed to sort of thread the needle
that look, we're already offering our one on on our foundry,
IAI foundry, come to us find the best models. We'll
also be able to we have our issue as supply,
we've got to continue to invest. So they managed to
vindicate a spending. I think Meta did a phenomenal job
(29:58):
of just talking up with such pompous, like grandiose ideas that.
Speaker 1 (30:04):
Won everyone over.
Speaker 7 (30:05):
You know, musted the same, the fact that actually the
numbers look pretty ugly. But he's so optimistic about Optimist,
he's so optimistic about FSD that we managed to be
blindsided by the idea that actually the plans are there,
the money is being well spent, and we're still committed
to these companies. So ultimately, I think they've managed to
navigate a pretty rocky period Apple. The fact that it's
flat Microsoft's been really the only real pain point here.
(30:27):
St Micro had another problem ever in Europe as well.
I look towards Alphabet and Amazon. Can they vindicate the
amounts of money that they're going to have to save.
Speaker 2 (30:33):
I'm not going to put words in Mark Umman's mouth,
but he spent plenty of time over the last few
months on our program really criticizing Apple for.
Speaker 1 (30:40):
Its AI is and it's analysts.
Speaker 7 (30:42):
He loves to criticize the analyst.
Speaker 2 (30:45):
AI and you know, a question about slow rolling AI
and to what extent this actually is something that's not
just incremental but is actually meaningful. When do we start
to see Apple intelligence really flourish.
Speaker 7 (30:59):
I think they're signaling it signaling in the even the
press release saying that more languages are coming in April,
we will be making it further integrated. It's also interesting
when they bring these things without us even knowing, like
the news that they brought starlink and the fact that
we can now use with it, they just hide in
these little operating system grades.
Speaker 2 (31:21):
So example, publicly acknowledge that, I know Mark Grimman reported
that it was.
Speaker 5 (31:23):
Going to happen.
Speaker 7 (31:24):
I think T Mobile CEO came on and talked about it,
and it's just that ultimately they do slow roll. They
don't perhaps they realize that they need to speak to
the investor.
Speaker 1 (31:32):
Base about intelligence.
Speaker 7 (31:33):
They're going to talk about how they're really managing to
infuse it in a more seamless manner. But to you
and I as a consumer, I think they just don't
want to stress test it too much. They want to
slowly have us naturally absorbing it and making our life
simpler and simpler. But thus far, like a little summari
of my email hasn't changed my life.
Speaker 5 (31:52):
All that much.
Speaker 3 (31:53):
Yeah, exactly. I just want to remind everybody that we
do see Apple shares fluctuating in the aftermarket. Apple as
our Mark German Reports posted sales that were slightly better
than analysts estimated, even as the iPhone and sales in
China were weaker than anticipated. Caroline, just talking about that
revenue number, it did rise four percent to one hundred
and twenty four point three billion in the fiscal first quarter.
(32:16):
Analysts had estimated one hundred and twenty four point one, so,
you know, coming in just a hair better than what
the street was forecasting. But again concerns over China and
Apples struggling there stacks up about four tenths of a
percent here in the aftermarket. Yeah, I just think, you know,
it's interesting to see after what a crazy week that
(32:36):
we've seen. I feel like with technology that the stock
is just kind of flat.
Speaker 7 (32:40):
Yeah, we priced it in, and remember great point, it
was kind of beaten up running into this. We'd had
five analyst downgrades right in the last month or so,
and unlike in Nvidia that has zero cells, there have
been a few creeping into Apples, So I think people
had started to price in the China weakness.
Speaker 1 (32:57):
Interestingly made the point to.
Speaker 7 (32:59):
Like all the going to sell us cheaper price points
they are, according to Mark Gumman, going to be focusing
on the iPhone SE, which is the cheaper around five
hundred dollars offering that's going to come in April March.
Maybe that's going to pull more people perhaps away from
the Samsung's and the Android offerings. Maybe we get the cheaper,
lower end Airpod's making a dent. But all of this
I think had just been guided. We knew that Apple
(33:22):
was going to have a terrible time in China, and
Apple Intelligences isn't there yet, and people have really been
complaining about the latest os, like use cases, the way
in which the phone just doesn't feel as slick.
Speaker 1 (33:34):
As it used to.
Speaker 2 (33:35):
Are we going to start hearing more chatter about Tim
Cook and a succession plan. We've been talking a lot
about Intel and what Intel does post Gal Singer, and.
Speaker 1 (33:44):
They've got some big issues they do.
Speaker 2 (33:47):
Tim Cook has been an Apple since nineteen ninety eight,
he's been CEO since twenty eleven.
Speaker 5 (33:51):
What's the succession plan?
Speaker 7 (33:52):
And they've just had a CFO come into the MITS
who's been trained up from within. I don't think anyone
feels that Tim's going anywhere soon. He navigates the first
Trump administration so swiftly and seamlessly worked well to be
able to protect his business that of course is so
dependent on China, not just from a selling perspective, but
it's more from a production perspective. What do tarifs mean
(34:13):
for him? So I think in this next administration can't
I wouldn't ever bet that he's going to hand over
the baton anytime soon. But I think that is a
key question that people are gonna be asking who from
within has been groomed up, because.
