OpenAI’s Spring Update Event, GPT-4o, Apple Hardware at the OpenAI Event
Hello everyone.
Let's jump right into today's update.
OpenAI’s Spring Update Event
In what may become an annual tradition, OpenAI held a spring event to unveil ChatGPT and GPT-4 updates. GPT-4 is OpenAI’s multimodal large language model. The event took place just one day ahead of Google’s annual developer conference and about a month ahead of Apple's WWDC.
The livestreamed presentation (available here via YouTube), which appears to have taken place at OpenAI’s headquarters in San Francisco, had an audience consisting of two to three dozen people. Judging from the applause, the crowd was comprised of OpenAI employees. OpenAI CTO Mira Murati kicked things off and then guided the presentation along.
Murati anchored the event around three updates:
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Apple 2Q24 10-Q Takeaways, Thoughts on Apple’s Dividend, Thoughts on Apple’s Share Buyback Authorization
Happy Monday. Welcome to a new week.
Today marks the ninth anniversary of the Above Avalon membership launch. The first members joined on May 13th, 2015. Over that span, nearly 1,700 daily updates have been published. To the inaugural group of early members, thank you for nine years of support.
Let’s jump into the first update of Year 9.
Apple 2Q24 10-Q Takeaways
Published at the end of FY1Q, 2Q, and 3Q, 10-Q filings provide additional commentary and disclosures regarding a company's business and financial results.
The following items from Apple's 2Q24 10-Q jumped out at me.
Product Details. Apple provided additional commentary behind sales trends for its major product categories.
iPhone. Net sales decreased due to “lower net sales of Pro models.” This was expected as 2Q23 iPhone sales included a catchup in supply for iPhone Pro models impacted by COVID in China.
Services. Net sales increased due
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Apple Pencil Pro and iPad Pro M4 Unboxing
A quick Apple Pencil Pro unboxing.
Made in Vietnam.
Works with iPad Pro M4 and iPad Air M2.
An intriguing computer from Apple with the broader category likely having a future role to play in spatial computing.
Experience my iPad Pro 13-inch (M4) unboxing.
Notably lighter (15%) than previous generation.
Device dimensions may play some mind tricks on you at first. You will probably want to try bending the device.
Lays surprisingly flat on table (w/o case/cover).
Three Charts From Apple’s 2Q24 Earnings, Warren Buffett Trims Apple Stake, Buffett and AAPL Underperformance
Happy Thursday.
As mentioned yesterday, we will circle back to Apple's 2Q24 earnings today. There is also Warren Buffett news to go over.
We still need to go over Apple’s 2Q24 10-Q - we can quickly discuss the most interesting takeaways from the document next week.
Let’s jump right in.
Three Charts From Apple’s 2Q24 Earnings
Quarterly earnings provide snapshots for how a company is performing. Stringing together a few earnings reports provides a clearer picture of business trends.
After going through Apple's 2Q24 earnings, a few items jumped out at me as needing some context.
The following three charts highlight a few intriguing Apple financial trends: Gross Profit Growth (HW vs. Services), HW vs. Services Revenue, Wearables Revenue.
Gross Profit Growth (HW vs. Services)
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The iPad Event
Hello everyone. Today's update will be dedicated to discussing Apple's iPad event. We will circle back to a few final things about Apple's 2Q24 earnings (and Warren Buffett news) tomorrow.
The iPad Event
Yesterday’s iPad event consisted of a 38-minute taped presentation similar in style to what Apple has been producing since the pandemic. I attended a small gathering that Apple held where the presentation was shown. Afterwards, a hands-on demo area allowed guests to try out the new products.
The announcements were grouped into five buckets:
Updated iPad Air (the big news being the Air will come in two sizes for the first time - 11-inch and 13-inch).
Updated iPad Pro (all-new thin design including an Ultra Retina XDR Display).
M4 chip unveiling (the M4 is the first chip relying on second-gen 3nm process tech).
All-new $129 Apple Pencil Pro.
Updates (with various "AI" features) to Logic Pro and Final Cut Pro. Many of the features demoed were impressive.
Tim Cook kicked off the presentation by
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Reading Between the Lines of Apple’s 2Q24 Earnings Q&A With Analysts
Hello everyone. This is shaping up to be a busy week. We still have a good amount to discuss when it comes to Apple’s 2Q24 earnings. There is then an Apple product event (online) on Tuesday at 10 am ET. Let’s jump into today’s update.
