Apple Reports Results… And Market Impact From The Fed’s Rate-Cutting Pause 1/30/25

0:03Live in the heart of New York City's Times Square, this is Fast Money. Here's what's on tap tonight. All eyes on Apple taking a leg lower in just the last few minutes. Now at after hours lows, the tech giant missing. iPhone revenue estimates seeing a big drop in China sales. We've got all the details on the numbers and we'll bring you the trade. And breakout or breakdown? Two bellwether stocks doing big about faces this week. Are these moves a change in trend or just a temporary blip? We'll dive into the charts to find out. Plus, UPS doesn't deliver. Comcast sees its worst day since 2008. And an old school tech stock hits all-time highs today.

0:37I'm Melissa Lee, coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feinerman, Guy Adami, and Michael Cantopoulos, Director of Fixed Income at Richard Bernstein Advisors. Welcome, Michael. We start off with Apple results, a big tech giant reporting its fiscal first quarter results in the last half hour. Shares right now are down about one and a half percent. After a rare miss on iPhone sales, the company did beat on top and bottom lines, but posted an 11 percent drop in China revenues. Apple's conference call started just moments ago. CNBC's Steve Kovak is at Apple headquarters with more.

1:08Steve. Hey, Melissa. Yeah, the big headlines out of here. iPhone sales down, China sales down. That's despite beats on the top and bottom line. Let me give you some of the numbers here, and then we'll talk about what all this means. EPS was a beat by five cents at$2.40. Revenue, a slight beat by a couple hundred million dollars,$124.3 billion there. iPhone, though, This missed expectations, 69.14 billion. Street wanted 71 billion. And by the way, sales year over year for the period, down about eight tenths of a percent there. Services, though, that is the bright spot the last several quarters here, up 14 percent and beating expectations at 26.34 billion dollars.

1:50And then greater China, this is the big one, down 11 percent year over year to 18 and a half billion dollars. I did get a chance to catch up with Tim Cook on these Apple earnings and talking a little bit about AI and how that's driving iPhone demand. That is the big question, of course, going on in here. Let me tell you what he said. Quote, we saw that in markets where we had rolled out Apple intelligence, that the year over year performance in the iPhone 16 family was stronger than those markets where we had not rolled out Apple intelligence. So basically saying here, Apple intelligence, at least in the areas where it was available, that's the United States and some limited other countries last year and limited languages last year.

2:31It did outperform where it was not available. And then China, of course, we talked about that and what went on there with sales down 11 percent. He gave me three reasons here. Part of it is that no Apple intelligence in China. They're waiting for government approval before they could launch Apple intelligence in that country. that includes partnering with a Chinese AI company, whether that be Baidu or Alibaba or even DeepSeek, to replace the chat CPT functionality, which is banned over there. By the way, they also have to get their own Apple intelligence models approved as well before they can launch.

3:05He also told me they're working with regulators to get Apple intelligence approved, but no updates on progress there. He also in China blamed some channel inventory problems and government subsidies that went into effect for some electronic devices. this month. It's unclear how that impacted last quarter, but I'm expecting to hear more on the call from Tim Cook on that, about what really went down in China. We should be getting some more details on that soon. And then also tariffs. I did ask him about the potential tariffs from the Trump administration that would impact Apple probably more than any of the big mega cap tech companies we talk about.

3:42He said they're monitoring any potential tariff impacts that would have on the company, but really declined to comment further whether or not President Trump has given any indication that Apple will miss out on tariffs like they did in the last Trump administration. Like you said, the call is just getting started now. We should be getting some guidance from the new CFO and also some more commentary on these disappointing China numbers. Right now, though, you see shares are down about a percent and a half, Melissa. Those government subsidies that you mentioned on electronics, Steve, is that government subsidies for homegrown brands, for domestic brands?

4:18It's unclear. So we're hoping to get more details on that. He did say, I believe he told me that Apple is involved in that in some way, but we're waiting for more details on that. But this is, again, for this year, not the December quarter we're talking about. So I'm not sure if the implication here is whether or not people were holding off on their iPhone purchases for these subsidies. We're going to find out in a few minutes, hopefully, Melissa. So, OK, Steve, keep us posted. Thank you. Steve Kovach. A lot of the issues that Stephen mentioned in terms of the weights on the quarter, we knew, especially the China weights.