Speaker 1 (34:24):
Remember they lost a lot of talent as well.
Speaker 7 (34:25):
Johnny E's left, and a lot of people seem to
move from the engineering the product development side of things.
Speaker 3 (34:30):
All right, fascinating stuff, Caroline, thank you again. Second day
like making anyways sense of all the big tech earnings.
As we said, Caroline Hyde is co host of Bloomberg
Technology on Bloomberg TV. Catch It. They'll continue coverage of
all the earnings this week. That'll be at eleven am
Wall Street time tomorrow on Bloomberg TV. Right now, tim
Apple shares just down about one quarter of one percent.
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:08):
This is Bloomberg Business Week with Carol Masser and Tim
Stenovak on Bloomberg Radio.
Speaker 3 (00:16):
I want to get to some earnings because we're seeing
some stocks move here in the aftermarket. Intel shares they
are right now up about two percent. This is as
we got in terms of some of the big headlines
from Intel C's first quarter. Justin gross margin of thirty
six percent, that's below with the Street was forecasting of
about thirty nine point three percent. Go back to the
fourth quarter, the last quarter revenues that was a beat
(00:38):
fourteen point twenty six billion versus an estimate of thirteen
point eighty one billion. And again talking about first quarter revenue,
some forecasts here a bit of a range eleven point
seven billion to twelve point seven billion, and that Tim
compares with the street estimate of twelve point eighty five billion.
But again right now we're seeing Intel up about two percent.
I know they also talked about in terms of some
(00:58):
spending right and I think basically saying they will not
be spending speculatively. So I feel like some of that
plays to maybe some of the commentary we've had about
the AI spend maybe a rethink this past week.
Speaker 2 (01:11):
Reminder too, they're also looking for a new CEO at
this point to take up for patkel Singer who left
at the end of last year. For more, let's go
to Jackie Doavolos. She's in our San Francisco bureau. She's
been following this company and these numbers closely. Jackie, how
is the turnaround going?
Speaker 4 (01:26):
Well, that's the question everyone wants to know. The key
uncertainty here is who's taking over the company. You had
some guidance from the CFO as to how the next
quarter is going to look like, but not so much
guidance on who's going to be taking the reins. And
I think that's the big point of uncertainty. And if
you look at shares, it's kind of a tepid response
(01:47):
considering how much uncertainty is swirling around the company right now.
But to your point, Carol, I think some of that
optimism is coming in through the comments around spend. As
you know, the former CEO, Pat gal Singer was ousted
just last month, and big part of the reason for
that was this ordinate amount of spending that the board
(02:09):
perceived to be a drag on the company's performance. Now,
we might not know who might be taking over, but
what we do know is that next quarter they're looking
at revenue of about eleven point seven to twelve point
seven billion dollars. That's below estimates, but perhaps some of
that optimism from the fact that they beat pretty well
on their revenue figures for the fourth quarter is coming through.
Speaker 3 (02:31):
Yeah, it's interesting just looking through to some of the
reporting from Ouroni and King of course, who follows the
chips sector, and saying that you know, again, what you
guys were just talking about investors in analyst waiting for
the appointment of a new leader who will determine Intel's future.
I mean, it's a big question. The company's outsource manufacturing
push will not see meaningful revenue from silicon customers until
(02:52):
twenty twenty seven. For now, the bulk of outside sales
will come from packing works. So we're getting a little
bit more in terms of the business here, Tim. But again,
the stock, as Jackie mentioned, just pulling it up again
here in the aftermarket, and the stock right now just
up about one point two percent here. But it's not
selling off, which is interesting.
Speaker 2 (03:08):
I mean, there's been a lot of selling off of
the last few years with Intel to you know, when
you zoom out, of course, Jackie, the data center business
certainly facing competition from Nvidia and AMD their core business
PC processors. How is demand there, how's competition there?
Speaker 4 (03:26):
Well, we got some comments from the CFO who said
that competitive dynamics is a big reason why we're seeing
a bit of a weaker forecast. He also cited the
macro uncertainties and of course seasonal weakness. But when we
go back to those competitive dynamics, who is the competition
and tim You're absolutely right, those AI accelerators are the
(03:48):
big question for investors. Can they get in here and compete?
Obviously with the gold standard coming from Nvidia, it's going
to take a lot of work and investment to really
chip away there. But in the meantime they're also facing
competition from their bread and butter in that processing personal
computer processing unit. You have AMD really coming in, and
then of course on the outsourcing manufacturing site, Taiwan Semiconductors
(04:12):
is also a pretty big player now, so they're kind
of facing this competition from all ends. Even you know,
as we look at AI being this big opportunity for
pretty much every tech player out there. Intel has really
been struggling to make a name for themselves in the space.
Speaker 3 (04:29):
Just to rehash, Intel shares folks in the aftermarket up
about one point three percent. Going to the first quarter
forecast seeing revenue of eleven point seven billion to twelve
point seven billion. The estimate on the street is twelve
point eighty five billion, so above that. Also in terms
of forecasts, he's an adjusted EPs of just flat. Estimate
(04:50):
is for eight cents. He's a justin gross margin of
thirty six percent. That's a miss too. Estimate is thirty
nine point three percent. Go back to the fourth quarter
and their current quarter sales and profit forcat asked falling
short of analyst projections. But if we go back to
the fourth quarter fourteen point two six billion, that's the
revenue that's down seven point four percent year over year.
