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The 5 biggest takeaways of Apple's Q3 2015 quarterly earnings

Jason Snell | July 23, 2015
Another quarter, another happy financial report from Apple. The company's third financial quarter is rarely the place where you expect to see records--in Apple's largely seasonal business, the period from April to June is generally the sleepiest quarter--but there was still a lot to be gleaned from the numbers, and from the following hour-long call with financial analysts.

Apple thinks watchOS 2 + holidays = success

Several times during the analyst call, Cook pointed out that Apple's still learning about Apple Watch and hoping to build a product family that's successful in the long term. But Cook seemed particularly excited that Apple has "learned a lot about the [Apple Watch] buying experience" and as a result, plans to expand their sales channel before the holiday. "We're convinced that the watch is going to be one of the top gifts of the holiday season."

Sure, that might be hype but it also sounded to me like Apple was genuinely unsure how the Apple Watch would play with consumers, and now that it's seen sales figures and customer-satisfaction numbers, it's convinced that the Apple Watch could be a huge gift item during what is already Apple's biggest quarter of the year.

Apple remains bullish on China

Over the past couple of years, Apple has made a point not just in conversations with the financial industry, but also on stage at media events of discussing its efforts in China. The massive effort the company is putting into China is certainly paying off: While the last two quarters have showed 75 percent year-over-year growth, Apple more than doubled its China revenue in this most recent quarter, compared to the same quarter a year ago. Apple isn't just growing in China, its growth is accelerating.

With the Chinese stock market and economy being called into question in recent days, it was interesting to hear Cook defend the market to financial analysts. He made it clear that Apple believes China will ultimately be Apple's largest market. (It's already surpassed Europe in total revenue.)

"We're not changing anything [in China] we have the pedal to the metal" on growing Apple's retail presence, he said, and pointed out that with LTE networking only available in 12 percent of China, there's an "incredible smartphone future" in the country as broadband speeds improve and online video becomes more viable nationwide.

As Cook has mentioned several times before, perhaps the biggest opportunity in China is the rapidly growing middle class. "I can't overstate this the rise of the middle class is continuing, and it is transforming China," he said. "I saw a recent study from McKinsey that's projecting the upper middle class to grow from 14 percent to 54 percent of households over the 10 year period from 2012 to 2022, [and] for all of us who travel there so much, with every trip you can see this occurring."

In other words, Apple's long on China. "We would be foolish to change our plans," Cook said, given that China has "an incredible, unprecedented level of opportunity."

 

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