Gene Munster

Gene Munster

AI impact on jobs update: ADP Private payrolls rose by 109k in April vs expectations of 84k and 61k in March.

While this may suggest AI is not impacting jobs, a closer look shows job growth coming from areas where the human touch matters, education and health (added 61k), trade and transportation (added 25k) and construction (added 10k).

Those knowledge workers (including myself) are still at a fork in the road: embrace the tools or risk being replaced.

Source: Gene Munster

Last night Anthropic announced a multi year $200B commitment to $Alphabet - C(GOOG.US) Cloud.

The debate about can Anthropic make good on the deal misses the point.

The big picture is this announcement underscores how early we are in AI, with the need for compute taking off on the heels of last Novembers step function improvement in many of the models utility.

That’s good news for the entire AI model and infrastructure stack.

Source: Gene Munster

$Meta Platforms(META.US) getting more into physical AI (aside from smart glasses). They just acquired Assured Robot Intelligence to build humanoid robots. No terms given. My guess is they paid sub $5B.

Big Tech (TSLA, GOOG, AMZN) appears all-in on robotics,and they'll be purchasing gear from smaller companies to build that future. My Innovator Deepwater Frontier Tech ETF ($Innovator Deepwater Frontier Tech ETF(LOUP.US)) has a focus on smaller, high-conviction companies enabling the AI and robotics transformation.

To view LOUP’s holdings:

Source: Gene Munster

Cooks says if they get a tariff refund, which I estimate would be close to $5B, they would reinvest it into the US.

Source: Gene Munster

John says "AI is an important investment area and we will be doing that on top of our other investment efforts".

My take: They're going to be spending more on AI. We don't know how much more. $Apple(AAPL.US)

Source: Gene Munster

Question comes up on why the iPhone 17 has been so strong. Cook calls it "amazing" across the world.

Cooks says they set a new record for upgraders, which underscores some of what we are seeing in these strong numbers is the benefit of that 39% iPhone growth spike in FY21.

Source: Gene Munster

More on the constraints. Cook says the availability of advanced modes in System on Chips (SoCs), not memory.

The majority is on the Mac mini, Mac Studio and Mac Neo. Those products collectively account for about 3% of revenue.

The bottom line is if not for the supply on the Mac, the guide would have been higher, by likely 1% or at most 2%. It's small and a positive. $Apple(AAPL.US)

Source: Gene Munster

$Apple(AAPL.US) June revenue growth target of 14-17% vs. Street at 9%. Cook says Mac will be constrained in June which means the real growth is slightly better.

Source: Gene Munster

$Apple(AAPL.US) up 4% does not reflect how good the guide was. In a vacuum, I would have expected the stock to be up closer to 10% on that guide.

I believe the reason is investors are thinking about what's after this super cycle.

The answer is growth will move back to 5-10%, but all of the goodness of growth over the past few quarters lays the groundwork for the next super cycle likely in three years. Yes, that's a long ways out, but it's a carrot on the horizon that's here to stay.

Source: Gene Munster

CFO says capital returns remains important to long term shareholder value. He also said, the needs of the business come before capital returns.

Source: Gene Munster

Strong guide from $Apple(AAPL.US). Stock now up 2%.

June revenue growth target of 14-17% vs. Street at 9%.

Gross margin at 47.5%-48.5% vs. Street at 47.6%.

Source: Gene Munster

Cook says the iPhone would have been stronger if not for supply constraints. I'm surprised the stock did not move higher. $Apple(AAPL.US)

Source: Gene Munster

Cook reiterates Siri coming this year. He also told CNBC that he's excited for the new Siri at WWDC.

All eyes are on WWDC26 June 8th.

Source: Gene Munster

CFO Kevan Parekh says if not for supply constraints, revenue would have been higher in March. That's a good sign for the upcoming guide.

Stock still down 1%. Investors want to hear the guide. $Apple(AAPL.US)

Source: Gene Munster

Tim and John kick off the $Apple(AAPL.US) call.

John assures investors that he will be thoughtful and deliberate around financial decisions.

As for products, he previewed he would not talk about upcoming product details, and says its the most exciting times to build products.

My take, that “time” is AI time.

Source: Gene Munster

For the $Apple(AAPL.US) call.

Revenue guide for June: I expect 10-12% ($104B-$106B)

This has been a super cycle. Whats the encore in CY27?

