Data Sheet—Why Apple CEO Tim Cook Will Be Getting the Last Laugh

Just two days earlier, the Apple CEO looked to be thoroughly enjoying himself on stage at the Brooklyn Academy of Music, introducing a bevy of hot new products and giving Lana Del Rey a big hug. He looked relaxed and in command in his crisp white oxford and quarter zip blue pullover, flashing a victory sign to photographers as he mingled with journalists and some celebs later in Apple’s demo area.

But Thursday was Apple earnings day—and what a frustrating day it must have been for Cook, Apple CFO Luca Maestri, and the rest of the team.

For one, Wall Street just doesn’t seem to appreciate how Apple is coping with the global slowdown in smartphone sales. Raising prices on hardware while pushing further into all kinds of cash-generating services combined to help Apple report a healthy 20% gain in revenue to almost $63 billion. (The $10 billion increase over last year’s quarter alone would qualify as a Fortune 300 company.) And that was with virtually zero growth in the number of iPhones sold compared to last year. But investors focused on the weak number of iPhones sold, not that the average selling price per phone had jumped to $793 from $618, and immediately sent Apple’s share down about 3% in aftermarket trading.

Which brings us to the second, even bigger source of frustration. Apple decided to make a couple of big changes to the information it discloses every quarter. And one made investors even more unhappy.

First, it will start revealing the cost of providing all those services (like app sales, cloud storage, and mobile payments). Analysts will be able to compare the cost to the revenue brought in (which Apple already discloses) and calculate a gross profit margin. Second, and more controversial, it will stop disclosing how many iPhones, iPads, and Mac computers it sells every quarter. Thus, analysts will no longer be able to see trends in iPhone unit sales, calculate average selling prices, or discern other key trends. Apple shares gapped down to a 7.4% loss, briefly sending the company’s stock market value below $1 trillion, before slightly recovering. (As I write this, Apple shares are off 5% on Friday morning, putting it just over the $1 trillion mark.)

Quote machine and analyst Walt Piecyk at BTIG Research cut to the chase. “Speculation on what is occurring in Apple’s business segments will fill the void created by the absence of information,” he wrote. “The uncertainty that speculation breeds is rarely positive for stocks.”

After another analyst got a little pushy about the change on Cook and Maestri’s Thursday evening conference call and the two execs responded, the company ended the Q&A session (though it had run for the usual hour length).

But I’d bet it’s Cook who will have the last laugh. Remember how Amazon’s stock price exploded upwards in 2015 after the company began disclosing not just its revenue from cloud services, but its stronger-than-expected profits, too? That may be the headline in three months when Apple first discloses the profits of its services business, which some currently assume isn’t all that profitable, or at least less so than $1,000 iPhones. Stand by for the answer.

(Updated on November 2 to correct the spelling of Luca Maestri’s name.)

NEWSWORTHY

Pfft. Looking for more reasons why Apple will stop reporting iPhone sales? Third quarter global smartphone shipments decreased 6%, the fourth quarter in a row of shrinkage, Strategy Analytics reports. “The global smartphone market has now declined for four consecutive quarters and is effectively in a recession,” said Strategy Analytics director Linda Sui. Rival market forecasters at Counterpoint Research predicted yesterday that 2018 will be the first calendar year ever of smartphone sales declines and I've now got a link for you on that report.

Bends towards justice. Google, Apple, and Facebook were among 56 major companies that sent a letter Thursday to the Trump administration opposing any federal policy changes that define gender as based on one’s biological sex at birth. The companies, which represent more than $2.4 trillion in collective revenue, said they stand in solidarity with transgender, gender non-conforming, and intersex people. "Diversity and inclusion are good for business," they wrote. "Discrimination imposes enormous productivity costs."

Meow. The phenomenon of CryptoKitties, the digital currency-like game of trading virtual pets, may have seemed like a flash in the pan (especially after one cryptokitty sold for $140,000!), but serious investors see a sustainable business. Dapper Labs, the startup behind the game, raised $15 million of venture capital from Venrock, Samsung Next, and Alphabet's GV. In other slightly weird funding news, robotic pizza maker Zume is getting $375 million from SoftBank's Vision Fund in a deal that values the company at $2.25 billion. Robot pizza unicorns? Let's dance.

