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Highlights of Apple’s Fiscal Q3 2016 Earnings Conference Call

Highlights of Apple’s Fiscal Q3 2016 Earnings Conference Call

As is usual, Apple CEO Tim Cook and Apple CFO Luca Maestri participated in a conference call following the release of Apple’s financial report for the fiscal third quarter of 2016. Here are some of the highlights and comments from the call. (We listen, so you don’t have to!)

Highlights of Apple's Fiscal Q3 2016 Earnings Conference Call

The Numbers for Q3 2016

Apple earned revenue of $42.4 billion and $ 7.8 billion profit, or $1.42 per diluted share. These results compare to revenue of $49.6 billion and net income of $10.7 billion, or $1.85 per diluted share, in the year-ago quarter.

Gross margin was 38% compared to 39.7% in the year-ago quarter. International sales accounted for 63% of the quarter’s revenue. Apple sold 40.4 million iPhones, 9.9 million iPads, and 4.2 million Macs. As usual, no numbers were reported for the Apple Watch or Apple TV.

The iPhone

Tim Cook says he is “very optimistic” about sales of the new iPhone in the fall, even in the face of rumors that the iPhone 7 won’t boast many changes over the current iPhone 6s lineup.  Cook said he sees “so many signs that are positive” pointing towards good sales numbers for the fall.

Demand for the iPhone SE outstripped expectations and demand in the quarter, and Apple added capacity to meet demand.  The average iPhone selling price dropped to $595 in the quarter, due to the popularity of the iPhone SE. The company expects to see ASP increase next quarter.

The company saw its highest level of switchers to the iPhone from other platforms (::COUGH!:: Android! ::COUGH!::), ever recorded.

Total revenue from Greater China was nearly $40 billion in the first three quarters of Apple’s fiscal year. The Chinese iPhone install base has grown 34% year-over-year. However, revenue was $8.9 billion for Q3 2016, down considerably from $13 billion in Q3 2015.

With the 33% revenue drop in China, Europe regained its number two market position after the United States, bringing in $9.6 billion in revenue during Q3.

iPhone sales in India were up 51% year-over-year. Cook mentioned the development accelerator for iOS Apple is planning for India, and the new Maps development center, saying he sees huge potential in the country.

The iPad

The iPad saw its best revenue result in 10 quarters, as its revenue was up 9% year-over-year, and the iPad’s average selling price increased to $490, both due to iPad Pro sales.

Half of iPad Pro buyers say they’re buying it for work. Among those planning on buying a tablet in the next six months, 63% say they’re planning on buying an iPad. The iPad Pro is the top choice among those planning to purchase an iPad.

Corporate buyers have a 94% satisfaction rate with the iPad, and 71% intend to purchase more.

The Mac

Apple sold 4.2 million Macs in Q3 2016, down 4.7 million one year ago. However, Luca Maestri reported the Mac is gaining a “high percentage of new customers,” and the Mac install base was at an all-time new high at the end of the June quarter.

Mac sales were down, due to a rough overall PC sales market.

Apple Services

While overall revenue was down for the quarter, Services revenue was up 19% over last year. CEO Cook said the company saw its highest App Store revenue numbers ever, setting an all time high. App Store growth was 27% compared to the year-ago quarter, as Apple Music, AppleCare, and iCloud also showing growth.

Services now account for 11% of Apple’s overall revenue, up from 8% in the year-ago period. Apple expects Services revenue to “be the size of a Fortune 100 company,” next year.