Apple’s CEO on the company’s 2019 Q2 earnings

Apple's second-quarter results for 2019 are in. Here's our transcript of the call.

Apple CEO Tim Cook and CFO Luca Maestri spoke with analysts during the company's Q2 2019 earnings call. Here's our ongoing live transcript of their remarks! If you want more info on Apple's results, we recommend checking out the awesome charts from Six Colors.

Cook's opening remarks

Tim Cook

Good afternoon and thanks to all of you for joining us today. This has been an exciting and productive quarter for Apple. In my letter to investors at the beginning of January, I wrote that one of Apple's great strengths is our culture of flexibility, adaptability, and creativity. This quarter featured some important announcements that speak to the power of our commitment to innovation and long term thinking. I'd like to start with some top line highlights and then move into greater detail with you. I'll get started with financial results. Our revenue was $58 billion, toward the high end of our guidance range. We see this result as a positive outcome in light of ongoing headwinds from weaker foreign currencies relative to the US dollar. In constant currency, our year over year revenue performance would have been 200 basis points better than our reported results indicate. We had great results in a number of areas across our business. It was our best quarter ever for services, with revenue reaching $11.5 billion. We had a blockbuster quarter for iPad, with revenue up 22% from a year ago — this is our highest iPad revenue growth rate in six years. And it was another sensational quarter for wearables, with growth near 50%. This business is now about the size of a Fortune 200 company, an amazing statistic when you consider it's only been four years since we delivered the very first Apple Watch. I'll talk more about these categories later.

While we grew year over year in developed markets, and while we had record March quarter results in a number of major markets, including the United States, Canada, the United Kingdom, and Japan. We did experience a revenue decline in emerging markets, but we feel positive about our trajectory. Our year over year revenue performance in Greater China improved relative to the December quarter and we've seen very positive customer response to the pricing actions we've taken in that market, our trade-in and financing programs in our retail stores, the effects of government measures to stimulate the economy, and improved trade dialogue between the United States and China. Our App Store results are still reflecting the impact of the slowdown in regulatory approval of gaming apps in China, but we're encouraged by the recent increase in the pace of approvals. We believe strongly in our long-term opportunity in China thanks to our robust ecosystem, our talented developer community, and the country's growing population of tech savvy consumers who value the very best products and services.

For iPhone, while our worldwide revenue was down 17% from a year ago, declines were significantly smaller in the final weeks of the March quarter. Looking back at the past five months, November and December were the most challenging so this is an encouraging trend. We like the direction we're headed with iPhone and our goal now is to pick up the pace. Importantly our active installed base of devices continues to grow in each of our geographic segments and set a new all-time record for all major product categories. That growing installed base is a reflection of the satisfaction and loyalty of our customers and it's driving our services business to new heights. In fact, we had our best quarter ever for the App Store, Apple Music, cloud services, and our App Store search ad business. And we set new March-quarter revenue records for Apple Care and Apple pay. Apple Pay transaction volume more than doubled year over year and we're on track to reach 10 billion transactions this calendar year. Apple Pay is now available in 30 markets and we expect to be live in 40 markets by the end of the year. More and more transit systems are accepting Apple Pay and New York's MTA system will begin the rollout in early summer. As we've seen in places like London, Tokyo, and Shanghai, contactless entry into transit systems helps to spur broader Apple Pay adoption and we believe this will get even more people using Apple Pay in the United States. And TicketMaster has just announced that they will be accepting Apple Pay for ticket purchases on the web and through the Ticketmaster app and over 50 of their entertainment and sporting venues are launching contactless tickets this year, including the vast majority of NFL stadiums. Subscriptions are a powerful driver of our services business. We reached a new high of over 390 million paid subscriptions at the end of March, an increase of 30 million in the last quarter alone. This was also an incredibly important quarter for our services moving forward. In March we previewed a game-changing array of new services, each of them rooted in principles that are fundamentally Apple. They're easy to use; they feature unmatched attention to detail; they put a premium on user privacy and security; they're expertly curated, personalized, and ready to be shared by everyone in your family. These features aren't just nice to have, they actually helped to eliminate the boundary between hardware, software, and service creating a singularly exceptional experience for our users. First, building on the great momentum of Apple News which is already the number-one news app in the United States and the United Kingdom, we launched Apple News+. It will bring together over 30 popular magazines, leading newspapers, and digital publishers into a beautiful, convenient, and curated experience within the Apple News app. Apple News+ builds on our commitment to supporting quality journalism from trusted sources while providing the best magazine and news-reading experience ever for mobile devices. Advancing our vision to replace the wallet, we announced Apple Card built on principles Apple stands for like transparency, simplicity, and privacy. Apple Card is integrated into the Wallet app and delivers all new experiences that only Apple can provide, integrating our hardware, software, and services in an elegant solution, it places the customer at the center. It's the first card to encourage you to pay less interest, eliminate fees, and give you daily cash on all your purchases, and customer interest to date has been terrific. We also previewed Apple Arcade, the world's first game subscription service for mobile, desktop, and the living room. With over 100 new games all with no ads or ad-tracking, no additional purchases, and respect for user privacy, we've created a service for players of all ages — kids to teens to adults — and one that families can enjoy together.

