Wednesday Jul.28, 2021

🍎 Apple earnings and smokeless cigs

_Apple pulling the Android users to its side [Jacobs Stock Photography/Digital Vision via GettyImages]_

Hey Snackers,

A life-changing revelation is sweeping social media: the ridges on the edge of Ritz crackers are made for cheese-cutting. Our take: this "revelation" was made for TikTok.

Stocks snapped their five-day win streak ahead of Fed Chairman Jerome Powell's announcement today. As usual, investors are worried that the central bank will scale back its economy-boosting policies.

Crispy

Apple has its best third quarter ever (feat. iPhone "switchers"), as Big Tech flips the growth narrative

Can't stop, won't stop... Big Tech companies are giving off manatee meme vibes. Lockdowns may be behind us, but Big Tech's growth streak is hotter than ever. Despite reopenings, some online pandemic habits seem to have intensified. Here we go again with the quarterly records:

Microsoft posted its most profitable quarter ever, with cloud services leading the way to record sales.
Google had its fastest quarterly sales growth in more than 14 years, as Google Cloud revenue soared 54%.
Apple posted its best third quarter in its 45-year history (#MidlifeThriving).

Cancel the Cabo trip... Apple prefers the Silicon Valley marathon. In January, Apple had its biggest quarter ever. Then again in April, Apple reported record second quarter sales as the 5G iPhone 12 fueled an upgrade cycle. The third quarter (aka: this latest one) is kind of like Apple's "Spring Break" — usually, it's the slowest of the year. These intense numbers just killed that vacay narrative:

+36%: Total sales growth from 2019. Sales for every product category jumped by double-digit percentage points. Services (think: App Store, Apple Music) got a 33% boost.
+50%: iPhone was the fastest-growing product, making up nearly half of Apple's $81.4B in quarterly sales. That was thanks to upgraders and "switchers" — aka: Androiders who switch to the Fruit. That's a great bragging point for CEO Tim Cook, since Android is still the most-used smartphone OS in the world — by far.

Big Tech has flipped the growth curve... Companies' growth tends to slow as they get larger and older. The smaller something is, the more it has room to grow (think: toddler vs. NBA player). For companies, it's often easier to double sales from $5M to $10M than from $50B to $100B. But after massive growth in 2020, tech giants are somehow still growing faster in 2021.

Puff

Philip Morris might stop selling cigarettes to go “smoke-free": what that really means

Double-take on the headline... Philip Morris International is the smoke giant behind 130+ cigarette brands, including Marlboro, Parliament, and your great aunt's Chesterfield's. This week, PMI said it plans to stop selling cigarettes in the UK within the next 10 years. In fact, CEO Jacek Olczak said he wants to allow the company to leave smoking behind altogether. Huh?

Blowing smoke?... If you think the headline is surprising, just look up PMI's website: it says "Delivering a Smoke-Free Future" all over. What it's really selling when it says smoke-free: heated tobacco products and vapes. Smoking kills more than 8M people per year, but PMI is pushing these products as "less harmful" alternatives for smokers. While cigarettes still make up the bulk of PMI's biz, "smoke-free" products accounted for 28% of its sales last quarter:

IQOS: These heated tobacco units are a rare sight in the US, but they're more popular in Europe and Asia. You stick a cigarette into a device, but instead of burning it, IQOS heats the tobacco at a lower temp which releases lower levels of harmful chemicals.
Vapes: Juul-style. Last year, PMI launched an e-cig version of the IQOS in select markets. These work by heating nicotine-laden vape juices instead of cigarettes.

To roll it up... While cigarette use has been declining, PMI's sales actually grew 6% last quarter. That was thanks to IQOS, which now has an estimated 19M+ users. Regardless of the "smoke-free" narrative, heated tobacco units still require PMI’s pseudo-cigarettes, called “Heets” sticks, which boosts PMI's sales.

"Smoke-free" saved Big Tobacco... for now. Global tobacco use has been falling for decades, with 60M fewer users since 2000. Smokers are trading tobacco-filled paper for liquid-filled metal and other puffable tech. That's why smoke giant Altria (PMI's former parent company), bought a big stake in Juul — and why PMI has been doubling down on its IQOS biz. But while "smoke-free" products may not be as harmful as OG cigs, non-smokers and teens are getting hooked, too. That's already posed major regulatory troubles for Big Tobacco.

