Apple Slips to No. 3 As Q3 Earnings Put Trillion-Dollar Mark in Sight

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While Apple CEO Tim Cook was discussing the company’s latest quarterly earnings report (and new innovations such as Siri Shortcuts; more below) on a conference call with financial analysts on Tuesday, a new IDC report on the global smartphone market showed that Apple had slipped to the No. 3 player in the world. China’s Huawei is now No. 2 while Samsung maintained its lead at No. 1.

As it’s still in a good position to become the first trillion-dollar company in history, Cook and Co. are likely none too worried about IDC’s figures. Apple posted fiscal third quarter revenue of $53.3 billion, an increase of 17% from the year-ago quarter, while international sales accounted for 60% of the quarter’s revenue.

In addition to the pricey iPhone X, which starts at $999 USD, other Apple products also showed strength in the last quarter, particularly wearables such as Apple Watch. Apple projects strong iPhone sales to continue with a forecast for total revenue of between $60 billion and $62 billion in this current quarter, for a healthy 14% to 18% increase from a year earlier.

“We’re thrilled to report Apple’s best June quarter ever, and our fourth consecutive quarter of double-digit revenue growth,” said Cook. “Our Q3 results were driven by continued strong sales of iPhone, Services and Wearables, and we are very excited about the products and services in our pipeline.”

Cook also told the analysts on the earnings call that “iPhone had a very strong quarter. Revenue was up 20% year-over-year and our active installed base grew by double-digits, driven by switchers, first time smartphone buyers and our existing customers whose loyalty we greatly appreciate. iPhone X was the most popular iPhone in the quarter once again, with a customer satisfaction score of 98% according to 451 Research. Based on the latest data from IDC, iPhone grew faster than the global smartphone market, gaining share in many markets including the U.S., Greater China, Canada, Germany, Australia, Russia, Mexico and the Middle East and Africa.”

“Second, we had a stellar quarter in services which generated all-time record revenue of $9.5 billion fueled in part by double-digit growth in our overall active installed base. We feel great about the momentum of our services business and we’re on target to reach our goal of doubling our fiscal 2016 services revenue by 2020.”

“Paid subscriptions from Apple and third parties have now surpassed $300 million, an increase of more than 60% in the past year alone. Revenue from subscriptions accounts for a significant and increasing percentage of our overall services business. What’s more, the number of apps offering subscriptions also continue to grow. There are almost 30,000 available in the App Store today.”

What’s more, Cook added, “The App Store turned 10 years old this month and we set a new June quarter revenue record. The App Store has exceeded our wildest expectations, igniting a cultural and economic phenomenon that has changed how people work, learn and play. Customers around the world are visiting the App Store more often and downloading more apps than ever before. And based on third party research estimates, the App Store generated nearly twice the revenue of Google Play so far in 2018.”
Other highlights that Cook noted include:

—Siri requests have already exceeded 100 billion so far this fiscal year, and the number of articles read on Apple News more than doubled year-over-year. Apple Pay continues to expand with well over 1 billion transactions last quarter, triple the amount from just a year ago, with growth accelerating from the March quarter. To put that tremendous growth into perspective, this past quarter, we completed more total transactions than great companies like Square and more mobile transactions than PayPal.

—Apple Pay is now live in 24 markets worldwide with over 4,900 bank partners and we look forward to adding Germany later this year. We’re excited to share that in the U.S., eBay is beginning to enable its sellers to accept Apple Pay and CVS Pharmacy and 7-Eleven will roll out Apple Pay acceptance in locations nationwide this fall. Transit is another important area of growth and Apple Pay can be used with iPhone and Apple Watch to quickly and conveniently ride public transit in 12 metropolitan areas. Apple Pay Cash, our peer-to-peer payment service, is already serving millions of customers across the U.S. less than eight months following its launch.

—Our third highlight of the quarter is the outstanding results in wearables, which comprises Apple Watch, AirPods and Beats and was up over 60% year-over-year with growth accelerating from the March quarter. Our wearables revenue exceeded $10 billion over the last four quarters, a truly remarkable accomplishment for a set of products that has only been in the market for a few years. Apple Watch delivered record June quarter performance with growth in the mid 40% range, and we’re thrilled to see so many customers enjoying AirPods. It reminds me of the early days of iPod when I started noticing white earbuds everywhere I went.

—A number of other notable events in the quarter, we expanded distribution of HomePod to three additional markets and we added new immersive listening features with support for HomePod stereo pairs and a new multi-room audio system. In June, we hosted an extremely successful developers’ conference that previewed many major advances coming this fall to our four operating systems, iOS, macOS, watchOS and tvOS. Developer and customer reaction has been very positive and we have over 4 million users participating in our new OS beta programs.