Reading Between the Lines of Apple’s 2Q24 Earnings Q&A With Analysts
After recapping each question-and-answer exchange that occurred on the call between Apple and sell-side analysts, we will go over my response to the exchange. Let’s go beyond what was talked about on the call with the 10th installment of reading between the lines of Apple's earnings Q&A with analysts.
NOTE: The following earnings call questions (“Q (Sell-Side Firm)”) and answers (“Cook” or “Luca”) have been cut, summarized, paraphrased, and rearranged for clarity. To read the full question and answer exchanges, Seeking Alpha offers a written transcript here.
3Q24 Guidance
Q (Goldman Sachs): What gives you confidence that revenue will grow in 3Q24 (the June quarter)?
Luca: Our guidance commentary will be limited to my prepared remarks: Overall revenue will be up “low-single-digits,” Services growing “double-digits at a rate that is similar to what we’ve done in the first half of our fiscal year,” and iPad up double-digits.
My response: With Services representing ~30% of 3Q24 revenue, growth of approximately 15% will go a long way to offset weakness in HW.
Q (Citi): What are you assuming for commodity pricing on memory in guidance?
Luca: Our guidance assumes memory and FX to be slight headwinds. FX will have a 30 basis point negative impact sequentially.
My response:
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Key Takeaways From Apple’s 2Q24 Earnings
Hello everyone. Welcome to a special Friday edition of the Above Avalon Daily. We will begin analyzing Apple’s 2Q24 earnings. There is a lot to unpack. The earnings review will take place across a few updates.
Key Takeaways From Apple’s 2Q24 Earnings
Heading into 2Q24 earnings, the expectations bar facing Apple had been set low. The company easily jumped over the hurdle. Both revenue and EPS beat consensus with revenue trending flat when excluding a one-time COVID impact. Gross margins are trending at levels that the company has not seen in over a decade. Apple provided 3Q24 guidance that suggested revenue growth will return. Everything is on track for FY24 to be something of a rebound year for Apple on the financial front. Under the hood, the Apple ecosystem continues to quietly expand as new users enter the fold and existing users move deeper into the ecosystem.
The Numbers
Here are Apple’s reported 2Q24 results versus my expectations with brief commentary for each item.
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My 2Q24 Apple Estimates, Expectations for Apple's 3Q24 Guidance, My Updated Apple Earnings Model
Happy Wednesday. One quick thing before we get to the second half of my earnings preview.
Financial Models Add-on. As a reminder, members now have access to my iPhone, iPad, and Apple Watch installed base models with the Financial Models add-on. These models make it possible to estimate device unit sales, the number of devices in the wild over time, product upgrade cycle length, percent of device sales going to new users versus existing users by year and more. For those of you who purchased the Financial Models add-on, all installed base models have been updated ahead of earnings. You can access the models at any time by logging into your Above Avalon membership account here and going to the Digital Package tab (shown below). My earnings model has also been uploaded so that it will always be available in the same tab for easy access.
The Financial Models add-on is designed to be a perfect companion for AAPL investors wanting to take a deep dive into Apple’s financials as well as Apple competitors and suppliers needing to better understand the marketplace dynamic. For pricing information and to purchase the add-on, check out this page.
My 2Q24 Apple Estimates
Here are my granular estimates for Apple’s 2Q24:
Revenue: $91.9B (consensus: $90.0B)
Overall gross margin: 46.9% (guidance: 46% to 47%)
Gross margin (HW): 37.4%
Gross margin (Services): 74.6%
EPS: $1.59 (consensus: $1.50)
iPhone revenue:
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Setting the Stage for Apple’s 2Q24 Earnings, Thoughts on Apple’s Stock Price Underperformance
Hello everyone. Happy last day of April. We will begin preparing for Apple earnings. Today’s discussion will look at the big picture ahead of Thursday’s earnings release. We will go over my granular estimates on Wednesday.
Setting the Stage for Apple’s 2Q24 Earnings
Heading into Thursday’s earnings, the setup looks positive for Apple. Expectations surrounding Apple are at a multi-year low while business fundamentals appear to be holding up OK. This lowers the bar for what Apple needs to report and say on Thursday to please analysts and company observers. While a slowdown in device upgrading and sales weakness at the low end of various product lines continue to weigh on Apple’s
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Alphabet 1Q24 Earnings, Pichai (Sort Of) Hints at Apple / Gemini Rumors, Google Announces HW Reorganization
Hello everyone.