The estimate on the street was thirteen point eight billion.
(05:12):
But again the key thing as we're talking about, you know,
not yet having any update on a permanent CEO. The
interim co CEO David Sisner saying our first quarter one
or quarter one outlook, I should say, reflects seasonal weakness
magnified by macro uncertainties. Further inventory digestion, and competitive dynamics.
Jackie sounds like a super full plate. We know it's
(05:34):
been a full plate for Intel, but it still is.
It's a reminder at least that it still is.
Speaker 4 (05:39):
One hundred percent. And as we look to the conference
call with analysts, the big question is going to be
not just an update for leadership, but also in this interim,
what's the game plan here, because now that you're seeing
kind of spend really being scrutinized after the deep Seek
drama earlier this week, it's sort of effect those who
(06:01):
might have been perhaps exempt from that kind of scrutiny
before these open you know, AI, other AI developer kind
of players out there, and so obviously this is nothing
new for Intel, but of course I think that might
be you know, some of the guidance that they want
this this conservative spend, What does that mean, How does
(06:21):
it look like in practice at a time when it
is going to take investment to really kind of break
into this AI space. Another thing that we'll be looking
out for in the conference call, it's just any more
guidance around what the company plans to do to perhaps
offset some of the weaknesses in its bread and butter
business in these personal computers. You know, what, what does
(06:42):
it plan to do about this kind of new competition
coming from Taiwan Semiconductors. I think That's what I'm going
to be looking out for in the upcoming call.
Speaker 2 (06:51):
I think what still surprises me, Jackie is this is
a company that has no full time CEO, and you
had Pat Gelslinger out earlier this week. We talked about
this with Ian King tweeting that he was buying shares
of Nvidia during the down during the decline of Nvidia
on Monday, he wrote about that on LinkedIn, and it
was surprising to see that I'm not, you know, here
(07:12):
to talk about Gelsinger. What I am wondering from you
about is what are analysts saying about the type of
leader who could come in and turn this company around? Like,
who are the names? Do we have names that are
being thrown around at this point? Do we have a timeline,
what do we know?
Speaker 4 (07:28):
I don't think there's too much that we do know
other than you know, the big point of scrutiny has
been spend and if you're going to bring in a
leader that can kind of articulate a new vision for
the company still kind of, you know, bring it something
that's forward looking, that is not going to be predicated
(07:50):
on a plan that is going to take, you know,
five to ten years to pan out, because I think
what investors want to see is what can we do
with what we have now? And you know, obviously a
pet Elsinger didn't get to live out his full five
year plan, but you know, he did put in in
place a solid foundation that I think a new CEO
can can work with. So some of the notes that
(08:11):
we've been seeing from the street include, you know, what
can be done with what foundation currently exists?
Speaker 3 (08:18):
Because it's not nothing.
Speaker 4 (08:19):
You know, some solid investments have been made, some good
inroads have been made, but I think it's just a
matter of kind of that conservative spend how far can
that take them?
Speaker 3 (08:28):
Hey, all right, Jackie, thank you so much. Jackie Devallas,
Bloomberg News Tech reporter joining us with the latest on Intel.
Keeping a watch on it as it moves up just
a little bit in the aftermarket. Do you want to
mention KLA Corp. Semiconductor manufacturing equipment company up about four
and a half percent in the aftermarket following its earnings,
looking at what the company has to say, second quarter
(08:49):
adjusted gross margins sixty one point seven percent, slightly better
than the street expected third quarter adjusted gross margin, so
looking towards the current quarter sixty one to sixty three percent.
Also talking about third quarter revenue, they're looking for two
point eighty five to three point fifteen million billion, excuse me,
and that is better than the street expected. So that
(09:09):
explains where you're seeing this stock up. Do not go anywhere.
Apple to come in just a moment. The earnings continuing
to come out. We are awaiting Apple, which is set
to report in just about seven minutes at the bottom
of the hour four to thirty pm Wall Street time,
So as soon as they cross, we will bring them
(09:31):
to you. A reminder of the company. We'll report for
the quarter despite some head wind stepping from China, the
slow rollout of in house AI future features. So there's
a lot coming at us when it comes to Apple
in particular, a lot coming at us when it comes
to the whole tech sector. This week, Angela Zino is
senior equeritly alyist over at CFRAA. He joins us from
New York City. Angelo, I do want to start with
(09:54):
Intel because they just came out certainly a big part
of the semi second, but they're also going through, of course,
some changes, waiting for a new CEO, new leader, a
new way forward. Initial thoughts on Intel.
Speaker 5 (10:09):
Yeah, now, thanks for having me.
Speaker 6 (10:11):
So, you know, you kind of look at the results overall,
and I would say they were okay. I mean, as
far as the results were concerned, I think earnings about
thirteen cents, sales were down seven percent, roughly kind of
in line where we were expecting. I think as far
as the guidance is concerned, it was definitely on the
lighter side of things, but you know, nothing abysmal, nothing
(10:31):
like we've seen in past quarters where they've kind of
missed by a much wider margin. So as far as
kind of the results are concerned, I think it was
perfectly fine, you know, within kind of you know, segments wise.
