Apple Inc.

Good day, everyone. Welcome to the Apple Incorporated First Quarter Fiscal Year 2020 Earnings Conference Call. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Tejas Gala, Senior Analyst, Corporate Finance, and Investor Relations. Please go ahead.

Thank you. Good afternoon, and thank you for joining us. Speaking first today is Apple CEO Tim Cook, and he'll be followed by CFO Luca Maestri. After that, we'll open the call to questions from analysts. Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements, including, without limitation, those regarding revenue, gross margin, operating expenses, other income and expenses, taxes, capital allocation, and future business outlook. Actual results or trends could differ materially from our forecast. For more information, please refer to the risk factors discussed in Apple's most recently filed periodic reports on Form 10-K and Form 10-Q and the Form 8-K filed with the SEC today, along with the associated press release. Apple assumes no obligation to update any forward-looking statements or information which speaks as of their respective dates. I'd now like to turn the call over to Tim for introductory remarks.

Thanks, Pages. Good afternoon, and thanks to all of you for joining us. We're thrilled to report Apple's biggest quarter ever, which set new all-time records in both revenue and earnings. We generated revenue of $91.8 billion, which is above the high end of our guidance range, with revenue growth accelerating for the third consecutive quarter. Geographically, we set all-time records in the Americas, Europe, and rest of Asia Pacific and saw greater China return to growth. Our record performance was fueled by iPhone, where December quarter revenue was up 8% year-over-year and by our fifth consecutive quarter of double-digit growth outside of iPhone, including a new all-time record for services and another blowout quarter for wearables. Our active install base of devices has now surpassed $1.5 billion, up over $100 million in the last 12 months alone, reaching a new all-time high for each device. of our main product categories in geographic segments. Not only is our large and growing install base a powerful testament to the satisfaction, engagement, and loyalty of our customers, but it's also fueling our growth across the board, particularly in services. Let's take each category one by one. On iPhone, revenue in the December quarter was $56 billion. Again, that's up 8% over a year ago, thanks to the exceptional demand for the iPhone 11 iPhone 11 Pro, and iPhone 11 Pro Max. In fact, iPhone 11 was our top-selling model every week during the December quarter, and the three new models were our three most popular iPhones. We had double-digit growth in many developed markets, including the U.S., the U.K., France, and Singapore, and also grew double digits in emerging markets, led by strong performances in Brazil, mainland China, India, Thailand, and Turkey. These new models are by far the best iPhones we've ever shipped, with advanced technologies, an unprecedented leap in battery life to easily get through the day, and a best-in-class camera experience. We have been wowed with the photos customers have shared in our all-new Night Mode Photo Challenge this month. Turning to services. Q1 revenue reached $12.7 billion, an all-time record, growing 17% over last year. Once again, we saw double-digit growth in all five of our geographic segments and established new all-time records for multiple categories, including cloud services, music, payment services, and our App Store search ad business, as well as setting a December quarter record for the App Store and Apple Care. 2019 was a historic year for our services business, and I'd like to touch on some highlights. For the App Store, 2020 started off strong with customers spending a new single-day record $386 million on New Year's Day alone, a 20% increase over last year. Apple Arcade, our new game subscription service, has been fast off the blocks with a catalog of over 100 new and exclusive games you won't find anywhere else, all playable across Apple devices with new games and expansions added every month. Apple TV Plus is off to a rousing start, and I want to congratulate the entire team at the morning show for their multiple Golden Globe nominations, Jennifer Aniston on her Screen Actors Guild Award, and Billy Crudup on his Critics' Choice Award. We continue to focus on telling stories that matter, like Little America, which recently premiered to widespread critical acclaim with much more great content still to come. Apple News now draws over 100 million monthly active users in the US, UK, Australia, and Canada and provides a curated and personalized experience using on-device intelligence to recommend stories. Apple News Plus continues to add new titles. offering subscribers seamless access to the world's top publications across all of their devices. For Apple Pay, revenue in transactions more than doubled year over year with a run rate exceeding 15 billion transactions a year. Apple Pay Transit support expanded with customers paying for journeys on transport for London more easily with Apple Pay Express Transit. And in spring of 2020, iPhone and Apple Watch customers