Margins: How will the component environment impact margins in the back half? Last quarter, Cook said changes are likely and it’s too early to determine the impact. The Street is modeling for gross margin to decline from 48.4% in March to 47.6% in June and 47.4% in September. I think they have that right.

Ternus is the upside case: Can Ternus start to convince investors that he will bring new AI innovation, and when will we see those products? If successful, AAPL multiple will go up.

AI: Any updates on the new Siri (aka Apple’s AI chops), which is expected to be previewed at WWDC. Timing of the rollout and how they plan on making money from it.

Source: Gene Munster

$Apple(AAPL.US) investors need to start thinking about iPhone growth next year.

This fiscal year iPhone will grow around 17%.

Next year the Street is expecting 5%.

The 5% is ahead of the growth we saw in 2023-2025.

FY25 - 4%

FY24 - 0%

FY23 - down 2%.

The key question is will the real iPhone please stand up. Is it a flat business or growing mid single digits.

My take: I believe every third year it should grow around 10%, and around 5% in the other years.

Source: Gene Munster

Thoughts going into $Apple(AAPL.US) earnings.

Expectations:

Expectations are modest given over the past one month, AAPL has underperformed the Mag 7 and Nasdaq.

Past month performance: Nasdaq up 17%.

GOOG: 34%

AMZN: 28%

NVDA: 19%

META: 13%

MSFT: 11%

AAPL: 10%

TSLA: 2%

* Over the past three months, AAPL is up 4.5% vs. Nasdaq up 5%.

March Quarter:

➡️The Street is expecting iPhone to be up 20.6% YoY. I expect 22% based on China.

➡️Services growth expectations of 14% should be in line.

➡️Gross margins should be in line with the Street at 48.4%.

June Guide

➡️I expect guidance for June to call for 10–12% YoY growth. The Street is at 9%. I believe the difference is iPhone.

➡️I expect them to talk down margins by 50bps q/q, The Street is looking for a 80bps decline to 47.6%.

Key Topics of the Call

➡️Margins: How will the component environment impact margins in the back half? Last quarter, Cook said changes are likely and it’s too early to determine the impact. The Street is modeling for gross margin to decline from 48.4% in March to 47.6% in June and 47.4% in September. I think they have that right.

➡️Ternus is the upside case: Can Ternus start to convince investors that he will bring new AI innovation, and when will we see those products? If successful, AAPL multiple will go up.

➡️AI: Any updates on the new Siri (aka Apple’s AI chops), which is expected to be previewed at WWDC. Timing of the rollout and how they plan on making money from it.

Source: Gene Munster

Both $Microsoft(MSFT.US) and $Amazon(AMZN.US) stocks are now green.

MSFT up 2% and AMZN up 4%. Both were down 2% when the calls started.

Reason is positive comments about cloud growth in June, and they are supply constrained.

Microsoft says Azure will growth will go from 39% in March to 40% in June. The Street was lookin for 37% in June.

My take: Higher cloud growth in the face of difficult comps is another data point how early we are in AI. Basically all of this cloud growth is coming from AI training and inference.

Source: Gene Munster

$Meta Platforms(META.US) says its new Muse Spark model is improving user sessions by a "double digit" percentage.

My take: AI is going to make it even more difficult for humanity to put down their screens.

Source: Gene Munster

$Meta Platforms(META.US) CFO would not comment on capex for 2027, but said they believe compute is increasingly important.

My take: This rhymes with Google's comment tonight that they expect capex next year to be up "considerably" The Street is expecting Meta capex to grow at 9% in 2027. I expect it will be up a similar rate as Google, around 20-30%.

Source: Gene Munster

$Meta Platforms(META.US) CFO Susan Li says headcount reductions that they announced last week will help offset increased spending in AI infrastructure.

My take: Latest data point that AI is having an impact on employment.

Source: Gene Munster

$Alphabet - C(GOOG.US) says there is "upside" to ad coverage in AI Overviews and AI Mode.

My take: Search in growth will be higher for longer. Street is looking for 15% growth this year. Likely closer to 18%.

Source: Gene Munster

Zuckerberg kicks off the $Meta Platforms(META.US) call explaining the deep in DAP growth. It was 7% last quarter and 4% in March. He says Iran and Russia regions were down.

My take: Adding those back it likely grew 5.5% in March.

Source: Gene Munster

Zuckerberg says AI will amp the ability for people to do what they want. Trying to smooth over the fact that Meta has been the most aggressive company at replacing humans with AI. My math is they've cut about 15% of headcount over the past year because of AI efficiency.

Source: Gene Munster