I think the client computing group, which is kind of
more their their PC business was down about nine percent,
and when you kind of look at their data center
business down about three percent. Again, I mean, it was
(10:53):
kind of where we had expected largely. So yeah, I
mean I think it's one of those situations where this
company is kind of just kind of going through the motions,
and we're just kind of waiting to see kind of
who that next CEO is going to be and what
they have to say on the call as far as
kind of cost cutting this concern here in the intermediate term, I.
Speaker 2 (11:13):
Could have asked you the same question I'm going to
ask you Angelo anytime over the last three years, where
is Intel in its turnaround?
Speaker 6 (11:22):
You know, it's it's a it's a tough one because, yeah,
there they continue to have to kind of restart in
terms of you know, where they're at, I mean you
and and it's typically because of the fact that they
haven't really kind of given you know, the existing leadership team,
you know, enough time to kind of you know, watch
their vision to really come to fruition.
Speaker 5 (11:43):
I think right now where we're looking at is you know,
you need you need a new CEO.
Speaker 6 (11:47):
I think when you kind of look at their core business,
it's really kind of under attack. Right on the PC
side of things. You hear things like you know, ARM
looking to take half the half the market. On that
side of things, you got got the kind of greater
competitive pressure.
Speaker 5 (12:00):
Going on there.
Speaker 6 (12:01):
You kind of look on the data center side of things,
they don't have the right offerings there. I mean, CPUs
are kind of a thing of the past at this
point in time, and you've got you know these you know,
these hyperscalers out there kind of rolling out their own
CPU offerings. So it is it is a very difficult
time for Intel at this point in time. There's really
kind of no direction. You need that direction. So the
(12:24):
faster you get a CEO.
Speaker 5 (12:26):
The better.
Speaker 6 (12:27):
Again, this is kind of almost a race to the bottom,
it seems like right now in terms of kind of
continue to continuing to course as their revenue trajectory continues
to go down. I think really kind of if I'm
looking at this company, it's all about how they can
execute on the foundry side of things right now. If
you're thinking about a turnaround going into the second half
(12:47):
of the year, I mean, you've got eighteen A that's
that's kind of been long awaited and hyped up panther Laics,
it's supposed to ramp here in the second half of
the year. We want to see kind of what kind
of customers like, you know, start ramping on that side
of things. You're not going to have a major hyperscaler
out there all of a sudden just give business to Intel,
they need to kind of execute on that side of things.
(13:07):
So that's where we're at right now. I think they
need to start show some sort of promise on the
foundry side of things, and hopefully they can kind of
gain some momentum from there.
Speaker 2 (13:16):
I got to tell you, I get these emails on
the terminal when stories are read at like a high rate,
those read spikes. People want to know about Apple. It
says that to Apple that our live blog on Apple
Carol is already hitting a red spike before those numbers
come out. We're expecting those numbers in just about two minutes. Angelo, China,
(13:40):
is that the biggest concern? We saw some downgrades the
early part of this year.
Speaker 6 (13:45):
Yeah, I mean it seems like, you know, when you
kind of look here over the last couple of years,
January just hasn't been a good month for Apple, and
you know, you can kind of say maybe a part
of that is seasonality and what have you. I think
obviously the other issue is you kind of look over
the last two three years, the competitive pressures have.
Speaker 5 (14:01):
Definitely escalated out in China.
Speaker 6 (14:03):
I mean, Huawei has become you know, a real threat
again at the high end of the market, and you know,
we kind of want to know what's going on with China.
It's somewhat of a black box at this point in time,
and you kind of look at some of the sell
through numbers that have been posted, you know, specifically by
the Chinese government here late in the year.
Speaker 5 (14:22):
The numbers don't look good.
Speaker 6 (14:23):
And I think most people realize that most investors are
kind of going into these numbers knowing that China or
expecting that China is not going to be good. The
question is how bad is it? You know, we are
we kind of going to have to deal with some
sort of excess inventoryous situation where they're going to start
discounting more than we expect and it's going to, you know,
look like an ugly March Quarter in terms of the guidance,
(14:44):
I think that's at this point what we're looking at.
But in terms of the biggest risk kind of going
into the print here and as far as the March
Quarter is concerned, it's absolutely China. And we also know
as far as the March Quarter guidance is concerned, it's
going to be someone on the weaker side of things
because of the four X uncertainties, you.
Speaker 3 (14:58):
Know, Angela. We're just about forty seconds away from those
Apple earnings. Stocks down about five percent. We know it's
been lagging some of it's tech brethren. If you will,
question is kind of what's next for Apple? What could
they say today that might give some indication of what's next.
They've started to give some clues. Just got about twenty
seconds here.
Speaker 6 (15:18):
I think the hope is that you get a better
than fear type number really on China. I think that's
kind of the big thing. And then of course on
the services side of things, you want to make sure
that that's running on all cylinders. We're going to hopefully
continue to get double digit growth. And I think if
you can kind of get you know, those two kind
of things running, I think that should be enough as
far as kind of where the stock is at and
(15:38):
the pullback that we've seen.