4:51But China was down 11 percent and maybe that was, I don't know, worse than expected. What do you make of the quarter? I think that's what people are probably expecting. I mean, for me, yeah, people will look at China, 4 percent revenue growth, maybe 7, 8 percent EPS growth. Services went the wrong way, in my opinion. We're down about 22 percent of overall revenue. with that revenue growth, I would have liked it to see better. And then you say to yourself, you know what? Again, understanding this is backward looking, the stock just, I think, just got a little more expensive. Now, 220 was a level that we held.

5:21We actually talked about it on this show. That had been prior support. I think the bounce that we've seen up to 240 probably did it a disservice into this print. I mean, I don't think you have to run away from it, but it wasn't all that exciting for me. So we expected weakness in China. This was weaker weakness, more weakness for sure. So are we near the end of that? Who knows? Probably not. You would think. Right. We haven't even gotten into, I guess, this weekend starts off tariff season, apparently. So, you know, we'll see. I think that I was surprised wearables actually didn't do a little better.

5:52I thought that holiday season was was good. I would have thought I mean, it's relatively small portion, but I would have thought that would have done a little better. So, I mean, to me, nothing super shocking, just a little weaker than I thought. And it leaves me lukewarm on it. No timeline, excuse me, on Apple intelligence seems to be very troubling. I mean, it gets to a point where if people are buying domestic brands with AI features already, what is the time lapse that has to happen between the purchase of that, you know, Huawei phone or whatever it is. Domestic in China. Right, domestic in China.

6:24And the next Apple purchase. I mean, at some point they're sort of forfeiting market share just by not having that AI feature. And who knows when those customers would come back, if they come back at all. Well, I don't think anyone should be surprised by those China numbers. I mean, we just got fourth quarter numbers in China two weeks ago. We knew they were those were down 15 percent for the quarter. We know where they've been losing market share, where they're in third place, et cetera, et cetera. We know that the local administration has been supplying subsidies for low to mid tier phones. So, by the way, Apple's not a low to mid tier phone.

6:57So you can make an argument that that really shouldn't be eating into their market share. But but tell me who's even close to Apple everywhere else in the world. That includes China 2.0, which is India, at least in terms of a smartphone market that's, I would say, in its infancy. And you're not going to find one. So to me, the fact that the services business was up better than expected, north of 14 percent, that the margin on that business, that the ASPs on the phones are selling everywhere else in the world. And by the way, having priced in any AI, these numbers were fine. This wasn't even about the quarter, by the way.

7:28There was nothing in this quarter we expected to be good. And the fact is, I think you've got a better number on services. The biggest issue I have for Apple right now that's not China are regulatory dynamics in Europe, which are a big deal when 30 % of your app store revenues, 30 % of your services revenues come from the app store. So that's something to worry about. But as someone who's long Apple, and I'm not pounding the table on Apple here, but you can't tell me there's a lot of good news priced into Apple. This is a stock I want to own because there's zero. And DeepSeek, if anything, showed.

8:00Is there enough bad news in Apple? Is there enough bad news priced into Apple? I don't know. I mean, haven't we been talking about China for six to nine months in Apple? And that's related to the handset sales and some tariffs. I mean, I think the tariff is still an unknown dynamic. But again, and we know that Apple caught a bid on the day of Deep Seek because the sense is that the efficiency for AI to the smartphone could happen and proliferate faster. So, you know, again, sometimes I feel like I have to really defend Apple here. I'm sure most people are long Apple, but it doesn't seem like there's much sentiment in favor.

8:32All fair. And the margins were better. And, you know, I'm going to beat you to a question you typically ask. Which is what? What do you want to hear from? What's your first question on the conference call? What is your first question? Free cash flow, miss. I think the street was like 36 billion. It came in at 27 or so. And, you know, I'm just trying to do the math, which I can't do that quickly. But, you know, where did that come from? But, you know, to Tim's point, we've been talking about potential weakness in China for quite some time. The flip side of that coin is, though, this was supposed to be, and maybe it's going to be a couple of quarters, you know, the big upgrade cycle vis-a-vis AI and those things.