The App Store is already the world's biggest gaming platform and we think Apple Arcade is a way to unleash the creativity of the game developer community with a collection of new games not available on any other mobile platform or in any other subscription service. We can't wait for our customers to experience it for themselves beginning this fall. We were thrilled to provide a peek at what's new for TV. Beginning in mid-May, the all new Apple TV app will bring together the different ways to discover and watch shows, movies, sports, news, and more in one app across iPhone, iPad, Apple TV, Mac, smart TV's, and streaming devices. And users can subscribe to and watch new Apple TV channels like HBO, Showtime, and Starz, paying only for services they want — all on-demand available on and offline. And coming this fall, Apple TV+ will be the new home for the world's most creative storytellers, featuring exclusive original shows, movies, and documentaries.

We also had several major product introductions during the quarter. We launched a new, more powerful iMac with dramatic increases in both compute and graphics performance, making it a great update for consumers and pros alike. For our Mac business overall, we faced some processor constraints in the March quarter, leading to a 5% revenue decline compared to last year, but we believe that our Mac revenue would have been up compared to last year without those constraints and don't believe this challenge will have a significant impact on our Q3 results. For iPad, we were very happy to return to growth in Greater China while generating strong double-digit growth in each of our other geographic segments. Our great iPad results were driven primarily by strong customer response to iPad Pro. Late in the quarter, we launched an all new iPad Air with an ultra-thin design, Apple Pencil support, and high-end performance powered by Apple's A12 Bionic chip. In addition, we introduced a new iPad mini — a major upgrade for iPad fans who love an ultra-portable design and, like the new iPad Air, it delivers the power of the A12 bionic and support for Apple Pencil. Last month, we introduced new AirPods, the second generation of the world's most popular wireless headphones, and demand has been incredible. This is nothing less than a cultural phenomenon. With a new Apple-designed H1 chip, the new AirPods deliver faster connect times, more talk time, and the convenience of hands-free "Hey Siri." Our retail and online stores continue to be a key point of innovation. As we mentioned in January, we've been working on an initiative to make it simple to trade in a phone in our store, finance the purchase over time, and get help transferring data from the old phone to the new phone. As part of this initiative, we rolled out new trade-in and financing programs in the U.S., China, the UK, Spain, Italy, and Australia. The results have been striking. Across our stores, we had an all-time record response to our trade-in programs and with more than four times the trade-in volume of our March quarter a year ago. With each passing quarter, we're more inspired by the impact our products are having on people's fitness and health. This quarter we brought the ECG app on Apple Watch Series 4 to Hong Kong and 19 European countries including France, Germany, Italy, Spain, and the UK. Just like when the ECG app launched in the United States, there's hardly a day that goes by that I don't get a letter or an email from a customer in one of these countries talking about how this feature has significantly changed their life. We believe we're really just beginning to tap in to what we can do to help our users actively manage their health and well-being. For example, last month Stanford Medicine reported results of the Apple Heart Study, the largest study ever of its kind, which enrolled over 400,000 participants from all 50 states in a span of only eight months. And hundreds of institutions are now supporting Health Records on iPhone with recent additions including Michigan Medicine and UT Health Austin. In February, we announced that we are working with the U.S. Department of Veterans Affairs to make Health Records on iPhone available to veterans. This will be the first records-sharing platform of its kind available to the V.A. which is the largest medical system in the US, providing service to more than 9 million veterans across more than 1,200 facilities.

Stick around! We're transcribing the call live.