Speaker 3 (15:40):
All right, folks, we're talking with Angelo's, you know, senior
equity analyst over at CFR Research. He's going to stay
with us as we get ready for those Apple earnings
and they are crossing. So let's go through some of
the numbers. First quarter revenue one hundred and twenty four
point three billion. That is just a hair better than
what the street was expecting. One hundred and twenty four
point one billion is what the street was looking for.
(16:01):
Products revenue ninety seven point ninety six billion, that's up
about one point six percent year over year. Ten that's
a little bit light. Ninety eight point zero two billion.
You break it down. iPhone, the all important iPhone number,
sixty nine point fourteen billion, that is down year over year.
Estimate was for seventy one point zero four billion.
Speaker 2 (16:20):
And then you keep going down at China revenue, big
miss there, estimates for twenty one point six billion dollars
that came in at eighteen point five to one billion dollars. Wearables,
home and accessories coming in just shy of estimates. MAC
revenue coming in above estimates, iPad revenue coming in above estimates.
First quarter products revenue coming in shi of estimates. But Carol,
(16:40):
what we're talking about right now, iPhone revenue coming in
light sixty nine point one four billion versus estimates of
seventy one billion, and that China number significantly lower than
analysts one to see coming in at eighteen point five
to one billion.
Speaker 3 (16:52):
Apple also maintaining its cash dividend of twenty five cents
a share. I should say the stock has been bouncing
around in the aftermarket. We've seen it up about one percent.
Right now, it's just up about six tenths of a
percent of half a percent. Angelo Zeno come on in
initial thoughts on the first headlines off of this earnings release.
Speaker 6 (17:14):
Yeah, I mean, I think this is kind of a
situation where, you know, execution was I think as good
as you could have asked for. I mean, as far
as the top line is concerned, roughly in line. I
think the expectation again was about you know, one hundred
and twenty four billion, so you're looking at what was
it maybe three point eight percent or close to four
percent growth, let's call it, as far as kind of
on a year of a year growth rate. And I mean,
(17:36):
I think Tim kind of highlighted the iPhone numbers were
definitely a disappointment and the China numbers, so it's definitely
a China iPhone problem as far as the quarter is concerned,
and why we missed. And again, the expectations going into
the quarter was it was going to be a challenge,
and the fact that they had been able to kind
of navigate and still meet the numbers despite those issues,
(17:59):
I think kind of helps maybe do you risk the
stock at least when you kind of look at the
numbers this quarter. I mean, we'll see what the March
quarter guidance is going to look like. But my guess
is you're going to continue to see the further weakness
on the China iPhone side of things.
Speaker 2 (18:13):
Angelo, how much of the iPhone miss can you attribute
to China? Is is the iPhone miss just a result
of China?
Speaker 6 (18:24):
It seems like it, to be honest with you, just
kind of giving just given the high level numbers that
I'm hearing from you, it just seems like the weakness is.
Speaker 5 (18:33):
Really kind of you know, all China.
Speaker 6 (18:35):
And you know, my guess is, you know, Western markets
probably held up much better what held up as as to.
Speaker 5 (18:41):
Be expected, and and you know, we kind.
Speaker 6 (18:43):
Of saw, you know, some pronounced weakness on the China
side of things, and again not a surprise because a
lot of the sell through numbers that had you know,
come out from China, you know, was looking you know,
essentially it was kind of pointing towards double digit declines
out of kind of the eye phone business. So that's
essentially what you've got. So it's it's pretty brutal, but
(19:05):
not necessarily a complete surprise given some of the indications
we got going into the numbers.
Speaker 3 (19:10):
All right, the three bright spots, iPad, MAC, and services.
The iPad and MAC. The year over year services is
at an all time record. What's interesting too, all time
revenue record too as well, one hundred and twenty four
point three billion and narrowly beating Wall Street estimates. Again,
a huge miss for China when it comes to Apple
eighteen point five billion versus twenty one point six billion
(19:31):
that Wall Street expected, and a big miss for the
iPhone sixty nine point one billion dollars versus seventy one
billion dollars expected. And you know, initial reaction Angelo in
terms of the share price. Initially we saw pop and
then we saw the stock move down just down to
here a hare at this point, you know, a lot
(19:51):
of when we talk about Apple is we are saying
what's the next big thing? Right and certainly if the
iPhone is you know, certainly shoring business a still a
very big business. But maybe some questions about China growth
going forward. But where do you want to see the
company move into? Where are the new opportunities in your
view for Apple.
Speaker 6 (20:12):
Yeah, I mean, listen, I think, you know, we need
to continue to see good growth on the services side
of things, and then to continue to innovate and come
out with new offerings on the services side of things.
And I think that business will naturally continue to grow
due to a number of factors. But you know, as
far as kind of what we're looking for here over
the next couple of quarters, I don't think you should
forget about Apple Intelligence. I think that's still a very
(20:34):
important part of this story. We've kind of seen the
first two trunches of Apple Intelligence really roll out. The
first trunch well, you know, was really a non event.
I actually think, you know, and I have the iPhone sixteen.
