Thank you. Good afternoon, and thank you for joining us. Speaking first today is Apple's 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 the discussion today will consist of forward-looking statements, including, without limitation, those regarding revenue, gross margin, operating expenses, other income and expense, taxes, capital allocation and future business outlook, including the potential impact of COVID-19 on the company's business and results of operation. These statements involve risks and uncertainties that may cause actual results or trends to differ materially from our forecast. For more information, please refer to the risk factors discussed in Apple's most recently filed annual report on Form 10-K 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. I'd now like to turn the call over to Tim for introductory remarks.

Thank you, Tejas. Good afternoon, everyone, and thank you for joining us. Today, Apple is reporting another record June quarter with revenue of $83 billion, which was better than we expected despite supply constraints, strong foreign exchange headwinds and the impact of our business in Russia. We set June quarter records in the Americas, in Europe and in the rest of Asia Pacific region. We also saw June quarter revenue records in both developed and emerging markets with very strong double-digit growth in Brazil, Indonesia and Vietnam and a near doubling of revenue in India. We saw great enthusiasm for our products and services, resulting in an all-time record for our installed base of active devices. Our supply constraints were less than we anticipated at the beginning of the quarter, coming in slightly below the range we discussed during our last call. We know that this is a time of significant challenge around the world for all of us confronting new variants of COVID-19, to those experiencing a prolonged humanitarian crisis in Ukraine and everyone dealing with the consequences of an uncertain economic environment. We know that much of the world is living through uneasy times, and it is all the more reason why we are working hard to help our customers navigate the world as it is while empowering them to create the world as it can be. Turning to iPhone. We set a June quarter record for both revenue and switchers to iPhone. With its advanced performance, capability and ease of use, customers continue to find that iPhone remains the gold standard for smartphones. And they've been raving about the iPhone 13 lineup's extraordinary camera quality with features like cinematic mode and macro photography to create eye-catching content. We were also proud to celebrate the 15th anniversary of iPhone, a device that continues to change the world in profound ways with each new innovation. Last month, Apple unleashed a wave of innovation, including the completely redesigned MacBook Air and a new 13-inch MacBook Pro. Both of these systems are powered by M2, our next generation of Apple silicon for Mac. M2 delivers a faster CPU, GPU and neural engine along with higher memory bandwidth and new capabilities like Pro Res acceleration. And it continues the tremendous pace of innovation in Apple silicon for the Mac. We continue to have supply constraints with Mac, but we're encouraged by the strong response from customers to our incredible lineup. iPad, like Mac, continued to see strong demand during the June quarter despite ongoing supply constraints. Customers and developers have been especially excited about the new features we're bringing to iPad with iPadOS 16. This update was one of the many announcements we made at a truly extraordinary WWDC, where we shared a range of new features that give customers more control of their experience than ever before. This includes the ability to edit or delete sent messages, a new way of organizing apps on iPad and Mac, and an all-new customizable lock screen on iPhone and so much more. Today, iOS 16, iPadOS 16, MacOS Ventura and watchOS 9 are all in public beta, and we couldn't be more excited to see what our community of developers creates with them. We unveiled new innovations and accessibility such as door detection and live captions that support users with disabilities with navigation, health, communication and more. We also announced Apple Pay Later, which gives customers more flexibility to make purchases with their Apple devices. And with our next generation of CarPlay, we're improving the driving experience with deeper integration into vehicle hardware, allowing drivers to control their music, change the temperature and monitor their fuel levels, all from a single integrated platform. In the Wearables, Home and Accessories category, the innovation infused across our products continues to win over new customers. Apple Watch remains a great way for health-conscious customers to track their overall wellness and fitness. And we're bringing them even more data about their workouts, sleep cycles and medications with updates soon to arrive on watchOS 9. We were also pleased to get FDA approval for a new feature