| Apple earnings beat forecasts with help from iPhone and Mac sales Jessica Smith and Will McKitterick | November 02, 2015 Want to receive more free charts from BI Intelligence? Sign up here » Apple announced its calendar year Q3 2015 earnings last Tuesday, providing the first glimpse into how its newest product line has been received during its first quarter on the market. Overall, Apple's revenue grew 22% year-over-year (YoY) to $51.5 billion in Q3 2015. See below for our top-line takeaways. The hardware iPhone sales increased to 48.05 million units, up 22% YoY from 39.3 million units. That's notable considering last year's iPhone 6 and 6 Plus launch was the largest in the company's history. Apple CEO Tim Cook is very confident that the iPhone will continue to see particularly strong sales in the current quarter, partly catalyzed by growing demand in China and a sustained new customer pool of Android switchers. Cook estimates that the rate of Android switchers in Q3 2015 was 30%, its highest ever. Apple sees great growth opportunity in the 69% of Apple customers who still own devices released prior to the iPhone 6 and 6 Plus. The company expects that its newly launched installment plans will help expedite this group's device upgrade potential. 
iPad unit sales fell to their lowest level since June 2011. Apple sold just 9.8 million devices, a YoY decline of 13%. Tablet shipments are expected to decline 8% in 2015, according to the IDC. While the 2-in-1 or detachable segment, which includes Apple's new iPad Pro, has gained traction, the rest of the category continues to struggle as consumers shift to larger-screened smartphones. The iPhone 6 and 6 Plus, which were the first of Apple's iPhone suite to feature phablet-sized screens, have helped cannibalize iPad sales. 
The iPhone 6 and 6 Plus continue to drive up the average selling price (ASP) of iPhones. iPhone ASP was up YoY, but down slightly from its Q2 level. The average iPhone sold for $670 in Q3, up from $659 in the preceding quarter and $67 higher than last year. iPad ASP did not increase, remaining at around $432 during the quarter. YoY growth was relatively flat, but up 4% sequentially since Q2 2015. This could change next quarter with the rollout of the new iPad Pro, which could stimulate enterprise sales. 
Mac sales were somewhat surprising, considering the current PC landscape. Apple was able to buck the overall trend in the global PC market by selling 5.71 million units during Q3 2015, up 3% from 5.5 million units sold during the same period last year. The IDC estimated that total global PC shipments would decline 11% YoY in Q2 2015. Mac sales raked in a record $6.8 billion in revenue for the quarter, according to Luca Maestri, Apple's chief financial officer. That's more than any other category besides the iPhone.
While it's impressive that Apple's PC sales beat the market, growth in YoY unit sales of the Mac has stalled considerably over the past year. Part of that slowdown is undoubtedly due to a strong US dollar, which makes Apple's computers more expensive outside the US. The PC upgrade cycle was also elongated following the 2007 downturn. Sales of this category have been cannibalized in part by sales of tablets and larger smartphones. 
Apple Watch sales were up sequentially from Q2 2015, and are ahead of expectations, according to Cook. The unit sales numbers for the Apple Watch were not broken out during the earnings call. Instead, they were bundled with Apple TV and Beats as "other products." Revenue for this category during Q3 2015 was $3.05 billion. Cook did mention that the Apple Watch will be available in almost 5,000 locations in 32 countries by quarter-end.
Apple remains guarded about reporting on the Apple Watch. As we reported previously, the media is rife with speculation over whether Apple's new watch is one of the biggest tech blunders of all time. But if you compare unit sales estimates of the Apple Watch to other Apple product after the first quarter of their launch, Tim Cook's latest gadget is so far situated between the iPad and iPhone. What is also notable is that Apple's "other products" category is up nearly 50% over the previous year, a jump that could be attributed to Apple Watch sales.
The software iOS 9 is seeing faster adoption than any of its predecessors, and as of mid-October has been installed on 61% of active iOS devices with just 9% on legacy versions predating iOS 8. 
"Apple services," one of Apple's breakout categories that includes most of its software products, reached an all-time high of $5.1 billion in Q3, or 10% of all revenue generated in the quarter. Here are Q3 updates on some of the subsegments included in "Apple services":
- The App Store surpassed 100 billion cumulative downloads in the quarter and App Store revenue grew 25% YoY. There were also 18% more transacting customers in the App Store than in Q3 2014. Strong growth in China has been a major catalyst in App Store growth, and Cook intimated that the near- to mid-term future of the app market is in China; China's developer community is growing faster than any other country in the world with more than 1 million developers in the country.
