Apple just had its strongest quarter yet for revenue and devices, but failed to deliver on iPhone expectations

Apple posted its strongest-ever Q2 this past quarter in terms of device sales and revenue, the company announced at its earning call, marking its third consecutive strong quarterly performance. Despite these impressive results, though, the company still missed industry expectations for the company’s most profitable product, the iPhone; Apple sold 47.5 million iPhones vs. analyst expectations of 48.8 million. Apple’s Q2 iPhone sales were up 35% year over year (YoY).

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Here are the carry-over factors from the previous quarters that continued to drive growth:

  • Apple is gaining consumers from its competitors. Apple CEO Tim Cook stated that Q2 was Apple’s best-ever quarter for switchers from Android; he stated the same thing in the previous quarter. This trend will continue into the next quarter; Cook referenced third-party data that 86% of iPhone users plan to buy another iPhone for their next device, while that consumer share stands at just 50% for Android.
  • A lot of those consumers are buying Apple’s higher-priced devices. The average selling price (ASP) of iPhones rose to $US660, its second-highest ASP ever after Q4 2014 when ASP reached $US687. This indicates that more consumers are buying Apple’s high-end iPhone 6 and 6 Plus.
  • China continues to buy Apple devices at a rapid pace. Sales in China were up 87%, and revenue in Greater China was up by a massive 124%. Revenue from Greater China accounted for 26.6% of all revenue for the quarter; comparatively the Americas accounted for ~40%.

Apple’s got a lot of room to grow and is poised to see another massive Q4 at the end of the year. Just 27% of the iPhone user base that owned iPhones prior to the iPhone 6 launch have upgraded their devices. It’s almost certain that many of these consumers are going to hold out for Apple’s newest iPhones, slated to launch in September. Aside from potential gains from those upgrading, Apple also stands to continue to win market share in China, according to Cook. The Apple CEO went as far to state that he believes that China will soon become Apple’s largest market. This is a big deal not just in terms of sheer sales numbers, but also because an increased Chinese user base will have an impact on sales of ancillary products and services like those from the App Store. Cook said the company is moving as quickly as possible to grow to 40 retail stores in China. Here are some other important takeaways from Apple earnings:

  • The Apple Watch is doing well. While Apple didn’t break out sales or revenue figures for the Apple Watch, it included its newest product into its catchall “Other” category, which saw revenue grow by 184% YoY. In the call Cook stated that the Apple Watch was responsible for “more than 100%” of the growth in the category, which includes other products like the iPod and Apple TV. Perhaps most notably, Apple Watch sales were higher in June than they were in April and May. This flies in the face of the gradual slowdown that most estimated data has been indicating, and also means that Apple Watch is selling much better than most thought.
  • Cook has unwavering faith in the future success of the iPad. He stated that he’s still bullish on the iPad and thinks that new product enhancements coming to the device are power features that will significantly drive enterprise adoption.
  • Apple’s iOS and Mac App Stores had their best quarter ever marked by a 24% jump in revenue over the same quarter last year.

Here are other stories you need to know from today’s MOBILE INSIDER:


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