Ternus Makes Apple Earnings Call Debut With Duo Shortage and Paid Siri Plans in Focus
John Ternus made his debut as Apple chief executive on an earnings call on November 2. Apple reported quarterly revenue of $114.5 billion and earnings per share of $2.10 after the closing bell, beating expectations, but shares fell 3 to 4 percent in after-hours trading while the call went on. The guidance, the company’s forecast for the next quarter, came in below what the market expected.
The iPhone Duo came up first. The Duo is Apple’s first foldable phone, and it sold out quickly online in October, with lines forming at stores. Ternus told Reuters the device remains supply constrained and that he could not predict when supply and demand would balance. Chief Operating Officer Sabih Khan said the shortage continued.
The rebuilt Siri came up next. Siri is the iPhone’s voice assistant, which Apple says it rebuilt from the ground up as an artificial intelligence assistant. Ternus said Siri handles 2.5 billion requests a day. Server-based features such as Siri AI and photo editing will have usage limits, he said, and people who want more will later be able to pay for added capacity. He gave no price or date. Siri requests are processed on the device and in Apple’s private cloud.
The December-quarter outlook was mixed. Chief Financial Officer Kevan Parekh said revenue would grow 7 to 10 percent from a year earlier, above the 6.1 percent the market expected. But he put the gross margin at 45 to 46 percent, below the 46.3 percent consensus, and services revenue growth at 8 to 9 percent, slower than the 10 percent of the September quarter. Parekh cited currency effects and the cost of licenses from outside providers.
Spending also came up. Research and development cost $11.7 billion in the quarter, up 32 percent from a year earlier, and total operating expenses reached $19.2 billion, up 21 percent. Apple is spending more on artificial intelligence. The number of active Apple devices passed 2.5 billion, a record.
Results varied by product. iPhone revenue rose 17 percent to $57.58 billion and Mac revenue rose 24 percent to $10.79 billion. iPad revenue fell 10 percent, and revenue from wearables, home and accessories fell 8 percent. Apple raised prices on Mac and iPad models in June and raised iPhone prices by $100 in September.
Analysts pressed Ternus on the competition in AI assistants. Gene Munster of Deepwater Asset Management said Ternus sidestepped questions about personalized AI agents and called that the biggest risk to the Apple ecosystem. Ternus said there is room to expand what Siri can do, while making sure users know what they are handing to an AI assistant and that security and privacy are protected.
The call was Ternus’s first earnings presentation since he succeeded Tim Cook as chief executive on September 1. The results themselves were records, but the market weighed the next quarter’s margins and the pace of Siri monetization more heavily. The questions ahead are how much iPhone Duo supply catches up in the holiday season, and when paid added capacity for Siri begins.