What else we’re Snackin’

Ship: UPS stock fell 7% after it said quarterly package deliveries fell as more shoppers emptied their e-carts and ventured to physical stores.
UMart: Walmart will pay for full college tuition and book costs at some schools for its US workers, in a move to attract talent during the labor shortage.
Re-Mask: The CDC reversed its mask guidance, saying that even fully-vaxxed people should mask up in riskier indoor areas like schools.
Rebound: GE posted expectation-beating sales growth thanks to a rebound in orders of jet engines, power, and hospital equipment.
Labor: The Biden admin is advancing regulatory changes aimed at increasing workers’ pay, continuing its push to tilt the balance of power from employers to employees.
Newsflix: NBC plans to hire 200+ employees for its streaming and digital news teams, joining CNN in a race to gear up for the stream-y future of news.

Wednesday

Jerome Powell press conference
Earnings expected from Facebook, PayPal, Shopify, Spotify, Pfizer, McDonald’s, and Boeing

Authors of this Snacks own shares of: Apple, Google, Uber, Walmart, and Microsoft

ID: 1739523

Latest Stories

Bottom lines

April 19: AmEx up, paint ain’t, banks sank

Norway now has a wealth fund worth $290k+ for every citizen of the country

William Coulman, David Crowther5h

More wind power capacity was installed last year than ever before

Tom Jones, David Crowther5h

Do you want to run the State Department of McDonald’s?

A couple of days ago, a tweet making fun at McDonald’s hiring a “Manager for Diplomatic Relations” went viral.

At first glance, the idea that McDonald’s, a burger franchise known for its double quarter pounders and perfectly salted fries, is expanding its diplomatic influence with policy makers in Foggy Bottom and the world at large sounds comical. But it’s actually crucial.

There are more than 40,000 McDonald’s locations spread across 115 countries around the world, and 90% of these stores are independently owned and operated franchises that pay royalties to the parent organization to operate. Tens of thousands of franchises operated by different owners with different beliefs, priorities, and values can get complicated, fast.

As we noted in Snacks in February, McDonald’s received heavy backlash from franchisees in countries including Saudi Arabia, Oman, Jordan, Kuwait, and Pakistan after McDonald’s Israel donated thousands of free meals to IDF personnel. But it wasn’t McDonald’s, as an entity, that made the donations. It was the owner of the company’s Israel franchises, who was acting under his own volition.

Tom Jones, David Crowther

The data doesn’t lie: Taylor Swift is the biggest pop star on the planet

TOPSHOT-CORRECTION / AUSTRALIA-ENTERTAINMENT-MUSIC-SWIFT

Matt Phillips

Nuke stocks up on AI excitement

For most of humanity, the thought of “nuclear-powered AI” sends a shiver down the spine. But the stock market is all for it! Just check out the list of top performing S&P 500 stocks this year. Just behind established AI plays — Super Micro Computer and Nvidia, you’ll find Constellation Energy, the largest operator of nuclear plants in the U.S. NRG Energy, which also operates nuclear plants, isn’t far behind. Bloomberg reports that CEO of power distributor Exelon — which spun off Constellation in 2022 — says in the Chicago area alone, AI could drive a 900% jump in demand for energy from data centers.

Rani Molla

China makes Apple remove WhatsApp, Threads, Signal and Telegram from app store

In its latest move to restrict foreign tech, Beijing has ordered Apple to remove a number of popular messaging apps from its app store there, including WhatsApp, Threads, Signal and Telegram.

These apps had only been available through VPNs but were popular nonetheless, according to the Wall Street Journal.

Apple said the Chinese government asked them to remove the apps in the iPhone maker’s second biggest market over “national security concerns.” Last week, China told its state-owned telecoms to phase out the use of US chips by 2027.

Exclusive | China Orders Apple to Remove Popular Messaging Apps

Rani Molla

Tesla's recall reveals just how bad Cybertruck delivery numbers have been

Thanks to a recall of Tesla’s Cybertrucks, we now know how many of them have actually been delivered: 3,878 since the EV company began releasing them to customers in November.

In its third and fourth quarter earnings report, Tesla said that its current Cybertruck production capacity was greater than 125,000 a year. Musk had previously said he expected to produce 250,000 Cybertrucks a year by 2025.

Either way, that’s a lot more than the roughly 775 it’s delivered each month so far.