that will let users with irregular heart rhythms track the time they spend in Afib. Turning to Services. Customers continue to engage enthusiastically with our content across news, fitness, music, gaming and more. Services revenue rose to $19.6 billion, a June quarter record and a 12% increase year-over-year, which was in line with our expectations. We're proud of how Apple TV+ productions like Severance and Black Bird have captured the popular imagination, and we're looking forward to more exceptional content developed by extraordinary creators throughout the year. In 2.5 years since launch, Apple TV+ has now earned 250 wins and over 1,100 award nominations and counting. Just this month, we learned that Apple TV+ earned 52 Emmy Award nominations across 13 titles. In our last call, I mentioned Friday Night Baseball on Apple TV+, which is already delighting baseball fans. And last month, we announced a 10-year deal to present Major League soccer matches around the world, giving global soccer fans a whole new way of viewing their favorite sport. One of the best parts of WWDC was welcoming developers to Apple Park while continuing to connect with developers all over the world. This year, we had an incredible group of developers and more opportunities to learn from one another than ever before. It was a truly special experience and a reminder of the economic miracle the App Store represents. We are proud of the fact that the iOS app economy supports more than 2.2 million jobs here in the United States and many more around the world. It's been wonderful to see earnings by small developers more than double over the past 2 years. And as we're supporting developers, we're also doing our part to protect customers. In 2021, we prevented nearly $1.5 billion in fraudulent transactions by stopping over 1.6 million risky and vulnerable apps and app updates. Now I want to turn to retail. This quarter, we opened the doors to Apple's first store in the Hubei province in China, welcoming the community to a beautiful new space. And earlier today, we opened Apple Brompton Road, our fifth store in Central London. We also expanded today at Apple Creative Studios to reach even more young creatives from underrepresented communities to help them realize their potential and bring their best ideas to life. I'd like to take this opportunity to express my appreciation to our team members working in Apple Stores, customer care centers and channel partner stores and to our Apple Care teams for their incredible work supporting customers wherever they are. Creating innovative products and services that enrich people's lives is our mission. Leading with our values and everything we do gives that mission purpose. That includes a commitment to the environment where we continue our aggressive pursuit of our 2030 goals. It includes our focus on diversity and inclusion, where we are committed as ever to making progress. And it includes our work to promote racial equity and justice. We recently announced that the Global Equity Innovation Hub, in partnership with Cal State Northridge, will provide new community grants to Hispanic-serving institutions to help the next generation of creators and innovators build skills and pursue high-demand careers in STEM. We also celebrated the graduation of the inaugural class of our Developer Academy in Detroit from a program designed to give students the skills they need to pursue jobs in the thriving iOS app economy. Leading with our values also means leading with a steadfast commitment to privacy and security. Last month, we announced the introduction of passkey, a next-generation credential that's intended to replace passwords. A passkey can't be phished nor can it be stolen by hackers in a data breach because the information is stored on your device and your device alone. And as part of our effort to combat targeted attacks against the highest risk targets like journalists and human rights activists, we introduced Lockdown Mode, which is designed to protect those most at risk of sophisticated digital attacks. And we're committed to doing our part to address the housing crisis across California. To date, we have deployed more than $1.3 billion to a number of initiatives, including ones that provide financial assistance to low and moderate income first-time home buyers develop new affordable housing and help support vulnerable populations. This quarter has ultimately been a reflection of our resilience and our optimism. As we look forward, we're clear-eyed about the uncertainty in the macro environment. Yet we remain ever focused on the same vision that has guided us from the beginning. We strive every day to be a place where imagination ignites innovation like nowhere else, where good people come together to achieve great things, where customers are the center of everything we do. And we'll continue to execute on that vision as we always have, led by a focus on excellence and a desire to leave the world better than we found it. And with that, I'll turn it over to Luca.