Apple reports earnings on Thursday. We will begin my earnings preview on Tuesday. With Apple being in the bottom 12% of performing stocks in the S&P 500 year to date, we have quite a bit to talk about. In today's update, we will look at Alphabet's earnings.
Alphabet 1Q24 Earnings
Last Thursday, Alphabet reported 1Q24 earnings. It was a good quarter for the company. Revenue was 15% to $81B while operating margin jumped to 32% (from 25% last year). Free cash flow was a solid $17B (unchanged from last year). Google TAC was up 11% which bodes well for Apple's Services revenue line item.
Alphabet has a few major trends on its side.
Like how Apple has long been criticized by some for being too dependent on the iPhone for revenue, Alphabet has been looked down by many as being too dependent on search for revenue. In the early months of AI mania, there was skepticism that Google would be able to continue printing money from search. A clear explanation as to how generative AI would disrupt Google search was rarely given. Instead, much of the analysis was superficial in that users were basically said to no longer need questions answered via a search portal. Given some of the crazy prognostications, my stance that Google Search’s sustainability was
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Meta 1Q24 Earnings, About Meta’s “AI-Recommendation” System, Meta’s HW Sales
Hello everyone. Today's update will be dedicated to discussing Meta's earnings. Let's jump right in.
Meta 1Q24 Earnings
Meta’s 1Q24 earnings release was a tale of the conference call. Actual results found in the release were what we have come to expect from the company. Meta’s advertising machine found its feet in 2023 after a shaky period involving macro headwinds and renewed competitive pressure. Revenue was up 27% with operating income up 91%.
While we can take issue with some of the inner workings of that advertising machine when it comes to AI - which we will discuss shortly – there is no debate that Meta's monetization struggles of 2022 and early 2023 have dissipated.
Management's 2Q24 guidance is pointing
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Apple Announces May Product Event, Apple Vision Pro Sales Noise, A Few Suggestions for Apple
Hello everyone. We will begin today’s update with some words on Apple’s upcoming product event. The discussion will then turn to Apple Vision Pro.
Apple Announces May Product Event
Yesterday, Apple sent out invites to a product event taking place virtually on May 7th.
Based on the event invite artwork, it’s safe to say we are going to see a new Apple Pencil and some iPad updates. Rumors point to Apple updating the iPad Pro and iPad Air segments of the iPad line.
Tim Cook’s tweet about the event hints at an Apple Pencil update.
Last October, Apple unveiled an Apple Pencil with a USB-C charging port which had fewer features than the Apple Pencil (2nd gen). Apple didn’t call the new pencil Apple Pencil (3rd gen). Instead, it’s Apple Pencil (USB-C). This would suggest that we may see a true 3rd gen Apple Pencil next month. For much more on Apple Pencil strategy, check out the October 17th update where we take a deep dive into all things Apple Pencil.
Taking a step back, expectations for this
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Meta Unveils “Open” Mixed Reality Ecosystem, Zuckerberg’s Motivation, Getting Out Ahead of Android XR
The news continues to flow. Today’s update will be focused on the big development from Meta in mixed reality land. Let’s jump right in.
Meta Unveils “Open” Mixed Reality Ecosystem
In a blog post published yesterday, here’s Meta:
“Today, we’re taking a major step toward our vision for a more open computing platform for the metaverse. We’re opening up the operating system that powers our Meta Quest devices to third-party hardware makers, giving developers a larger ecosystem to build for and ultimately creating more choice for consumers. This platform is the product of a decade of investment into the underlying technologies that enable mixed reality, and opening it up means a lot more people will benefit from that investment. We’re working with leading global technology companies to create a new ecosystem of mixed reality devices, and we’re making it even easier for developers to build mixed reality apps.
We believe a more open ecosystem is the best way to bring the power of mixed reality to as many people as possible. With more devices, this new ecosystem will offer more choice to consumers and businesses around the world. Developers will have a much larger range of hardware that can run their apps, and more device makers will expand their market to a wider range of users, much like we’ve seen with PCs and smartphones.”
Meta will be rebranding its mixed reality OS, which is built on top of Android, to Meta Horizon OS from Quest OS.