—Starting with iOS 12, Siri will take a major step forward with Siri Shortcuts, which deliver a new, much faster way to get things done and allow any app to work with Siri. We believe this will make Siri even more useful and significantly expand its adoption. We’ve also designed performance improvements across iOS 12 to make everyday tasks faster and more responsive. Camera launches up to 70% faster. The keyboard appears up to 50% faster and apps can launch up to twice as fast.

—We’ve always been about empowering users to get the most from our product, but not about spending all of their time using them and so we’re adding tools to iOS 12 to help our customers understand and take control of the time both they and their families spend interacting with their iOS devices. Activity reports will provide information on the amount and nature of time spent on iPhones and iPads and screen time will enable parents to monitor and limit their children’s activity from their own iOS devices using Family Sharing in iCloud.

—We want to empower our developers to bring their innovative apps from the iOS ecosystem to the Mac with minimal effort. Though iOS and macOS are different, they’ve shared common foundations from the very beginning, so we’ve taken key frameworks from iOS and adapted them to specific Mac behaviors like using a mouse or track pad, resizing windows, copy and paste and drag and drop.

—We’ve started with some of our own apps, so this fall, News, Stocks, Voice Memos and Home will be available on the Mac for the first time with macOS Mojave and we’ll be bringing these great new tools to our developers next year. We believe this will dramatically broaden the ecosystem to benefit all Mac users, creating even more great reasons to choose Mac. Also this fall, the Mac App Store is getting a full redesign with rich editorial content to help customers discover great Mac apps from our developers.

—We believe privacy is one of the most important issues of the 21st century and we’re always working to make our products more private and more secure for our users.

—As we announced at WWDC, beginning this fall, Safari will prevent share buttons and comment widgets on webpages from tracking users without their permission. Safari already protects personal data as users browse the web so they won’t be re-targeted by ads. For Apple Watch, users will see a significant expansion of features and functionality in watchOS 5. Apple Watch will become an even stronger companion for fitness, communication and quick access to information with features including new workouts, activity sharing competitions, auto workout detection, advanced running features, walkie-talkie, podcast and third party apps on the Siri watch face.

—For Apple TV, we’ve seen major growth in sales since the introduction of Apple TV 4K last fall as video providers around the world choose Apple TV 4K to deliver their subscription services. Later this year, Charter Communications will begin offering Apple TV 4K to its customers in nearly 50 million U.S. households, providing access to live channels and tens of thousands of on-demand programs via the Spectrum TV app on Apple TV 4K, iPhone and iPad.

—tvOS will take the cinematic experience of Apple TV 4K to the next level this fall with support for Dolby Atmos audio and new features to easily find popular shows and movies. Apple TV 4K already offers customers the largest collection of 4K HDR movies and this fall, iTunes will be the home to the largest collection of Dolby Atmos-supported movies anywhere.

Cook also touched on CSR and Sustainability:

I’m proud that our team’s hard work has an impact even beyond these innovative industry-leading products and services. We’re always working to leave the world better than we found it and as part of our commitment to address climate change and increase the use of renewable energy in our supply chain, we recently announced a first of its kind investment fund in China. Initially, 10 suppliers will join us in investing nearly $300 million over the next four years into the China Clean Energy Fund. The fund will invest in and develop clean energy projects totaling more than 1 gigawatt of renewable energy in China, the equivalent of powering nearly 1 million homes.

We’re seeing great momentum in our Everyone Can Code and Everyone Can Create initiatives. More than 5,000 schools and community colleges are now teaching Everyone Can Code and more than 350 schools have committed to incorporating Everyone Can Create into their curricula for the upcoming school year. Coding skills are opening doors for students and job seekers around the world as tremendous growth in the app economy creates opportunity everywhere we look.

We’re also teaming up with leading educators for blind and deaf communities across the United States who will start teaching Everyone Can Code this Fall.

Cook concluded, “Looking ahead, we couldn’t be more excited about the products and services in our pipeline as well as limitless applications for augmented reality and machine learning technology. We’re working with key partners in the enterprise to change the way work gets done with iOS and Mac. We’re welcoming communities and offering learning opportunities at our retail locations through hundreds of thousands of Today at Apple sessions each quarter. We’re expanding our reach into emerging markets and seeing strong double-digit growth in revenue and we’re making great progress toward our goal of significantly expanding our services business.”

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