Thank you, Tim, and good afternoon, everyone. We are very pleased to report our financial results for the June quarter, showcasing our ability to innovate across hardware, software, and services while managing our business effectively under challenging economic conditions. We achieved a record revenue of $83 billion for the June quarter, which is a 2% increase year-over-year, despite facing supply constraints, significant foreign exchange challenges, and the effects of our operations in Russia. We set new records in the Americas, Europe, and the rest of Asia Pacific. On the product side, we recorded revenue of $63.4 billion, with a new June quarter record for iPhone sales. Throughout the quarter, our installed base of active devices continued to grow due to exceptional customer satisfaction and loyalty, reaching all-time highs across key product categories and regions. Our Services segment achieved a revenue record of $19.6 billion, marking a 12% rise from a year ago, with all-time highs in the Americas and the rest of Asia Pacific, alongside new records in Europe and Greater China. We also set revenue records in each major Services category, including Music, Cloud Services, Apple Care, and Payment Services. Our gross margin was 43.3%, a decrease of 40 basis points from last quarter due to seasonal leverage losses and unfavorable foreign exchange impacts, although this was partially offset by a favorable product mix. The gross margin for Products was 34.5%, down 190 basis points sequentially, mainly due to seasonal leverage losses, product mix changes, and foreign exchange factors. The Services gross margin was 71.5%, down 110 basis points sequentially, influenced by mix and foreign exchange considerations. Our net income reached $19.4 billion, with diluted earnings per share at $1.20, while operating cash flow totaled $22.9 billion, achieving a record for the June quarter. Now, let's delve into the specifics of our revenue categories. iPhone revenue rose by 3% year-over-year, hitting a June quarter record of $40.7 billion, despite foreign exchange headwinds, thanks to strong customer interest in the iPhone 13 family. We set records in both developed and emerging markets, leading to an all-time high for the iPhone active installed base across all areas, driven by high sales performance and unparalleled customer loyalty. Recent surveys in the U.S. show iPhone customer satisfaction at 98%. We also attracted a record number of switchers during the June quarter, demonstrating strong double-digit growth. For Mac, we earned $7.4 billion in revenue despite facing supply issues and adverse effects. We are enthusiastic about our long-term potential in redefining the PC experience through ongoing innovation. Our dedicated efforts towards the Mac have significantly increased our installed base, which reached an all-time high during the June quarter, with nearly half of Mac purchasers being first-time buyers. iPad revenue was $7.2 billion, reflecting a 2% year-over-year decline due to supply constraints and negative foreign exchange impacts. Customer feedback for our iPad lineup remains strong across consumer, education, and enterprise markets globally. Consequently, the iPad installed base reached a new all-time high, with over half of the purchasers being new to the product during the quarter. Revenue from Wearables, Home, and Accessories was $8.1 billion, an 8% year-over-year decrease influenced by foreign exchange challenges, varied launch timings for products, supply constraints, and the overarching macroeconomic climate. Nevertheless, our installed base in this category set a new all-time record, fueled by robust customer loyalty and high new user rates. For instance, over two-thirds of Apple Watch purchasers during the quarter were new customers. In Services, we achieved a record revenue of $19.6 billion for the June quarter, increasing by 12% despite nearly 500 basis points of foreign exchange headwinds, along with challenges stemming from our operations in Russia and the broader economic environment. We established revenue records in both developed and emerging markets and set all-time highs in various countries, including the U.S., Mexico, Brazil, Korea, and India. The outstanding performance of our Services portfolio during the June quarter highlights the strength of our ecosystem in many respects. Our installed base continues to grow, achieving all-time highs across each geographic segment and major product category. Customer engagement with our Services also increased, with double-digit growth in transacting accounts, paid accounts, and accounts with paid subscriptions. Paid subscriptions have shown significant growth, with over 860 million subscriptions now on our platform, an increase of more than 160 million over the past year. We also continue to enhance both the breadth and quality of our Services offerings, providing new content on Apple TV+ and Apple Arcade, along with exciting new features for iCloud and Apple Music that we believe will resonate with our customers. In the enterprise sector, customers are increasingly investing in Apple products as a strategy for talent attraction and retention. For example, Bank of America is supplying iPhones to all financial advisers for instant client information access and timely wealth management advice. Wipro is investing in MacBook Air with M1 as an advantage in recruiting new graduates, benefiting from its superior performance and lower total ownership costs. With the introduction of the M2 chip in both the MacBook Air and the 13-inch MacBook Pro, we anticipate more companies providing Macs to their workforce. Now, regarding our financial position, we concluded the quarter with $179 billion in cash and marketable securities. We repaid $3 billion in maturing debt while increasing our commercial paper by $4 billion, resulting in total debt of $120 billion. Consequently, our net cash stood at nearly $60 billion at quarter’s end. During the June quarter, we returned over $28 billion to shareholders, which included $3.8 billion in dividends and equivalents and $21.7 billion through open market repurchases of 143 million shares. We firmly believe in the value of our stock and aim to achieve a net cash neutral position over time. Looking forward to the September quarter, we will not provide specific revenue guidance due to ongoing uncertainty. However, we are offering directional insights based on current macroeconomic expectations and COVID-related impacts not worsening. Generally, we expect our year-over-year revenue growth to increase in the September quarter compared to the June quarter, even with an estimated 600 basis point negative impact from foreign exchange. On the product side, we anticipate lower supply constraints than we experienced in the June quarter. For Services, we predict revenue to grow but decelerate from the June quarter, influenced by macroeconomic factors and foreign exchange. Our gross margin is expected to fall between 41.5% and 42.5%, with operating expenses anticipated to be between $12.9 billion and $13.1 billion. We expect interest and other expenses to reflect a negative impact from minority investments' mark-to-market adjustments, with a tax rate around 16%. Lastly, our Board of Directors has declared a cash dividend of $0.23 per share of common stock, payable on August 11, 2022, to shareholders of record as of August 8, 2022. Now, let's open the floor to questions.