I actually really liked let a number of the other
upgrades on the second trunch out there. I mean, I
use kind of visual intelligence all the time. Not crazy
about gen moji's and what have you, but you know,
(20:55):
I think there were a number of decent features out there,
specifically on the visual intelligence ide thinks I think Grounds
was great. I think the chat, GPT and integration is
super helpful for someone that just kind of you know,
looking to do stuff, you know, on the fly on
their phone. So I just don't think the consumer is
well aware of it obviously, and we're still at a
point where you know, most of kind of the installed
(21:15):
base doesn't have access or even knows about Apple Apple
Intelligence at this point in time. We'll get kind of
the the third you know, trunch here in the coming months,
and I think that's really going to help in terms
of the serie integration and what Apple can kind of
demonstrate across kind of the app store and what have you.
And then you know, clearly, you know, we kind of
want to see how that reflects across the rest of
(21:38):
the ecosystem as they kind of throw this out internationally,
what kind of partnerships they can kind of announce out
in China. Does that make a difference in China in
terms of kind of helping the demand outlook, because I
do think a big problem with with Apple right now
in China is the fact that they don't have AI
capabilities where you know, obviously they're they're China peers do
(21:59):
don't have a full device out there where their peers do.
And hopefully, you know, we see something on the foldable
side of things here over the next kind of two years,
So you know, where I'd like to see them go
is kind of, you know, start evolving their ecosystem where
they could find some success, at least in China, because
at this point in time, you know, what they've got
in terms of their offering in China is just not
(22:20):
going to.
Speaker 3 (22:20):
Cut it all right, Going to leave it on that note,
Angela's you know, he's senior equity analyst at CFR Research
joining us in New York City. Do you want to
mention Tim Cook? In the earnings release and the statement
called it the company's best quarter ever at Apple. He
also said, through the power of Apple Silicon, we're unlocking
new possibilities for our users with Apple Intelligence, which makes
(22:42):
apps and experiences even better and more personal. We're excited
that Apple Intelligence will be available and even more languages
this April. So Tim is certainly choosing to highlight that
we should point out. Apple shares though after an initial
pop right after the earnings release here in the aftermarket,
are now pretty much flat.
Speaker 2 (23:00):
Yeah, no mention of China in that statement, which certainly
will be a focus of investors on that call when
it does begin in just a few minutes. It's certainly
a focus for Caroline High. She's a Bloomberg Technology co host.
She joins us here in the Bloomberg Interactive Brokers studio.
Two big misses today Caroline highphone revenue coming in about
two billion dollars shi of estimates, and then greater China
(23:20):
revenue coming in about three billion dollars shi of estimates.
Does Apple need to change its strategy in China? Or
do investors need to adjust their expectations about China?
Speaker 7 (23:30):
Do we need to get more comfortable with their selling
fewer phones but in a higher average selling price. And
I think that's perhaps where they're trying to educate people towards.
Speaker 2 (23:38):
Is that in China?
Speaker 5 (23:39):
Is that everywhere?
Speaker 1 (23:40):
Well, I mean it.
Speaker 7 (23:41):
Feels like everywhere, but we do still have the slightly
cheaper phones that are available in the US, but we
don't have the rampant sort of competition that you do
have with a Huawei and with some of the local
operators that are in China that are just managing to
produce far more sophisticateated phones and a much lower price point.
And also there's some national patriotic fervor that's going on
(24:02):
and wanting to buy your locally made phones. So they
have been educating us and I think counterpoint research. For example,
front run the fact that they're going to have had
a dismal general amount sold eighteen percent rejection they thought
in terms of phone sold, But if the average selling
price is picking up, you're not going to be hurting
quite so bad. But look, ultimately we've seen it's a
big miss. They're growing in every region outside of China,
(24:25):
and even the America's Japan was pretty good, but really
China has been that real weak point, and we have
to perhaps see that the company is just going to
try and retrain us to think about them as a
services company, as an Apple Intelligence company. And look, with
iPhones missing as well, maybe we have to start to
think is this really always going to be the juggernaut
we thought it was?
Speaker 3 (24:42):
What about Apple Intelligence? Right? We have certainly heard so
much from the company, Tim Cook singling it out also
on the release and in a statement, So how is
the world thinking about Apple Intelligence and its opportunities?
Speaker 1 (24:55):
I mean, what what that's far?
Speaker 7 (24:58):
I mean, of course I want to have fun in
a Gen Moji, but ultimately I'm going to be upgrading
my phone for that. No, I probably have gone ungraded
to an iPhone sixteen because my darn camera is broken
and I want to get a better camera, and I
want to get a slimmer phone. But I wouldn't have
gone for it for Apple Intelligence largely because look, I
can integrate Google and to upgrade there and have it
magicing my emails and making life a little bit more
(25:20):
sophisticated there, and compared to Samsung, it is not able
to innovate in the way that Samsung's adapted to Alphabet's
offering Open Ai. Though, I think the winning formula for
Apple Intelligence going forward is that it hasn't spent billions
on its own large language model. It's gone in bed
with open Ai, and open Ai is probably gonna have
to get a lot cheaper because of what's happening with Deeze.
Speaker 2 (25:40):
Caroline h Have you been watching Severance?
Speaker 4 (25:43):
No?
Speaker 1 (25:44):
I haven't.
Speaker 5 (25:44):
Okay, Well, I'm.
Speaker 1 (25:46):
Too busy on the jacket, holl the day of the Jackal.