That unofficial Meta “leak” to the WSJ a few months back when Meta employees talked of wanting to be the Android to Apple Vision Pro makes a lot more sense now. It was difficult to associate a platform where one company handled both hardware and software as being the new Android of anything.
The “leading global technology companies” that Meta announced partnerships with include:
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Netflix 1Q24 Earnings, Netflix to Stop Disclosing Subscriber Data, Key Paid Video Streaming Metrics
Welcome to a new week.
It’s hard to believe, but we are beginning another earnings season. Netflix reported earnings last week. Heading into this tech earnings cycle, there’s angst in the air. Many companies have seen very strong stock price performances to date – Apple and Tesla being the exceptions – while macro issues are once again grabbing headlines.
Let’s jump right in with Netflix earnings.
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iPhone Sales Angst Continues, Sales on Apple Products Spread, Tesla Announces 10% Layoff
We kick things off with my thought’s on iPhone sales trends in the first three months of 2024. The discussion then turns to more retailers running with surprisingly large discounts on Apple products. We conclude with Tesla layoffs.
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Tesla Reportedly Cancels Inexpensive Car Project, Tesla’s Master Plan, Part Deux, Friday Q&A
We kick things off with my thought’s on Reuters’ article regarding Tesla cancelling its Model 2 project. The discussion then revisits Elon Musk’s revised master plan for Tesla from the mid-2010s. The update concludes with a Friday Q&A and the following questions:
Were Project Titan’s cancellation and the in-house microLED displays team disbandment driven by cost-cutting motives as revenue stagnates?
Why can’t Apple build a battery-powered HomePod or HomePod mini for portable use cases?
Do you think it will take years for Apple Vision Pro to become a meaningful contribution to Apple’s revenue story?
Why didn’t Apple launch Apple Vision Pro with a larger catalog of Apple Immersive Video films?
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Revisiting iPhone Manufacturing In India, U.S. Announces TSMC Subsidy, Samsung to Receive U.S. Subsidy
Hello everyone. Today’s update has an Apple manufacturing / supply chain apparatus theme. We begin with my thoughts on some new reporting regarding iPhone manufacturing and assembly in India. There are a few underlying themes found with the iPhone manufacturing in India story. The update then turns to TSMC and Samsung receiving U.S. subsidies under the U.S. CHIPS and Science Act.
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Apple Talks up Vision Pro at Work, Apple Announces Enterprise Spatial Design Lab, Inside Apple Vision Pro
In today’s update, we take a closer look at Apple’s attempt to draw attention to Vision Pro in business settings. The discussion turns to Apple announcing a new Enterprise Spatial Design Lab. We conclude with Lumafield publishing one of the more interesting “teardowns” of an Apple product.
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Apple Reportedly Partnering With Shutterstock for AI Model Training, Shutterstock’s Attractiveness, Apple Adds More Licensed Movies to Apple TV+
In today’s update, we go over my thoughts on the Reuters story regarding the how and why everyone in Big Tech is running to established content (photo) providers for ML and AI model training. The discussion then turns specifically to Shutterstock. We conclude with a few new observations regarding more licensed movies being available on Apple TV+.
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Tesla 1Q24 Deliveries, What’s up With Tesla?, Ford Increases Bet on Hybrids, GM Shakes up Software Team
One member in the forum raised a good point regarding livestreaming Apple Immersive Video. Last year, Apple acquired WaveOne. We talked about the acquisition in the March 28th, 2023 update (available here). The company was in the business of AI algorithms for video compression. The takeaway from that acquisition wasn’t specific to livestreaming sports but rather the broader trend of consuming video and your surroundings on spatial computers.
Today’s update will be dedicated to the auto space.
A few quick notes regarding how we will approach the auto industry following Apple halting Project Titan. In summary, there won’t be any major issues to coverage.
It is good to keep abreast of what’s unfolding in the car industry as the market is too large for Apple to ignore. While the ingredients may not be in ripe for Apple’s entry over the next few years, we can’t rule out the company having renewed interest down the road.
Apple’s CarPlay initiative is one of the more promising integrations between first-party hardware and non-Apple hardware. There are plenty of related implications worth monitoring including Apple Services’ role on the road (maps, music, etc.). It is good to stay up to date as to how CarPlay is being embraced via vehicles sales trends etc.
Let’s jump into today’s update.
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