Thank you, Luca. Operator, may we have the first question, please?

We'll take our first question from Amit Daryanani with Evercore.

I guess two from my side. Maybe to start on the gross margin discussion, Luca. You said that implying gross margin will be down I think, 130, 140 basis points sequentially and down a bit year-over-year as well in September. Maybe just what are the puts and takes here. And then very specifically, can you actually just call what the FX headwinds are embedded in the September quarter gross margin, that would be helpful.

Yes, Amit. We're guiding 41.5% to 42.5%. On a sequential basis, the decline is expected to be driven by, as you mentioned, foreign exchange but also mix, which will be partially offset by better leverage. We expect foreign exchange impact on a sequential basis to be 50 basis points. If you look at it from a year-over-year standpoint, we are in the ballpark of a year ago in spite of the fact that foreign exchange is going to be 130 basis points negative to a year ago. So clearly, foreign exchange is something that is affecting us but we think we're navigating that fairly well.

Fair enough. And then if I could just ask Tim the question. There's a lot of macro worries and high inflation impacting consumer demand. Certainly doesn't seem to be very visible in your performance and your expectations. So I'm wondering if you talk about, are you seeing any implications from recession fears or inflation fears to your end demand? And really just related to that, wearables decline was notable. Is that where you would typically see initial signs of consumer softening perhaps?

Thank you for the question. I’m not an economist, so I'll focus on what we experienced in the business. During the June quarter, we observed macroeconomic challenges that affected our performance, with foreign exchange being a significant factor impacting our year-over-year growth by over 300 basis points. For the iPhone, there wasn't much evidence of macroeconomic influence aside from foreign exchange. The Mac and iPad were constrained by supply, which limited our ability to gauge demand. In the Wearables, Home, and Accessories category, we did notice some impact from the broader economic environment. In terms of Services, certain areas, like digital advertising, were also affected by the macroeconomic situation. Overall, it’s a mixed picture, but we’re pleased with our results. Given the various challenges we faced this quarter, we feel good about the growth we achieved.

We'll take our next question from Harsh Kumar with Piper Sandler.

Yes. First of all, congratulations. These are tough times, and you are achieving impressive results, which we appreciate as investors. My question is regarding your Services business, which appears to be generating $20 billion quarterly. You consistently add intriguing and transformative features like payments each year. I'm trying to determine a suitable way to model the growth of this business given these innovative additions. Now that it has matured, what would be a good approach for us as investors to think about when modeling the Services business? I also have a follow-up.