Speaker 2 (25:48):
It's it's a huge investment by Apple, huge marketing, push
services revenue a bright spot for the company. Yes, coming
in at twenty six point three four billion dollars, it's
for twenty six point one billion. I bring up Severance
because that's part of the services category. This is a
high margin business for Apple, the services social TVs TVs.
(26:11):
But the services category. Yeah, does does services growth and
strength ever offset weakness in China or for MyPhone? Well?
Speaker 7 (26:21):
I think it's interesting. Then the new COFO who has
just taken on the role. He's a long time Apple executive,
but he's just taken on the role in January, is
really talking up about sort of the installed base, because
that's where they want you to think the amount of
max iPads phones that we all own. They say that
we now have an installed base of active devices that
reached an all time high across all products and geographic segments.
(26:43):
Suddenly the services bigot wheel just flies. And then when
you're getting into payments, when you're getting into interoperability, of course,
services just becomes ever more necessary.
Speaker 2 (26:52):
For I mean, I probably pay Apple more each year
between between the memory.
Speaker 1 (26:59):
Yeah, what about the app store?
Speaker 7 (27:01):
I do wonder with some regulatory perspective, we heard it
from Microsoft yesterday, Well was it Meta yesterday talk.
Speaker 1 (27:07):
Singling out EU.
Speaker 7 (27:08):
But how much are they going to have to change
the business model when it comes to the revenue They
can just skim away from an app store when it
think about how it's treating its own consumers and whether
we're being fairly treated across the world.
Speaker 3 (27:18):
I mean, what do you want to know and what
do you want to hear from them?
Speaker 1 (27:20):
On the car?
Speaker 3 (27:20):
Is it just China or is it other things?
Speaker 1 (27:23):
I think, what is your next big innovation? Is it
about the home?
Speaker 7 (27:26):
Because look, the Vision Pro looks cute, but are we
all spending thousands on it? No, it hasn't been the
R and D winner for them this yet, but it
might have spin offs when they can tell about how
much they've iterated there to bring it to what they're
going to do with the home, the video screens, the robotics.
We're going to see how they can become evanmore integrale.
We need another winning product. It wasn't cars, the Vision Pro,
(27:47):
not yet, But what about twenty twenty five is some
new unleashed hardware.
Speaker 3 (27:51):
I'm amazer not more entrenched in the home. I mean,
I know in my home it's such an Apple household,
but it's not.
Speaker 1 (27:57):
We're a Google home household.
Speaker 3 (27:59):
We are too. We are too, and so I'm kind
of amazed that they have kind of waited so long
to get into the home market.
Speaker 2 (28:04):
Yeah, it would be certainly that would be an interesting
product category from them. What about something more akin to
metas glasses that we spoke about yesterday, and if they
were to come out with something that is less vision
pro oculous and more sort of like low profile Rabia,
because that.
Speaker 1 (28:19):
Was the irritation for many.
Speaker 7 (28:20):
Was it the fact that you've basically got a huge battery,
we connected to you and it just.
Speaker 1 (28:24):
So harding around.
Speaker 7 (28:27):
The tried and tested formula of Apple is let everyone
else play and then you come in and win the
day with something beautiful sneak and everyone jumps on board.
So maybe that is the winning formula for the home
and when it will be for glasses and they'll start
to dabble in.
Speaker 1 (28:39):
I mean, Tim Cook's got nice pair of glasses.
Speaker 7 (28:41):
I wonder if he wants to start making them and
we suit you down to the ground, Tim, But I
do think that they do. They're always going to be
slightly slower off the mark. Then come and bring in
what it. They haven't got a foldable phone yet. Look,
Samsung has plenty on the market. Everyone's been wanting to
get a smaller form factor. They're just waiting until they
can perfect. So you don't get a crease in it.
(29:01):
So I do wonder whether it's gonna take a little
bit of time.
Speaker 3 (29:03):
You know, we have talked with Mark I guess about
just how the overall market here in the United States
is so overweighted to some of these big tech companies.
And I am curious though they are important, right when
you look at kind of the numbers that they bring in,
how twenty four million, I mean, it's just extraordinary, even
when we say right, maybe right, it's extraordinary. So how
are you thinking about this week of some of these
(29:25):
big tech names and the results that we've had.
Speaker 7 (29:28):
Thing they've done all right, considering Monday and the deep
seeky whiplash that we had, and I thought the spend.
Speaker 1 (29:35):
Would be so much more under consideration.
Speaker 7 (29:37):
But I think Satia, even though Microsoft saw a big
hit today, Satia managed to sort of thread the needle
that look, we're already offering our one on on our foundry,
IAI foundry, come to us find the best models. We'll
also be able to we have our issue as supply,
we've got to continue to invest. So they managed to
vindicate a spending. I think Meta did a phenomenal job
(29:58):
of just talking up with such pompous, like grandiose ideas that.
Speaker 1 (30:04):
Won everyone over.
Speaker 7 (30:05):
You know, musted the same, the fact that actually the
numbers look pretty ugly. But he's so optimistic about Optimist,
he's so optimistic about FSD that we managed to be
blindsided by the idea that actually the plans are there,
the money is being well spent, and we're still committed
to these companies. So ultimately, I think they've managed to
navigate a pretty rocky period Apple. The fact that it's
flat Microsoft's been really the only real pain point here.