9:02I mean, far these numbers suggest that didn't come to fruition. You know, the tariffs, the soft retaliation in terms of the response from Beijing may not be tariffs. It may be, hey, Apple, you can't have your AI partner here. And you're just going to have to wait. And you will wait long enough so all those people who want to buy AI handsets will go and buy a domestic handset instead. And you're just going to have to wait until all those people want to upgrade. And then maybe you'll get a shot at getting them back. I mean, that's, you know, in the scheme of tariffs, the sort of that's the realm that's sort of unquantifiable, right?

9:34It's sort of the how do we get back without hitting you with an actual tariff? Yeah, I mean, I think that's absolutely right. And what we've seen from President Trump in the past is that, you know, that unpredictability can can really sort of move markets and move sentiment. And, you know, I'd expect more of this throughout the year. And we saw today with maybe we'll talk about it in a bit. I saw it with Canada and Mexico, too. And, you know, it's that uncertainty, I think, that could leave a bit of an overhang in certain parts of the market that are exposed to, you know, tariff retaliation. For more on Apple's quarter, let's bring in Fast Money friend Gene Munster.

10:04He is also an Apple shareholder. Gene, what did you make of the quarter? Melissa, there's some challenges that I wasn't anticipating. And as Tim said, that the street was widely aware that the China number was going to be soft. But if you factor in what happened in China and look at what happened in the rest of the world, that was a miss too. And so I was expecting the rest of the world to be up 4%. It was up about 1%. And I just kind of want to drill into that for one piece is I've been bullish on what Apple intelligence could do back in September. My optimism has slowed slightly as the rollout has been slowed.

10:41but I have remained optimistic that Apple can beat their iPhone numbers based on this huge upgrade pool from 2021. That's the year where iPhone grew at 35%. And the December quarter is the first quarter where we start to see the real fruits of that upgrade cycle coming from a few years ago. And so I was expecting the rest of the world, even without Apple intelligence, to kind of power this higher. So that was one piece that stuck out to me. And then I want to highlight something else that you said, Melissa, on this tariffs and potentially restricting Apple with a partner to do AI. To put it into perspective, Huawei's business was up 15 % in the quarter.

11:19And so Apple, China business, iPhone was probably down 12 to 13%. And so what that tells us is maybe it's because Huawei has the Cecilia assistant that is an AI assistant that's gaining traction. but there's also kind of a question of is there a little bit of a shift in terms of how Chinese consumers are viewing these Western brands. If we put Samsung in the Western category, they struggled too. All of the other non-Chinese brands were down in the quarter. Some of those have AI assistants. And so that was the bad news. And Melissa, it's only fair for me to point out the good news because I'm a shareholder and I do believe where this company is going, is Tim Cook said on the call that their active install base was up, he gave the math, backing into math, was up 7 % year-over-year to 2.35 billion active devices.

12:10That's impressive. I mean, to grow that number at that rate, it's testimony that despite any sort of variance in what's going on with the iPhone in any given quarter, the fabric of that flywheel and their customers remain loyal, which I think ultimately is going to be something that Apple investors are going to take some confidence into tonight as they think about these numbers. You know, Gene, going into the numbers, there had been sort of a drumbeat of downward revisions, re-rating Apple lower. There's been a couple of downgrades, price targets being lowered, estimates being lowered, et cetera.

12:44And I'm just wondering if you think Apple, given the quarter that it just printed, like granted, we don't have the guidance yet, maybe we should factor in a much slower iPhone trajectory in here. And so if we're going to say that iPhone growth is going to be, I don't know, 1 % or whatever it is year on year from now on, what is that multiple that Apple is worth? And can services make up for that? Well, I think just first on iPhone, expect that the iPhone guide is probably going to be below where the street's at for March, just given what they reported. And that kind of sets up iPhone for the full year.