Well, as you know, we don't provide guidance past the current quarter. But I think the way to think about it, certainly the way we think about it is that there's a number of levers in our Services business to take into account. The first one is installed base. Installed base is the engine for our company and it continues to grow. As I mentioned, it has reached an all-time high across every geographic segment, across every product category. And so that's very important. Then the second lever is the customer engagement. And we know that our customers are getting more and more engaged over time. Transacting accounts, paid accounts, paid subscriptions are growing, so the level of engagement continues to grow. And then as you mentioned, the breadth and the quality of the services that we offer tends to grow over time. So these are all things that tend to help us over the long term. If you go back and you look at our growth rates over a number of quarters now, they've always been very good. Of course, the macro environment can have an impact on this business. Tim has mentioned, for example, digital advertising can be affected at times. During COVID, some of the compares have been a bit lumpy because there have been lockdowns and reopenings and so on. So it's very difficult to talk about a steady state growth rate for our Services business. But when we look at the entirety of what we are doing in the Services space, we feel very good about the future of the business.

Luca, very helpful. And for my follow-up, valuations have come down in the last 18 months or so for things and companies and targets that you might look at. I guess, particularly in the Services area, would there be an appetite on behalf of Apple to accelerate the growth of its Services business by looking at external products to acquire?

We always assess how strategic a potential acquisition is, and we never make purchases just for the sake of buying or for generating revenue. However, we would consider acquiring something that aligns strategically with us. So far, we have focused on smaller acquisitions of intellectual property and personnel. Nonetheless, I wouldn’t dismiss any possibilities for the future, and we are consistently monitoring the market.

We'll take our next question from Erik Woodring with Morgan Stanley.

I have two as well. Maybe Tim, if I start with you, I think there's a debate in the market that if you look back over time, there's been a 3-year cadence to iPhone cycles. We're 2 years into your 5G iPhone evolution. You're on track to grow units in '21 and '22. That implies there could be some pressure next year as upgrade rates slow. But your comments really suggest no slowdown. You're seeing double-digit growth in customers new to iPhone. So can you just walk us through some of the various factors you believe are driving this continued iPhone strength? And then I have a follow-up.

Today, the product and the innovation within the product that is driving it. And of course, the other key variables are some things that Luca mentioned earlier where the size of the installed base has been growing significantly. We also, just in this quarter, the June quarter, set a June quarter record for switchers with strong double-digit growth. And so this is fueling the additional installed base even more. And we continue to execute across some significant geographies where there's a very low penetration of iPhone. Some of those were called out in the opening remarks between Indonesia and Vietnam and India, where we did quite well, and iPhone tends to be the engine for those markets, particularly at the beginning of creating the market there for Apple products. And so we're really looking at all of these things from the installed base to the number of switchers to the geographic distribution. Of course, the most important thing for us is to maintain an incredible customer satisfaction and loyalty from the customers. And we're really pleased that it's currently at 98% for the latest iPhones. And so those are the things that underpin it. 5G has been an accelerant. And the 5G penetration, particularly if you look at it globally, is still quite low. In some geographies, it's obviously higher, but around the world, 5G penetration is still low. And so I think there's reason to be optimistic.

Okay, that's helpful. And then maybe, Luca, for you. As we move from the June to the September quarter, maybe can you dig a level deeper and kind of help us understand some of the moving pieces in the Services business? Meaning where do you think we could see an acceleration or maybe a deceleration? And should we still expect double-digit growth? If you could just frame that for us, that would be great.

Yes, Erik. I mentioned in my prepared remarks that we expect some deceleration from the 12% that we've had in the June quarter. Keep in mind, we're going to see, on a year-over-year basis, 600 basis points, 6% impact from foreign exchange so that is a big element for us. Also keep in mind that we're still lapping the impact of our business in Russia in these numbers. And Tim mentioned that there are some pockets of weakness, primarily in digital advertising that we will need to work through. But at the same time, our Services business a year ago grew a lot and so also the compare is a bit challenging. So we don't have a very specific number to give out today. Of course, we expect to grow. We will see how the quarter develops.