The recall is over an issue with the gas pedal pad that, the National Highway Traffic Safety Administration says when pressed, “may dislodge, which may cause the pedal to become trapped in the interior trim above the pedal.” The cause of the issue: “unapproved” soap that the manufacturer used to aid in getting the pad on the pedal.

A Cybertruck customer this week posted a TikTok about a terrifying incident in which this happened and “held the accelerator down 100%” in his 6,000+ pound vehicle. Thanks to some quick thinking where he held down the brake and put it in park, he wasn’t injured.

This is the long-awaited Cybertruck’s second recall since it came out five months ago.

Tesla recalls the Cybertruck for faulty accelerator pedals that can get stuck

Either way, that’s a lot more than the roughly 775 it’s delivered each month so far.

This is the long-awaited Cybertruck’s second recall since it came out five months ago.

Millie Giles & David Crowther

Cocoa hits $11,000

Cocoa prices are breaking records on an almost daily basis — with cocoa futures closing at (another) all-time high of $11,020 per metric ton yesterday.

That’s up 158% since the start of the year, and over 4x on the typical prices seen in 2022 — as crop production continues to fall short of demand.

Major cocoa-producing nations like the Ivory Coast and Ghana, which between them grow about two-thirds of the world’s cocoa, have seen excessive tree failure due to disease, changing weather patterns, and hot, dry conditions causing devastating droughts.

As such, consumers are starting to see the effects of the largest cocoa supply deficit in over 60 years: “shrinkflation” and reduced-cocoa recipes might soon hit your favorite chocolate bars, and Hershey stock was recently downgraded. Unfortunately, the worst may still be yet to come: the International Cocoa Organization expects production to lag behind demand by 374,000 tons for the 2023-24 season.

Why the World of Chocolate Is in Crisis

12h

Governments and companies tackle the climate crisis as damage intensifies

Jack Morse

Read

12h

Extreme weather has cost the US $2.6T, and the number keeps rising

Max Knoblauch

Read

12h

The cost of waste: e-junk and emerging tech add to America’s pollution prob

Nia Warfield

Read

12h

The biz of electric vehicles: the EV transition hits speed bumps

Bitcoin business will lose billions in the halving

Investors and miners have spent months prepping for the crypto-shattering event lying in bitcoin’s code. It’s finally arrived.

Friday, April 19th

13h

What’s happening

Casey Newton

Platformer

19h

Meta’s new AI paves the way for social networks where nothing is what it seems

Five ways of thinking about Llama 3, its latest large language model

Screenshot of Meta’s AI image generator, frog in a bathrobe

Matt Phillips

22h

World out of balance: It costs the US 3¢ to make 1 penny

The cost of producing the US penny rose 13% in fiscal 2023 to 3.07 cents. Yes, that means that Uncle Sam loses more than two cents for every cent it produces. (And no, you can’t make it up on volume.)

For the record, that’s the 18th-straight year the penny’s face value has been below production costs, fueling calls for abolishing the lowest value denomination coin. Canada started to phase out the penny in 2013, joining Australia, Brazil, Finland, New Zealand, Norway, and Israel, according to Smithsonian Magazine.

3.07¢

Pop Quiz!

What’s the world’s busiest airport?

Don't be a sucka

Rani Molla

24h

Netflix is going to stop sharing subscriber numbers

After posting subscriber numbers that beat expectations today, Netflix says it’s no longer going to share those numbers starting in the first quarter of 2025. That’s a big deal since subscriber numbers have long been one of the main metrics that investors have looked at.

“In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential,” its shareholders letter read. “But now we’re generating very substantial profit and free cash flow.” The company said that it will focus on revenue and operating margin as its main financial metrics, while it will look at time spent on the platform to gauge customer satisfaction.

Another way to read this? They’ve hit market saturation and just aren’t going to be growing that much anymore, and they thought they’d end on a good note. Going forward they’re focusing on how to get more money out of the customers they do have.

They’re doing so by cracking down on password sharing and charging for extra members. They’re also pushing people to ad tiers, which are more profitable than non-ad tiers.

“Scaling ads to become a more meaningful contributor to our business in ‘25 and beyond,” Netflix said.

Netflix’s ads membership grew another 65% in Q1 over the previous one, after rising 70% the quarter before, and 40% of signups in ad markets continue to be for those ad plans.

24h