13:19The street's looking for around 3 % growth for it probably to be kind of around that 1 % and then like your point is what's the right multiple on this when you put services into this and at the end of the day I still come back to this belief that this is a consumer staple company we saw that active install base this should have comfortably a multiple on the out year numbers that would be calendar 26 somewhere in the 25 to to low 30s number I mean yeah go back to the we've talked a lot in the past the coke the Clorox Procter and Gamble those types of companies have those kind of multiples even though they don't grow.

13:52I think Apple is that kind of staples company and does have upside to it relative to some of these things with Apple intelligence. Apple intelligence is going to have an impact. Steve Kovac reported that from Cook. It's going to have an impact. It's going to take longer than what I hoped, what a lot of people hoped. It's probably 26. But as you play this forward, think about the Apple investor now. We're seeing downward revisions to numbers, but then you start looking out over the next several quarters, you should start to see accelerating revenue growth off of that. All right. Jean, thank you.

14:21Let us know if you hear anything from the conference call. We'll do. Jean Munster. So how do you look at the picture now? Granted, we don't have guidance yet. Right. Well, I like to, this is why I always say you've got to listen to the call. You want to hear the body language and you want to hear, you know, also the questions are really important. I'm, you know, the point you brought up, I think is a really important one. Jean sort of touched on, so how much went to Huawei, that was really pretty good growth. And Apple was the reverse, the mirror image. Is that a customer lost forever? That was your point, sort of leaving the ecosystem, right?

14:53And then how does that figure into the multiple of going forward? If you just bought a Huawei phone, are you going to buy another phone? You might have that phone for three years or however long it is. And then you might be in the Huawei ecosystem. So I don't know. I want to hear about that. Yeah, but again, I think we know the share losses in China are going to continue. The question is, are we worried about share loss anywhere else in the world than China? And if we're not, this is an ASP story. This is a margin story. I just, again, I don't think you've priced a whole lot in. And remember, also, this stock, when it broke out from around$195 to the current range, it had done nothing in two years.

15:31The stock has done nothing for a long time. That's not a reason to go buy a stock, except for the fact that if you think about where we've been in the world of technology and innovation and efficiency, and this stock has not participated. You know, we don't cover individual stocks at RBA, but I did find something that Gene mentioned super interesting in that he views Apple as a consumer staple. Yeah. Look what happened in 2022. 2022, Apple was down something like 27 percent and the broader tech sector got completely hammered. Staples were not. Staples did quite well. These are technology companies.

16:00They're cyclical and they're also going to follow the global cycle. And if the global cycle slows, that's just something, you know, I think investors should pay attention to. Not saying that it will. Right. Huawei's assistant? Celia. What does that make you think about? Celia. Celia. Well, it's a Celia. You're breaking my heart. Yeah, you're breaking my heart. And for people that are long right now, a little heartbroken, but not all that much. That's a Paul Simon song. Are you familiar? Is it Simon and Garth? Let's not do Paul do it by himself. Let's let Art back in, please. Do you have anything else to add?

16:29I have a lot to add. No, the free cash flow thing, I mean, I wonder if it comes up. And it's a valuation story. What are you willing to pay? And again, services gives them a premium valuation. But it's funny, and we've said this 100 times, when this was a growth company a decade or so ago, it was trading with a 12-13 multiple. Now that it's basically become, I don't know, a value company-ish, it trades at a pretty expensive multiple. So something's a bit askew here. Meantime, President Trump announcing that he will decide tonight whether or not to impose oil tariffs on Canada and Mexico. Megan Casella has got the details.

17:03Megan. Melissa, that's right. those tariffs a little up in the air, but some others firming up this afternoon. President Trump formally announcing he'll be putting 25 percent tariffs on Canada and Mexico this Saturday. He had threatened these last week, but there had been some expectation that if the two countries took action to tighten their borders and stem the flow of fentanyl, that the tariffs could be avoided. But Trump being firmer now, saying that he's taking action not only because of immigration and the flow of fentanyl, but also because of trade deficits. I'll be putting the tariff of 25 percent on Canada and separately 25 percent on Mexico.

17:40And we will really have to do that because we have very big deficits with those countries. Those tariffs may or may not rise with time. Now, Trump was also asked whether oil specifically would be included in the tariffs, and he said maybe. He said he would decide probably tonight on that point. And he also seemed to downplay the impact of the tariffs, saying that the U.S. has all the oil and the lumber that it needs. So this is the clearest language that we've seen yet from him on these tariffs. We do still have about 48 hours until they would take effect. So a little bit of time left to wait and see if anything changes.

