When corporations discuss quarterly earnings, executives typically deploy language designed to puff up, excuse or obfuscate their corporations’ latest efficiency. The aim is to excite traders over implied future success. And in the end to provide the corporate extra money. At all times. Extra. Cash. The Apple quarterly earnings name takes place Thursday afternoon.
However whenever you’re the iPhone big — with a mind-blowing market cap and a seemingly endless provide of hit merchandise, together with ongoing progress in providers — you usually don’t have to craft hopeful-yet-non-material statements or deflect questions designed to get on the true backside line.
So CEO Tim Cook dinner and new CFO Kevan Parekh will report on all of the numbers (former CFO Luca Maestri stepped down January 1, 2025). As a result of many tariff impacts are but to come back, analysts predict a 4% income enhance year-over-year, plus a soar in earnings per share. Notice that Apple begins its fiscal 12 months with Q1 within the earlier 12 months’s vacation season, so calendar quarters path its fiscal quarters.
At any price, Apple’s name is prone to be no exception to the earnings-call guidelines of monetary wordiness and exaggerated success. In case you’re not a professional investor, the monetary phrases and buzzwords rattled off by Cook dinner and Parekh could be complicated.
So Cult of Mac tried to make clear a few of typical earnings-report jargon beneath.
Apple earnings name on Might 1, 2025
First a little bit of background. Apple’s earnings name will comply with the issuance of the corporate’s quarterly earnings report, which will probably be all concerning the onerous numbers. In the course of the earnings name, Cook dinner and Parekh will learn ready statements and take questions from Wall Avenue analysts. It’s all an try and put the earnings report’s onerous numbers into context for traders.
Cupertino probably won’t battle as a lot as some corporations to justify its latest numbers. It’s a cash machine, in spite of everything. (Simply have a look at the transcript from the final quarterly name.)
As essentially the most worthwhile firm on this planet, Apple’s worth sits at simply over $3 trillion, not far beneath the gross home product of India. However as monetary advisers typically warn traders, previous efficiency just isn’t an indicator of future success.
If you wish to hear in, Apple’s earnings name is scheduled for Thursday at 2 p.m. Pacific time. If it’s your first time, you’ll want to learn our glossary of phrases earlier than the decision.
Earnings name glossary of phrases
ASP
On Apple earnings calls, commonly mentions ASP with out spelling out that it refers to a product’s common sale worth (generally known as common promoting worth). It’s typically talked about within the context of fluctuations in total gross sales quantity. Each go up and down.
ARPU (common income per unit/person)
Generally an analyst will state the time period ARPU as “ar-poo,” as one did on the a latest earnings name. It abbreviates ” common income per unit (or person).” It refers to complete income divided by the variety of a services or products’s customers or subscribers.
Foundation factors
A foundation level is a measurement finance of us use to explain the share change within the worth of one thing, like an organization’s gross margin or the impact of a price change on a monetary instrument like an index fund. One foundation level is equal to 0.01% (1/a centesimal of a p.c). It’s a small-sounding factor used to explain a giant factor, like a rise in Apple’s earnings.
CAPEX
This refers to capital expenditures, or what Apple spends on “property, plant and gear (PP&E).” These are thought-about long-term bills, versus OPEX, or working bills, that are extra like day-to-day bills (payroll, lease, advertising, and many others.).
The corporate sharply lowered its CAPEX spending over the previous few years, then jacked it up vastly in 2021 — to $3.5 billion.
That’s simply three months’ value, however on an annual foundation, that might be about the identical because the GDP of Cambodia.
Difficult examine
Cook dinner and his CFO generally seek advice from a “difficult examine” or a “troublesome examine” when a earlier quarter’s outsized success makes the present quarter look weaker than it really is. “We had a troublesome examine as a result of this time final 12 months we had the extraordinarily profitable launch of the redesigned M1 MacBook Professionals,” Cook dinner mentioned on the February 2023 earnings name.
Channel stock
A producer like Apple sells quite a lot of its merchandise to prospects via retailers. When Apple sells in bulk to a retailer like Goal or Amazon, however the retailer has not but offered the merchandise to shoppers at a mark-up in worth, these merchandise are thought-about “channel stock.” It’s often known as “promote in,” whereas stock later offered by retailers is named “promote via.”
The producer might not have the ability to pinpoint quantities of channel stock except the retailer studies its gross sales. Consider the retailer because the channel.
Fixed-currency foundation
On latest earnings calls, the Apple executives continuously referred to income figures thought-about on a “constant-currency foundation” in opposition to robust overseas exchange-rate headwinds.
A “fixed foreign money” is a hard and fast change price used to take away the affect of exchange-rate fluctuations on monetary efficiency numbers wanted for monetary statements. It takes out the fluctuations.
