This week Apple announced plans to add an additional campus in Austin, TX along with strengthening satellite locations in Culver City, San Diego, and Seattle.

• The initial reaction from tech followers has been centered on Apple adding offices in cities outside of the valley largely for recruiting purposes. While recruiting talent in AI and content creation is undoubtedly part of the motivation behind the expansion, it’s not the key takeaway.
• Most important, Apple’s campus expansion is a clear indicator that the company is in long-term growth mode and needs to add headcount to continue to expand.
• Today, Apple employs just over 6k people in Austin. The new campus will be Apple’s second largest and could accommodate 15k employees. The 9k additional employees would increase non-retail US headcount by about 15%.
• In Austin, the new positions will focus on customer support, engineering, finance, sales, and operations. Other focuses will be: AI (Seattle), original video content (Culver City), and chip design (San Diego).
• As for the near-term iPhone demand concerns, while there is risk to Dec-18 and Mar-19, this storm will pass.

Growth Outlook Contrasts iPhone Concerns

This growth outlook is in contrast to investor concerns that the company’s iPhone franchise is slowing. There is risk to Apple’s revenue and earnings estimates for Dec-18 due to slowing emerging markets and consumers boycotting Apple products in retaliation of Huawei’s CFO arrest. Additionally, investors should expect a guide down for Mar-19, but the near-term slowdown does not indicate a deterioration in the iPhone franchise. We believe the 1.3B total device base is intact. Apple is adding headcount to accommodate future growth, and that future growth will be powered by several themes. In the years to come, Apple will grow as iPhone sales rebound riding the rollout of 5G. Services growth will be buoyed by the addition of video content. Apple Watch will progressively become a must-have as a health and wellness device. Augmented reality will evolve from the phone to glasses powered by 5G. AI will open the autonomous car opportunity to Apple, likely through partnerships.

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