Apple earnings report: iPhones destroy iPads, China pays off

Tim Cook announced Apple’s quarterly earnings yesterday, highlighting a couple of significant trends which can help us better understand where The Big Red is moving.

Apple reported US$58-billion revenue and a nice US$13.6-billion profit. This was mainly fuelled by China, with larger iPhones leading the pack in products and services overall. Unfortunately for tablet lovers, Apple’s latest array of golden-clad iPads is falling behind the limelight.

China is paying off

Revenue from China rose a massive 71% to US$16.82-billion since last year. According to the report, 69% of the Californian-based company’s quarter revenue was made from those outside the company’s motherland.

“Apple’s forays into emerging markets have begun to bear fruit as iPhone sales in China are surpassing those in the US plus international sales account for 69% of total sales in the most recent quarter,” says Loizos Heracleous of Warwick Business School.

Read more: With 5 billion from China, Apple’s slump is over (but it wants ‘to do better’)

Apple shifted focus two years ago when it announced early sales of the iPhone 5 in 2012 after it picked up that the market represents 15% of its revenue pie.

It’s clear that the US company is trying to secure its role as the leading smartphone brand in China with key partnerships with local telecoms such as China Mobile, which boasts country-wide 4G coverage as well as the country’s most subscribers.

China has an estimated 500 million smartphone users. Moreover, China Mobile has over 90 million 4G users which represents a massive online market for Apple’s services.

This bodes well for the CEO who predicted two years ago that China will become Apple’s largest market.

Less iPads…

“We are thrilled by the continued strength of iPhone, Mac and the App Store, which drove our best March quarter results ever,” Apple CEO Tim Cook said in the press release.

There might be a new range golden iPad Air 2’s kitted with slightly better cameras and 6.1mm thickness, but less people seem to be interested in them. Only 12.6 million units were sold this time round compared to 21.4 million iPads the last quarter, in January.

It should however be taken into account that Apple’s latest crop of tablets was announced in mid-October and released soon after, so a spike in their sales between then and January should be expected. Having said that, last year’s second quarter earnings reported 16.35 million tablets sold which is a lot higher than this year.

… means more iPhones

“The decline in iPad sales is more than made up for by higher iPhone sales, and the introduction of the Apple Watch represents significant potential for the company,” notes Heracleous.

Last year this time, Apple has sold 43.7 million iPhones in its financial quarter. It sold a massive 61.1 million this time round, which could mostly be attributed to its focus on new markets, the most notable being China.

“We’re seeing a higher rate of people switching to iPhone than we’ve experienced in previous cycles, and we’re off to an exciting start to the June quarter with the launch of Apple Watch,” Cook added.

Are tablets becoming less relevant in a world dominated by 5.5-inch iPhones? It appears so.

What about the Apple Watch?

Cook didn’t reveal any numbers of the Apple Watch unfortunately. Estimates do however put smartwatch’s sales in at nearly one million on its first day, 24 April.

This is very bad news for Google and smartwatch manufacturers loyal to the Android Wear ecosystem which only shipped 720 000 units in the whole of 2014.

“Right now demand is greater than supply so we are working hard to remedy that,” the CEO said referring to the Apple Watch. “We’re ahead of where we expected to be from an application point of view.” Cook added that there are already more than 3 500 apps available for the Apple Watch at launch, which is a lot more commitment to the 500 apps that were available when the iPhone launched in 2008.