Firms with an giant worldwide operations, like Apple, have a tendency to make use of constant-currency numbers to place a unique spin on the tougher figures they’re required to report.
Constrained
This phrase can have quite a few purposes, however one to notice is when it’s used to seek advice from supply-chain constraints leading to shortages of merchandise out there to ship to consumers, inflicting longer wait instances. “We’re constrained on iPhone,” Maestri acknowledged when an analyst on a latest name requested concerning the probably easing of constraints within the following quarter, for instance.
Diluted shares
Shares shares in an organization seek advice from all inventory held by all shareholders. Diluted shares are the overall variety of shares if an organization workouts all of its convertible shares. (Convertible shares are newly issued shares, inventory choices, inventory warrants, convertible bonds and extra.)
A rule of thumb is to see fundamental share worth as how the corporate is doing proper now; diluted share worth tells you ways it will do in a disaster, if the corporate needed to problem each promised share. By both valuation, Apple is doing fairly properly.
Dividends
Once they have cash, corporations typically set an quantity to pay to shareholders frequently, normally quarterly. That’s referred to as a dividend. Apple has sort of sucked at this, paying irregularly through the years, and it has been criticized for it. However Apple started once more to pay common dividends lately.
Earnings
Earnings are the online advantage of an organization’s operation on which tax is assessed. An organization’s inventory worth is about based mostly on earnings. Due to this fact, earnings per share is an efficient solution to worth an organization’s inventory.
Final 12 months’s October-to-December quarter was Apple’s greatest one ever. However don’t get your hopes up, or a minimum of not crazy-high up. Cupertino’s quarterly earnings typically break data, however it appears unlikely they’ll this quarter. And analysts will probably be searching for the explanation why Apple will make up any losses.
Fiscal 12 months
For many companies, the primary quarter of a 12 months really ends within the final week of December. Sure, to you and me that’s the top of the earlier calendar 12 months. For corporations, that accounts for the standard Q1 holidays gross sales enhance. The fourth quarter offers it up on the finish of September.
Foreign exchange
Foreign exchange, generally simplified to “FX,” is brief for overseas change price for foreign money. Charges can fluctuate, generally severely, and have a constructive or unfavourable impact on a multinational firm’s revenues.
Gross margin
Gross margin will get at gross earnings relative to web gross sales. Expressed as a share, it refers to web gross sales minus the price of items offered. It’s calculated because the promoting worth of an merchandise, much less manufacturing prices (however not together with oblique mounted prices like administrative bills). The basic components is gross margin equals income minus price of products offered divided by income.
Headwinds
If you sail right into a headwind, it slows you down. “Headwinds” is monetary analyst lingo for points that will intrude with earnings, similar to new taxation, a glut out there or gross sales dips associated to, properly, something. COVID-19? Certain.
Apart from the pandemic, “headwinds” headlines prior to now couple of years have referred to the Biden administration’s proposed tax adjustments offsetting tax breaks from a couple of years in the past and biting into Apple’s revenue.
Vacation season
For many retailers, this refers to late December. For Apple, it virtually appears to imply January 1 to December 31, with a bump up on the finish. In any case, it’s normally accounted for within the first quarter earnings of the next 12 months.
I don’t know what your wage is, however Apple made $1 billion per day in a latest Q1, the one which included the year-end holidays.
Legacy nodes
These are older microchips and elements in {hardware} that assist run processes (e.g., driving shows or radio communications). They’re not the thrilling new GPU/CPU chip an iPhone or different machine would possibly pack, however they’re nonetheless necessary, and supply-chain points can have an effect on them.
Combine
When Cook dinner or Parekh seek advice from “a robust combine” or a “a unique combine” having an impact on the numbers, he’s normally referring to the product combine. That’s, all Apple merchandise out there on the market in a given timeframe, making an allowance for new releases, delayed launches and occasional empty cabinets.
Income
Usually outlined on the quarterly report’s earnings assertion (to not be confused with the steadiness sheet or the cash-flow assertion), income is solely all earnings an organization makes from all sources, similar to gross sales of services and products.
Beneath this cover you’ll be able to assess working earnings (income minus direct prices) and web earnings (aka “the underside line,” it additional accounts for issues like curiosity earned or paid and, in fact, taxes).
We initially revealed this put up on April 27, 2021 and up to date it on July 27, 2021, October 28, 2021, January 27, 2022, April 28, 2022, July 28, 2022, October 27, 2022, February 2, 2023, Might 4, 2023, August 3, 2023, November 2, 2023, February 1, 2024, Might 2, 2024, August 1, 2024, October 31, 2024, January 30, 2025, and Might 1, 2025.