- The number of Apple Watch apps continues to grow, a growth partly fostered by the rollout of Watch OS 2 in September, which enables native app capabilities. The number of Apple Watch apps currently exceeds 13,000, of which 1,300 are native apps.
- Apple Music is now in 100 countries and has 15 million accounts (both family and individual). Notably, 6.5 million of those accounts, or 43%, are paid accounts.
- The number of Apple Pay transactions has seen double-digit growth each month, and will likely continue to grow as new partnerships roll out. Cook announced an official partnership between Apple Pay and American Express during the earnings call, which will help expand the Apple Pay user base. Starbucks will rollout Apple Pay to all of its US stores in 2016.
- Apple News now has 40 million readers and 70 publishers. The app recently launched in the UK and Australia with partners like the Daily Mail and the BBC.
Apple's enterprise push Apple is doubling down on efforts to win enterprise market share. The company partnered with IBM in mid 2014 to better position both companies for adoption in the enterprise. Since, Apple has released an enterprise-oriented iPad called the iPad Pro and launched another enterprise-oriented partnership with Cisco. According to information shared on the earnings call, these efforts are starting to pay off. Enterprise business was $25 billion in Q3, which is up around 40% YoY. - There are now 55 apps in the IBM MobileFirst for iOS selection.
- Apple added 25 new mobility partners in Q3, pushing the total to over 65.
In the big picture, Apple's enterprise success is fairly narrow at the moment, but the company is building momentum to catalyze further enterprise adoption, according to Cook. Although Apple's lackluster iPad sales in Q3 may seem reason for concern for Apple's enterprise potential, it's likely that businesses are holding off on purchasing new tablets until the iPad Pro is available starting in November. Apple's calendar year Q4 iPad shipments will be much more indicative of growing momentum in the enterprise. Revenue Apple revenue beat expectations again, reporting $51.5 billion in revenue for calendar year Q3 2015. This represents YoY growth of 22% from last year's $42 billion. The iPhone still makes up the largest segment of revenue for the company, but all other categories saw solid growth, with the exception of iPads. - iPhones accounted for 63% of Apple's Q3 revenue. iPhone revenue grew 36% from $23.68 billion in Q3 2014 to $32.21 billion in Q3 2015.
- Revenue from iPads saw growth of -20% in the quarter, down to $4.2 billion from last Q3's $5.32 billion. As a caveat, Apple's newly announced iPad Pro likely caused anemic iPad sales in the quarter as many consumers will hold off on purchasing a new iPad until the newest version is released.
- The "other" category saw the largest YoY growth, from $1.91 billion in Q3 2014 to $3.05 billion in the most recent quarter, representing a growth of 60%. The Apple Watch is included in the "other" category and could be the main reason this segment saw such strong growth. In its Q2 2015 earnings call, Apple stated that the Apple Watch was responsible for "more than 100%" of growth in the other category, and in the Q3 call, the company stated that the Apple Watch's contribution continued to grow, meaning that the Apple Watch had a larger impact on the "other" category this quarter than it did in Q2.
- Revenue from Mac sales was the second-highest money-maker for Apple behind the iPhone, and it generated $6.9 billion in revenue in the quarter. Mac sales hit an all-time high in Q3, and Macs have a higher average selling price than both the iPhone and the iPad.
Here's another look at revenue by segment:  Note: Retail sales include global revenue generated from all Apple retail locations, separate of online revenue and other revenue from the existing geographic segments. Beginning in the fourth quarter of 2014, Apple no longer breaks out retail revenue separately from its global regional segments.
China is still a big piece of the Apple pie in terms of revenue by region. The country accounted for 24% of all revenue in Q3, making it the second-biggest market for Apple behind the Americas, which accounted for 42% of Q3 revenue. Revenue in Greater China (including Hong Kong) reached $12.52 billion for the quarter, nearly doubling YoY, although it fell 5% sequentially amid worries about consumer demand. Looking forward, Apple is bullish on China's growing middle class, which it predicts will help make the country its primary growth market for years to come. The company opened its 25th store in greater China this quarter and is on track to achieve its goal of 40 stores by next year. Another interesting stat that Cook relayed is that over 50% of people in China who have bought a new iPhone were first-time buyers. As you go down the product line, to say the 5s, that number only gets higher. Apple is known for hooking first-time buyers into purchasing more products down the road. That gives Cook optimism that Apple's Chinese fanbase will only grow in the quarter to come. Cook listed a similar stat for iPad sales. About 68% of people who purchased an iPad in China were first-time tablet buyers, 40% of whom had never previously owned an Apple product. 
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