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Apple (AAPL) Timothy Donald Cook on Q2 2016 Results - Earnings Call Transcript

Q2 2016 Earnings Call

April 26, 2016 5:00 pm ET

Executives

Nancy Paxton - Senior Director, Investor Relations and Treasury

Timothy Donald Cook - Chief Executive Officer & Director

Luca Maestri - Chief Financial Officer & Senior Vice President

Analysts

Simona K. Jankowski - Goldman Sachs & Co.

Eugene Charles Munster - Piper Jaffray & Co (Broker)

Kathryn Lynn Huberty - Morgan Stanley & Co. LLC

A.M. Sacconaghi, Jr. - Sanford C. Bernstein & Co. LLC

Shannon S. Cross - Cross Research LLC

Steven M. Milunovich - UBS Securities LLC

Rod B. Hall - JPMorgan Securities LLC

Operator

Good day, everyone, and welcome to the Apple Incorporated second quarter fiscal year 2016 earnings release conference call. Today's call is being recorded.

At this time for opening remarks and introductions, I would like to turn the call over to Nancy Paxton, Senior Director of Investor Relations. Please go ahead, ma'am.

Nancy Paxton - Senior Director, Investor Relations and Treasury

Thank you. Good afternoon and thanks to everyone for joining us today. Speaking first 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 margins, operating expenses, other income and expense, taxes, future business outlook, and plans for capital return and debt issuance. Actual results or trends could differ materially from our forecast. For more information, please refer to the risk factors discussed in Apple's Form 10-K for 2015, the Form 10-Q for the first quarter of fiscal 2016, 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 speak as of their respective dates.

In addition, today's comments will refer to a metric we describe as the purchase value of services tied to our installed base. This is a non-GAAP measure, and a reconciliation to the corresponding GAAP measure can be found on our Investor Relations website at Apple.com/investor.

I'd now like to turn the call over to Tim for introductory remarks.

Timothy Donald Cook - Chief Executive Officer & Director

Thanks, Nancy. Good afternoon, everyone, and thank you for joining us. Today we're reporting the results of a very busy and challenging quarter, and we're also announcing an update to our capital return program.

Revenue for the quarter was $50.6 billion, which was within our guidance range. Despite the pause in our growth, our results reflect excellent execution by our team in the face of ongoing macroeconomic headwinds in much of the world and difficult year-over-year comparisons. We saw continued currency weakness in the vast majority of our international markets. In constant currency, our revenue declined by 9% from last year, 400 basis points less than the reported decline of 13%. For the first half of the fiscal year, our revenue in constant currency was up 1% year on year.

Despite challenges, there were a number of encouraging signs during the quarter. Our installed base of over 1 billion active devices continued to grow strongly. We added a huge number of Android switchers and new-to-Mac customers, and we generated very strong growth from Services. We sold 51.2 million iPhones in the quarter, consistent with the range of our own expectations but lower than the exceptional year-ago quarter when we saw an acceleration in iPhone upgrades and 40% iPhone sales growth over the previous year.

To provide some additional color, iPhone sales come from three sources: customers who upgrade from previous iPhone models; customers who switch from Android and other operating systems; and customers who purchase a smartphone for the first time.