(30:27):
St Micro had another problem ever in Europe as well.
I look towards Alphabet and Amazon. Can they vindicate the
amounts of money that they're going to have to save.
Speaker 2 (30:33):
I'm not going to put words in Mark Umman's mouth,
but he spent plenty of time over the last few
months on our program really criticizing Apple for.
Speaker 1 (30:40):
Its AI is and it's analysts.
Speaker 7 (30:42):
He loves to criticize the analyst.
Speaker 2 (30:45):
AI and you know, a question about slow rolling AI
and to what extent this actually is something that's not
just incremental but is actually meaningful. When do we start
to see Apple intelligence really flourish.
Speaker 7 (30:59):
I think they're signaling it signaling in the even the
press release saying that more languages are coming in April,
we will be making it further integrated. It's also interesting
when they bring these things without us even knowing, like
the news that they brought starlink and the fact that
we can now use with it, they just hide in
these little operating system grades.
Speaker 2 (31:21):
So example, publicly acknowledge that, I know Mark Grimman reported
that it was.
Speaker 5 (31:23):
Going to happen.
Speaker 7 (31:24):
I think T Mobile CEO came on and talked about it,
and it's just that ultimately they do slow roll. They
don't perhaps they realize that they need to speak to
the investor.
Speaker 1 (31:32):
Base about intelligence.
Speaker 7 (31:33):
They're going to talk about how they're really managing to
infuse it in a more seamless manner. But to you
and I as a consumer, I think they just don't
want to stress test it too much. They want to
slowly have us naturally absorbing it and making our life
simpler and simpler. But thus far, like a little summari
of my email hasn't changed my life.
Speaker 5 (31:52):
All that much.
Speaker 3 (31:53):
Yeah, exactly. I just want to remind everybody that we
do see Apple shares fluctuating in the aftermarket. Apple as
our Mark German Reports posted sales that were slightly better
than analysts estimated, even as the iPhone and sales in
China were weaker than anticipated. Caroline, just talking about that
revenue number, it did rise four percent to one hundred
and twenty four point three billion in the fiscal first quarter.
(32:16):
Analysts had estimated one hundred and twenty four point one, so,
you know, coming in just a hair better than what
the street was forecasting. But again concerns over China and
Apples struggling there stacks up about four tenths of a
percent here in the aftermarket. Yeah, I just think, you know,
it's interesting to see after what a crazy week that
(32:36):
we've seen. I feel like with technology that the stock
is just kind of flat.
Speaker 7 (32:40):
Yeah, we priced it in, and remember great point, it
was kind of beaten up running into this. We'd had
five analyst downgrades right in the last month or so,
and unlike in Nvidia that has zero cells, there have
been a few creeping into Apples, So I think people
had started to price in the China weakness.
Speaker 1 (32:57):
Interestingly made the point to.
Speaker 7 (32:59):
Like all the going to sell us cheaper price points
they are, according to Mark Gumman, going to be focusing
on the iPhone SE, which is the cheaper around five
hundred dollars offering that's going to come in April March.
Maybe that's going to pull more people perhaps away from
the Samsung's and the Android offerings. Maybe we get the cheaper,
lower end Airpod's making a dent. But all of this
I think had just been guided. We knew that Apple
(33:22):
was going to have a terrible time in China, and
Apple Intelligences isn't there yet, and people have really been
complaining about the latest os, like use cases, the way
in which the phone just doesn't feel as slick.
Speaker 1 (33:34):
As it used to.
Speaker 2 (33:35):
Are we going to start hearing more chatter about Tim
Cook and a succession plan. We've been talking a lot
about Intel and what Intel does post Gal Singer, and.
Speaker 1 (33:44):
They've got some big issues they do.
Speaker 2 (33:47):
Tim Cook has been an Apple since nineteen ninety eight,
he's been CEO since twenty eleven.
Speaker 5 (33:51):
What's the succession plan?
Speaker 7 (33:52):
And they've just had a CFO come into the MITS
who's been trained up from within. I don't think anyone
feels that Tim's going anywhere soon. He navigates the first
Trump administration so swiftly and seamlessly worked well to be
able to protect his business that of course is so
dependent on China, not just from a selling perspective, but
it's more from a production perspective. What do tarifs mean
(34:13):
for him? So I think in this next administration can't
I wouldn't ever bet that he's going to hand over
the baton anytime soon. But I think that is a
key question that people are gonna be asking who from
within has been groomed up, because.
Speaker 1 (34:24):
Remember they lost a lot of talent as well.
Speaker 7 (34:25):
Johnny E's left, and a lot of people seem to
move from the engineering the product development side of things.
Speaker 3 (34:30):
All right, fascinating stuff, Caroline, thank you again. Second day
like making anyways sense of all the big tech earnings.
As we said, Caroline Hyde is co host of Bloomberg
Technology on Bloomberg TV. Catch It. They'll continue coverage of
all the earnings this week. That'll be at eleven am
Wall Street time tomorrow on Bloomberg TV. Right now, tim
Apple shares just down about one quarter of one percent.
Hosts And Creators
Tim Stenovec
Carol Massar
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