Kicking off Apple’s conference call announcing its record-breaking numbers for Q3 2015, Apple CEO Tim Cook reported that the company had its strongest June quarter ever, exceeding the high end of the company’s guidance by $1.6 billion and topping expectations for sales of the iPhone, iPad, Mac, and Apple Watch. A June quarter record was set for the iPhone with 35 percent growth, gains in marketshare in all geographic segments, and revenue up 59 percent in both developed and emerging markets. Cook also highlighted that this quarter had the highest switcher rate from Android that has yet been measured, and spoke about the iPhone’s continuing high customer satisfaction rate. The quarter also saw Apple pulling in revenue of $5 billion in services, with the App Store seeing its best quarter ever with 24 percent growth.
Cook went on to talk on the Apple Watch being a major highlight of the quarter, speaking on the initial launch of pre-orders in 9 countries on April 10th and the delayed retail availability due to demand exceeding supply by “a wide margin,” but noted that the Apple Watch has now expanded to a total of 19 countries currently and three more are expected to be added at the end of this month. Notably, however, Apple CFO Luca Maestri later stated that Apple will not be disclosing specific sales numbers of Apple Watch as they do not want to provide information “that would help [their] competitors.” Cook commented, however that Apple has received “incredibly positive” feedback from the Apple Watch, with a 97 percent customer satisfaction rate, and that Apple has been “very happy” with the usage statistics it is seeing for the wearable device. Cook went on to highlight how doctors and researches at leading hospitals in the U.S. and Europe are using the Apple Watch to improve patients’ lives in areas such as doctor-patient communication and patient health monitoring, and mentioned how the Apple Pay and Siri user experience on the Apple Watch is “nothing short of incredible” and noted that 8,500 third-party apps are now available for Apple Watch, stating “it’s a rare privilege to launch a new platform with such potential.”
Speaking about the launch of Apple Music on June 30th, Cook noted that customers and reviewers have loved the human curation features of Apple Music and how it’s helping people discover new music, with “millions and millions” of customers having signed up for the three-month trial period, and 15,000 artists on board to post on the new Connect service. Addressing the U.K. launch of Apple Pay, Cook noted over a quarter million of locations on day one, with credit and debit cards from the U.K.‘s most established banks, and highlighted how U.K. users can use Apple Pay for the London Underground, hoping it will become a model for other public transportation systems around the world. For Apple Pay in the U.S., Cook noted how the new Square reader coming this fall will bring Apple Pay to “even more neighborhood businesses” and how 80,000 small and medium sized businesses are being added every month. He also mentioned that American Express will be adding corporate card Apple Pay support next month, 700 universities and colleges will begin accepting Apple Pay this fall, and 1.5 million U.S. locations are expected to support Apple Pay by the end of 2015.
During the Q&A portion of the call, Cook noted that 27 percent of the installed base of iPhone customers prior to the launch of the iPhone 6 and 6 Plus have now upgraded to one of the latest models, which combined with the very high Android switcher rate suggests that the iPhone is “doing outstanding” from Apple’s point of view. He noted that Apple is also still seeing very high numbers for first-time iPhone buyers in countries such as China, Russia, and Brazil, and that this indicates that there’s still room for the smartphone market to expand and he believes Apple can “compete for a fair number of those” based on the company’s results thus far.
Responding to questions about whether the Apple Watch category is taking off as quickly as some may have hoped, Cook noted that Apple made a decision back in September to specifically not disclose shipment and sales numbers for the Apple Watch, however he emphasized that this wasn’t a matter of “not being transparent” but rather “not giving our competition insight on a product that we’ve worked really hard on.” Cook noted that although the Apple Watch fits into the “Other” product category, it’s not accurate to simply look at year-over-year change in numbers and assume that the difference represents total sales of the Apple Watch, since other products in those categories, such as iPod and accessories are shrinking, offsetting the gains from the Apple Watch. Cook noted that sales on the Apple Watch exceeded expectations even though supply was still trailing demand at the end of the quarter, and specifically noted that the Apple Watch sell-through was higher than the comparable launch periods of the original iPhone and the original iPad, and that Apple was able to do that with only 680 points of sale and online sales demand preventing in-store inventory from even being available until mid-June. In short, Cook noted that Apple feels “really great about how we did” concerning the Apple Watch, but that the objective hasn’t primarily been sales, as he is more excited about how the product is positioned for the longer term since it’s an entirely new category. Cook note that Apple has learned a lot from the buying and retail positioning experience, and expects to expand the number of channels before the holiday season as he is “convinced the Apple Watch is going to be one of the top gifts of the holiday season” and that he “feels fantastic about what the team has done and delivered.”