Apple’s quarterly conference calls with Wall Street analysts can be tepid affairs, with little news or excitement. But that wasn’t the case on Thursday evening, as CEO Tim Cook and CFO Luca Maestri dropped a bit of a bombshell on the investment community. The surprise spooked shareholders and briefly pushed the Apple’s stock market value below $1 trillion for the first time since it crossed that symbolic threshold in August.
That disappointment was magnified an hour or so later when CFO Luca Maestri dropped the bombshell. Reading off a list of reporting and accounting changes Apple would make in its next quarterly report, Maestri dryly added that the company had decided to stop disclosing exactly how many iPhones, iPads, and Mac computers it sold every quarter.
“As we have stated many times, our objective is to make great products and services that enrich people’s lives and to provide an unparalleled customer experience so that our users are highly satisfied, loyal and engaged,” he told the analysts, reading from the script. “As we accomplish these objectives, strong financial results follow. As demonstrated by our financial performance in recent years, the number of units sold in any 90-day period is not necessarily representative of the underlying strength of our business.”
Apple’s stock price, which had already slipped about 3% on the weak forecast in after-hours trading, quickly dropped as much as 7.5% on concern over what the reduced disclosure might signal. Though later, the drop moderated a bit and Apple’s value was sitting just above $1 trillion.
Analysts sounded less than pleased, saying investors may see the policy change as a way to avoid admitting that fewer iPhones are being sold. “You know, there will probably be a lot of pushback about not giving iPhone unit data,” Citigroup analyst Jim Suva said to Cook and Maestri on the call. “It sounds like you’re still going to give revenue data, but some people might fear that this now means that the iPhone units are going to start going negative year over year.”
Cook and Maestri pushed back, but ended the call after giving their responses to Suva. “This is a little bit like if you go to the market and you push your cart up to the cashier and she or he says ‘how many units you have in there,'” Cook explained. “It doesn’t matter a lot how many units there are in there in terms of the overall value of what’s in the cart.”
Apple seems to hope ending the disclosure will help focus investors on other data points, but that’s unlikely according to analyst Walt Piecyk at BTIG Research. “Speculation on what is occurring in Apple’s business segments will fill the void created by the absence of information,” he wrote after the call. “The uncertainty that speculation breeds is rarely positive for stocks. As an example, there will now be one less check on the validity of the rampant and ever changing supply chain news reports that appear ahead of quarters, which had finally begun to diminish in recent quarters.”
The pair of Apple execs also tried to focus attention on a new stat Apple plan to start disclosing: the cost of providing services, like apps and cloud storage. Apple already reports revenue from its service sales, so combined with the new figure, analysts will for the first time be able to see Apple’s gross profit margin on services. Just as when Amazon impressed investors by disclosing how profitable its cloud business was, Apple could benefit if the profit margin is higher than expected by Wall Street.
Over the past year, the number of iPhones sold has stalled—it rose just 0.4% compared to the same 12-month period a year earlier. But by raising prices and adding the new more expensive iPhone X model, Apple has convinced customers to pay more and showed strong revenue growth in the business. Over the last year, iPhone revenue increased 18% to almost $167 billion.
That strategy is continuing, as Apple’s new iPhones introduced last month came at higher prices and the company debuted an even more expensive top-end model, the iPhone XS Max. Then this week, Apple (aapl) copied the strategy and raised starting prices for its new iPad Pro, MacBook Air, and Mac mini models.
One of the CFO’s rationales is indisputable. Masetri noted that “our top competitors do not provide unit sales information.” That’s true. Companies like Amazon (amzn) and Google (googl) never reveal exactly how many gadgets they’ve sold in a quarter, or even the revenue generated by such products, as Apple will continue to do even after the surprise shift.