Apple Q2 Earnings: Tim Cook Underscores India’s Importance
Apple’s revenue in Q2 FY23 beat Wall Street expectations coming in at USD 94.8 billion (down 3 per cent) due to better-than-expected iPhone sales. But India was in the spotlight during the company’s earnings call as CEO Tim Cook highlighted setting a quarterly record in the country, registering strong double-digit growth year-over-year (YoY).
“[..] India is an incredibly exciting market. It's a major focus for us. I was just there, and the dynamism in the market, the vibrancy is unbelievable,” Cook said.
Though the iPhone-maker registered a second consecutive quarterly revenue decline, Cook emphasised on the company setting an all-time record for its Services business and March quarter record for iPhone sales. He said emerging markets, including Mexico, Indonesia, the Philippines, Saudi Arabia, Turkey, the UAE, Brazil, Malaysia and India, did very well in the Q2 fiscal 2023.
The Apple CEO mentioned the opening of two Apple stores in Mumbai and Delhi as milestones for the company. “I was there to see it for myself, and I couldn't have been more delighted by the excitement and enthusiasm of the customers, developers, creators and team members I got to spend time with,” he noted.
The Cupertino-based company reported USD 24.16 billion in net income during the quarter as compared to USD 25.01 billion during the corresponding quarter in the last fiscal year.
Apple stayed away from providing any formal guidance, which has been its approach since 2020. But the company’s CFO Luca Maestri said Apple expected June quarter year-over-year performance to be similar to the March quarter under the assumption of macroeconomic outlook not worsening from what has been predicted in current quarter.
Maestri also added that Apple was faced with macroeconomic challenges in digital advertising and mobile gaming (part of the Services business).
Emerging Markets – The Focus
Cook said Apple will focus on several emerging markets as they are performing well despite the headwinds. He shared that there was a great opportunity for the company in these markets given Apple’s low share and “dynamics of the demographics”.
Apple has been ramping up its efforts in India lately. According to a Bloomberg report, the Cupertino-based company logged revenue of USD 6 billion from India as opposed to USD 4.1 billion in the year through March 2022. It has also increased its production of iPhones in India, accounting for as much as 7 per cent of its global iPhone production volume in 2022. This number was up from about 1 per cent in 2021. Moreover, Apple assembled over USD 7 billion worth of iPhones in India in 2022 alone.
On India, the Apple CEO said during earnings call that there was opportunity across the board, including in devices, TV and movie streaming, and music, as the Average Revenue Per User (ARPU) was much lower in the country as compared to other regions. “But if you look at it over a long arc of time, I think there's a good opportunity across the board,” he added.
Cook said that Apple hoped to convince a lot of smartphone users in India to buy an iPhone as they entered the middle-class income category. “I am hopeful that we can convince some number of them to buy an iPhone and we'll see how that works out. But right now, it's working out well,” the Apple CEO said.
The shipment volumes of iPhones in India in 2022 grew 60 per cent year-on-year (YoY), while their value increased by 162 per cent, according to a report by Counterpoint. The report also mentioned that Apple’s brand value share went up to 25 per cent in 2022, up from 12 per cent in 2021.
A forecast by Taiwan’s DigiTimes Research highlighted that India could be assembling up to 50 per cent of all iPhones by 2027, which would put the country’s production at par with that of China.
Despite Apple’s growing emphasis on India, Cook was hesitant on comparing it with the Chinese market which is the source of roughly 85 per cent of all iPhones produced by the company.