We'll take our next question from Richard Kramer with Arete Research.

Tim, you cited growth in Apple apps in the past, and clearly, the privacy policies you've taken have really reshaped the mobile ad market. Can you give us a sense of how you see Apple's role as an ad network and perhaps helping developers to monetize not just app sales but also growing ad monetization over time?

Yes. Richard, we view privacy as a fundamental human right. And so what we try to do with all of our features on privacy is put the decision back at the user where we believe it belongs as to whether they want to share their data or not. And so that was what was behind application tracking transparency and a number of other features. We're trying to empower the user to own their data and make their own choices. In terms of us selling ads, we have a search ad business across the App Store that we believe represents a great way for discovery for small and large developers. And so I see that we play a role in that.

Can you provide insight, particularly with the launch of Pay Later, on what actions you are planning to take to enhance the affordability of Apple products? We understand that economic conditions will be challenging for individuals globally. How do you envision the development of different payment plans in the U.S. expanding into other regions, particularly in emerging markets?

Yes. I mean, obviously, affordability is a very important topic for us. It's been for many years. Buy now, pay later is the latest that we are doing on this front. Fundamentally, we are working on 2 major initiatives for affordability. One is installment plans and installment plans have become more widespread around the world, not only here in the United States but in most markets, particularly in emerging markets. Incredibly important in terms of reducing the affordability threshold. And trading programs. Trading programs are available in a number of markets. We can do better in other markets. They're incredibly important because the residual value of our products is a huge differentiator for our users. After they use our devices, they can bring them back and they retain much more value than other platforms. And therefore, it's important for us to raise that awareness. And so we will continue to expand those programs around the world. So installments and trade-ins, very, very important on affordability.

We'll take our next question from David Vogt with UBS.

I just wanted to circle back on sort of the macro and sort of the demand signals that you're seeing versus sort of the supply chains that you're facing. I know that there's been a couple of U.S. carriers that have talked about some of their customers having some difficulty paying bills. And you mentioned in your prepared remarks that you saw sort of the record number of switchers in the quarter. So just wanted to kind of get a sense for what you're seeing in that particular channel without naming a specific customer. And are you seeing any sort of issues from a spin-down effect maybe because customers are having some difficulty because of inflation? And then I have a follow-up on Macs.

On an aggregate level and looking at the iPhone data for the June quarter globally, there is no clear indication of a macroeconomic challenge. I’m not implying that there isn’t one, but the data does not reflect it, particularly when we consider the Wearables, Home, and Accessories segment. Therefore, I would like to differentiate between these two areas.

Great. Regarding the Mac business, I understand that you are facing significant supply chain constraints. Can you provide insight into how the overall market is affecting the Mac business compared to the supply chain issues? It seems that the business is nearly entirely constrained by supply chain factors, but we are noticing anecdotal and some measurable evidence that the broader PC market is slowing down. About 90 days ago, you expressed confidence that with the new M2 chip, you could sustain growth despite potential market downturns. Do you still hold that view? Additionally, could you explain your perspective on the various components of your growth in relation to the market?

I prefer not to project for this quarter. However, in the last quarter, we experienced significant challenges when COVID restrictions affected the Shanghai corridor, severely impacting our supply of Mac units, which operated at reduced capacity or were completely halted for most of the quarter. This had a considerable effect on the Mac business. By the end of the quarter, we managed to reduce our losses to 10 points, which I would attribute largely to supply issues. Additionally, foreign exchange factors contributed due to global translation issues, and there were also impacts from the business in Russia. These three factors are the main reasons for our situation. Regarding demand testing, it's challenging to evaluate demand without sufficient supply, and last quarter we were not close to meeting that supply, so our demand estimates are just that—estimates. We are aware of the industry's trends and are optimistic about our Mac products, especially with the M1 and M2 chips. We have a robust offering for the back-to-school season, and we will assess our performance this quarter, with an update in October.

We'll take our next question from Ben Bollin with Cleveland Research.