will be able to simply tap to ride trains and buses in even more cities, including Shenzhen and Guangzhou. We are thrilled with the continued growth of Apple Card, and last month, customers began using Apple Card monthly installments at Apple retail and online to purchase new iPhones and pay for them over 24 months. We see great promise for these recently launched services and we're optimistic about what we've got in the pipeline for each of them. Now turning to wearables, we had another incredible quarter, setting an all-time record in virtually every market we track around the world, and this product category is now the size of a Fortune 150 company. Demand for AirPods continues to be phenomenal, particularly for our recently launched AirPods Pro, our new addition to the AirPods family that features active noise cancellation. Apple Watch had a great start to fiscal 2020, setting an all-time revenue record during the quarter. It continues to have a profound impact on our customers' lives, and it continues to further its reach as over 75% of the customers purchasing Apple Watch during the quarter were new to Apple Watch. Both AirPods and Apple Watch were must-have holiday gifts, helping drive unprecedented results for the category, even as we faced supply constraints for Apple Watch Series 3 and AirPods Pro. Mac and iPad generated $7.2 and $6 billion in revenue, respectively, and the high level of customer satisfaction and loyalty for both products drove the active install base of both Mac and iPad to new records in all geographic segments. For iPad, we saw growth in key emerging markets like Mexico, India, Turkey, Poland, Thailand, Malaysia, the Philippines, and Vietnam. With our current lineup of iPad Pro, iPad Air, iPad Mini, and iPad, along with the new iPad OS, we give the customers an unparalleled tablet experience integrating hardware, software, and services in a way that only Apple can. This was also a very exciting quarter for the Mac as we launched our most powerful notebook ever, the 16-inch MacBook Pro, as well as Mac Pro and Pro Display XDR, the most powerful tools Apple has ever put in the hands of pros. And we've already seen a strong response from the pro community. from developers, photographers, and music producers to filmmakers and scientists who rely on the Mac to create their life's best work. We also want to take a moment to congratulate all the Grammy-winning and nominated artists this past weekend who rely on Logic Pro X and their Mac to create incredible music we all love. I want to call out and celebrate the exceptional work of our retail and online teams. This quarter, we opened a beautiful new store in Kawasaki, Japan, and exciting things are taking place inside each and every store. Thanks in part to a doubling in iPhone trade-ins versus last year, our retail and online stores set an all-time record and delivered strong double-digit growth in iPhone. We see a very bright future for these efforts. and we continue to innovate to ensure that everyone who visits an Apple retail location has a great experience. We began 2020 with our greatest product lineup ever, and we are only deepening our commitment to do our part to make the world a better place. In November, we released a completely redesigned Everyone Can Code curriculum to help introduce more elementary and middle school students to the world of coding, The new curriculum includes even more resources for teachers, a brand new guide for students, and updated Swift coding club materials. Today, millions of students in more than 5,000 schools worldwide use Everyone Can Code curriculum to bring their ideas to life and develop important skills including creativity, collaboration, and problem solving. November also saw the launch of our new research app. the latest in our ongoing effort to put the future of health in the hands of every user. Customers in the U.S. can enroll in three landmark multi-year health studies that we're undertaking with leading academic and research institutions. The Apple Women's Health Study, the Apple Heart and Movement Study, and the Apple Hearing Study. As in everything we do, we built user privacy into the research app from the ground up. This quarter, we also announced a $2.5 billion plan to help address the housing availability and affording crisis in our home state of California. We feel a great responsibility to help the region we have always called home stay vibrant and to ensure that it remains a great place for everyone to live and raise a family, including those who do so much to serve the community, like firefighters and teachers. In much more recent news, We're closely following the development of the coronavirus. We're donating to groups that are working to contain the outbreak. We're working closely with our Apple team members and partners in the affected areas, and our thoughts are with all of those affected across the region. As we close the books on a record-breaking December quarter, we are already well underway on some new and exciting developments for the future. Apple's strength will always be its boundless creativity and innovation, and this year will be no different. But for now, for more details on the results, I'd like to turn the call over to Luca.