Ruff ruff. The new owner of Flickr is looking for more revenue and lower costs. SmugMug, which bought the faded photo hosting site from Verizon's Yahoo in April, says it's dumping a policy allowing up to 1 TB of free storage and deleting all but the most recent 1,000 pictures for non-pro (read: non-paying) users.

Polling place producer. Election participation records are public records and the new app Vote With Me uses them to let users know if everyone listed with an address in their contacts is registered and whether they voted in the past few elections. The idea is that a user can then remind friends to vote.

FOR YOUR WEEKEND READING PLEASURE

Digital Disruption Snarls Madison Avenue (Wall Street Journal)
Once big beneficiaries of the online-ad boom, agency groups now face existential threats.

Facebook Groups as Therapy (The Atlantic)
People are sharing their deepest secrets on Facebook. Does the social network understand what it’s gotten into?

Meet the Marathon Cheats (The Guardian)
As runners get ready for next Sunday’s New York Marathon, we look at what makes a person claim a medal when they haven’t gone the full distance.

Post Malone Is the Perfect Pop Star For This American Moment. That’s Not a Compliment  (Washington Post)
The most popular young artist in the most unpopular young nation is a rhinestone cowboy who looks like he crawled out of a primordial swamp of nacho cheese. Post Malone is a Halloween rental, a removable platinum grill, a Cubic Zirconium proposal on the jumbo screen of a last-place team.

FOOD FOR THOUGHT

Virtual reality is one of those amazing-sounding technologies that always seems to be not-quite-ready for primetime. The Outline's Joshua Topolsky has a nice survey of all that's gone wrong in the field lately, from the over-hyped Magic Leap headset to the demise of several VR-oriented gaming studios. What will it take for VR to actually, you know, succeed? Here's Topolsky's take:

In my opinion—as someone who watched this new generation of virtual reality emerge from the earliest days, and was one of its biggest fans—VR adoption will only happen when the barrier to entry is akin to slipping on a pair of sunglasses (and even then it’s no sure thing). Most people don’t want to wear a bulky headset, even in private, there’s no must have “killer app” for VR, and no one has made a simple plug-and-play option that lets a novice user engage casually. Everyone I know who’s tried a VR headset is blown away by the experience, but no one really wants to go deep on it except for what amounts to a rounding-error percentage of enthusiasts. Someone needs to break through with a seriously downsized and much more sophisticated offering... and the tech (nor the business incentive) is just not there. Apple has made a clear bet on augmented reality and Google already took a soft swing with VR that didn’t even get a mention at the company’s last press event, so don’t hold your breath for a white knight.

IN CASE YOU MISSED IT

Amazon Launches Black Friday Deals Store as Sales Heat Up By Don Reisinger

You Can Now Use Facebook's A.I. Brains to Build the Next Addictive App By Jonathan Vanian

Facebook Is Offloading Workplace to Its Own Site By Don Reisinger

Yes, Chinese Piracy Has Lost Microsoft a Lot of Windows Revenue. But the Story Isn't So Simple By David Meyer

WhatsApp Will Show Ads via Its Status Feature, Monetizing the Free Service By Renae Reints

Justice Department Charges Chinese-Controlled Firm With Semiconductor Trade Secret Theft From Micron Technologies By Glenn Fleishman

How Companies Can Help Employees Vote in the Midterms By Ashley Spillane

BEFORE YOU GO

Tenants at New York City WeWorks may be a little more lugubrious after 5 p.m. from now on. The popular workspace startup is setting a limit on how many free beers each customer may drink. It's just four 12-ounce glasses per person per day. Don't have a mouth full of anything when you read the company's almost self-parodying description of the new policy as "an innovative, software-driven mechanism to help manage the provision of alcohol in our spaces.” I'll drink to that.

This edition of Data Sheet was curated by Aaron Pressman. Find past issues, and sign up for other Fortune newsletters.