Tim, I was hoping you could share a little bit more about how you're thinking about the supply headwinds. You said less severe or less worse supply challenges into September. I'm interested when you think you find balance across products. And also, any thoughts on how or when that might influence replenishment of supply into your retail channels?

To provide more insight into what we experienced in the June quarter, we slightly fell below the $4 billion target we had set, with the low end of our forecast between 4 to 8. Most of the constraints last quarter were due to COVID restrictions, which led to plant closures and operations running at less than full capacity for much of, if not all, the quarter. Additionally, a smaller contributing factor has been the ongoing silicon shortage that has impacted our results for several quarters. Looking ahead, we are not able to predict when the silicon shortage will end, but we believe that our constraint numbers for the September quarter will be better than those in June. Overall, we are optimistic about the resolution of the COVID-related restrictions.

Okay. The other item. Tim, any thoughts on how you're thinking strategy is evolving with respect to progress in AR, VR in your existing products? Anything you're learning about content or how you're thinking about that opportunity?

We're thrilled right now to have over 14,000 ARKit apps in the App Store. And they're providing incredible AR experiences for millions of people. And that's utilizing iPhone and iPad. And of course, we are in the business of innovation so we're always exploring new and emerging technologies. But I wouldn't want to say anything beyond that.

We'll take our next question from Wamsi Mohan with Bank of America.

Luca, you mentioned revenues to accelerate year-over-year overall in September versus your June growth rate. Would you say that it would be reasonable to assume normal quarter-on-quarter seasonality of about $7 billion or so? Or would you say there are additional puts and takes this time around that could drive upside and downside to that? I know you noted 600 bps year-over-year on FX as potentially one of those. But maybe help us think through, on a sequential basis, how much of a normal versus abnormal seasonality we should expect? And I have a follow-up.

Yes, Wamsi, as you know, as we said earlier, we're not providing guidance because of all the uncertainty out there. But we have given a few data points. So one of them, which you've mentioned, approximately 600 basis points of negative foreign exchange. I mean, you do a rough math, it's around $5 billion. That's a big number right there that is going to affect us, that we are having some impact from the situation in Russia and that is obviously different from normal seasonality as well. Our supply constraints, as Tim just said, are going to be lower than what we've seen in the June quarter but they're still going to be there. So when you look at those 3 headwinds and you combine them with the acceleration that we talked about, we feel that, that is pretty remarkable.

Okay, Luca. Tim, I wanted to follow up on your comment about the macro impact you've observed on wearables. Your wearables portfolio is likely at the lowest average selling price across your product lineup. As you're providing this guidance, how much impact are you anticipating from any potential macro-related slowdowns affecting the rest of the portfolio? Why might investors not believe it's reasonable to consider some degree of hesitation driven by the macro environment, especially regarding your higher-priced products?

Let me elaborate on Wearables, Home, and Accessories to clearly convey our observations. We encountered a mix of challenges in this category, including foreign exchange issues and supply constraints that we've previously discussed. Furthermore, there was an impact from the business in Russia. In addition to these factors, which affected all products to a certain extent, we had different launch timings for some home and accessory items. For instance, in the same quarter last year, we launched AirTag, which did not have a comparable announcement this year. Beyond these four factors, we also believe there was a negative impact from the macroeconomic environment. While I can't specify whether this is due to lower average selling prices compared to the higher prices of phones, the data suggests there are additional challenges beyond the four items we've mentioned, which we attribute to macroeconomic factors.

We'll take our next question from Samik Chatterjee with JPMorgan.

Great. And congrats on the results in this tough macro. I guess I wanted to start with China smartphone market here a bit. Tim, I thought you said in response to earlier question that you haven't really seen a material impact from the macro on iPhone yet. But wondering, did you see an impact of the COVID lockdowns there on demand itself? Or was there a snapback fall in that? If you can comment about the sort of exit run rate that you saw in that market, following the COVID shutdowns ending there. And I have a follow-up.