18:15Melissa. All right, Megan, thank you, Megan Casella. We may have enough lumber, we may have enough oil, but there are plenty of other things that we get from Canada and Mexico. In fact, Cardinal Health CEO on his conference call today was talking about the impact of tariffs on that company. That is a health care, health services, health products company, there are impacts far and wide that we're not even thinking. That's not just oil and gas here. Right. And the nearshoring that so many industrial companies in the United States have taken part of in Mexico, I think they're not going to be thrilled about this.

18:43So the analysts are already coming out and trying to what is the impact of, you know, I saw a UBS report that said 25 percent tariffs on Canada and Mexico equals 80 basis points drag on GDP, but not a terrible increase in inflation. In fact, they say on an annual basis, 10 bips. What do you think? Yeah, I mean, I think it can't be underappreciated, the amount of inputs that come in from Mexico into the U.S. to build stuff, right? And so it really does bite quite a bit. It will not help the jobs market in the U.S. And don't forget the agricultural aspect as well. We do a lot of agricultural trade with Mexico.

19:19Listen, this is just the beginning. And even though this specific announcement might not be broadly inflationary, the general tariff tone and where that's going likely is not going to help inflation get back down to target. You know, there's this lens of we're either winning or losing. And if you see a deficit, it assumes that we must be losing. But all it really means is we're just there. Our good their goods are attractive for our economy and for our consumers. It's not a win or loss. That's just the way the economy works. So I think if you look at it through that lens, it makes a lot more sense.

19:55But these tariffs, to your point, I don't think people really fully realize the ramifications. Yeah, and to that point, what are they going to do back? And who is that going to hurt, right? So we sell vehicles, whatever, to Canada, right? I don't know what you do if you're Canada. Do you tit for tat or do you try to sort it out? What do we do with hockey players, Guy? So, you know, it's an interesting question. Well, we have a lot of great Canadian hockey players here in New York. Some of them not playing as well as they probably should be right now. Not really that interesting. Coming up, we'll keep an eye on Apple shares.

20:28Bring you all the headlines in the conference call as they come in. And we've got more earnings action to bring you in the meantime. Shares of Intel on the move after reporting results. The numbers out of that one next. And speaking of earnings, IBM, Caterpillar, and Comcast all making major moves on the back of their results. The details behind the swings and how our traders are handling the action. Do not go anywhere. Fast Money is back in two.

20:58Welcome back to Fast Money. We've got a little bit of a turnaround in Apple shares in the after-hour session on the conference call. The company just giving out guidance for its fiscal second quarter, current quarter, saying it's going to be in line with what the street was estimating. So we're up about 3 percent right now. Meantime, an earnings alert out of Intel. shares higher after hours despite the company issuing weak guidance. CNBC's Christina Parsone has got the latest. Christina, still no word on a permanent CEO, though. No, it's progressing, but they've told many analysts before it's going to take about four to six months.

21:27So that's as of last month. So who knows, in the next three months or so. They said on the call right now that it's underway, we cannot be all things to all people. And more specifically, they admitted they're not yet participating in the cloud AI data center market in a meaningful way, So much so that they were supposed to launch this Falcon Shore GPU, their own GPU, and they just announced that they're simplifying things and they are no longer bringing that particular chip to market. It was interesting, too, the co-CEO. I was able to chat with both of them in the 3 o 'clock hour just about the fact that the Q1 guide was light.

21:58They blamed seasonality. They also said that a lot of the purchases were pushed forward into Q4 because of tariff concerns. But the other thing is margins, margins taking a hit a little bit lower than expected for Q1. And they said that what they're doing is they're taking parts for their chips, like memory, and then taking it from the vendor and literally selling it at cost. So they're really not making much money on those chips. And they're planning on doing that for the entire year, I guess, in a way to stay competitive. And so that's why margins will stay lower until they wrap into 2026. And then, of course, the foundry business is still part of the equation,$4.5 billion.