Yes, both things are true. We did see a lower demand based on the COVID lockdowns in the cities the COVID lockdowns affected. And we did see a rebound in those same cities toward the end of the quarter in the June time frame. And in particular, in the run-up to June 18, which as you know, is a major shopping holiday in China. We think that the net of that was still a negative, but some of it did rebound by June time frame. The restrictions begin to come off toward the beginning of June, if my memory is correct.

Okay. And for my follow-up, I know you said you don't want to sort of predict the macro here or be an economist. But if I go back and look at the sort of OpEx for the last few years, you've been increasing that by a double-digit percentage. And just given the uncertainty that you've talked about in the macro further on this call a lot, how are you thinking about sort of that investment base going forward? Are you trying to look at areas that where you can sort of pull back? I mean, just in terms of how you're preparing for the uncertainty is I guess the question.

We believe in investing through the downturn. And so we'll continue to hire people and invest in areas, but we are being more deliberate in doing so in recognition of the realities of the environment.

We'll take our next question from Jim Suva with Citigroup.

While I'm calling you on my iPhone 13 Max Pro and loving it, I just wanted to ask you, though, with replacement cycles, have you noticed any change now that we've been through like 2.5 years of COVID where people upgrading at a different rate and kind of post COVID, hopefully, upgrade cycles or replacement cycles, how we should kind of think about that? Obviously, when I drop and break my phone, I replace it immediately. But a normal replacement, have they changed at all? Any insights from that would be great.

It's challenging to measure the replacement cycle at any point in time with exact precision, and so I'm going to punt on the question a bit. However, our key task is to make a product that everybody loves and that they want to trade in their current phone to get. And so that's what we are focused on is innovating like crazy and giving somebody something that they really want and see themselves using.

We'll take our next question from Jim Suva with Citigroup.

Okay, that makes sense. Well, then maybe I can ask Luca a question more on the gross margins. As you look ahead, the supply chain issues, expedited shipping and all of that, do you think probably the September quarter is kind of the worst of FX and all those headwinds and things? Or is there a little bit of timing delays due to your contractual purchase commitments that you do, that maybe your suppliers are looking at higher costs and you're benefiting from some lower contracts or maybe that has already caught up? If you could give us some insights on the kind of longer-term nature of the directions or the gross margin impacts.

We provide guidance for the current quarter, but looking ahead, certain elements of gross margin are beyond our control and need to be considered. One factor is the foreign exchange environment, which has already affected the September quarter and impacted June as well. A strong dollar poses a challenge for us. While our hedging program helps mitigate this impact, those hedges will eventually roll off, making it more difficult over time. We will need to monitor foreign exchange rates. Additionally, the mix of our products and services affects aggregate gross margin due to varying margin profiles and sometimes different accounting treatments. It’s important for us to ensure that customers love our products and services, and we want all of them to succeed in the market. Despite the tough economic conditions over the past year, including COVID, inflation, and rising interest rates, we’ve seen significant growth in gross margins. Regarding commodities, we are experiencing some price pressure on certain silicon components, but overall, commodities are performing well.

Congratulations to you and all your team members.

Thank you.

We'll take our next question from Krish Sankar with Cowen and Company.

And Tim, I apologize, it's also macro-related. You mentioned that it impacted digital advertising within Services. I'm just kind of curious, if the macro does worsen, do you worry about subscriber growth, App Store purchases, et cetera? And conversely, are there any parts of the Service business that you consider recession-proof, like maybe a buy now, pay later or something else? And then I have a quick follow-up for Luca.

We have incorporated all of our thoughts in the guidance that Luca gave, which says that we think in the aggregate, we're going to accelerate revenues in the September quarter as compared to the June quarter and will decelerate on the Services side. And so we see the digital advertising cloud, if you will, continuing in the current quarter.

Got it, got it. Very helpful. And then a quick follow-up on the lockdown in China during the June quarter. Do you actually see any noticeable negative effects on your App Store revenue for the region or any positive effects like maybe more gaming downloads?

China had very good results on Services last quarter. And so they grew strong double digit better than the company average, and they set a new June quarter revenue record during the quarter.

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