Apple (NASDAQ: AAPL) said it shipped 47.4 million iPhones in its most recent quarter, a figure slightly below what some analysts had expected. However, the company's quarterly profit jumped 38 percent, slightly more than analysts had expected. Apple's stock was down around 8 percent immediately after the news, likely due to investor hopes for higher iPhone sales.
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"The gap is widening between us and our competitors," Apple CEO Tim Cook told the Wall Street Journal in discussing the company's iPhone sales during the period. Cook said Apple recorded the highest rate of switchers ever from Android phones to iPhones during the quarter.
During the company's quarterly conference call, Cook said that Apple's iPhone sales grew at three times the overall smartphone market. He added that Apple gained smartphone share in all of its markets, and that 80 percent of iPhone owners plan to stick with the brand for their next phone.
Importantly, Apple said its iPhone average selling price reached $660, up $99 from the same quarter a year ago. The increase likely is mainly due to the iPhone 6 Plus, which Apple introduced in September and which is around $100 more expensive than the iPhone 6. BTIG analyst Walter Piecyk noted that Apple's iPhone ASP is up 17.5 percent annually--notable considering the company's ASP figure declined an average of 5.2 percent during the past three years. Luca Maestri, Apple's CFO, said that the 6 Plus is selling "extremely well" in Greater China and other Asian markets. Apple said its iPhone sales in China were up 87 percent overall in the quarter.
Further, Cook said that 27 percent of iPhone owners have upgraded to Apple's iPhone 6 and 6 Plus since the gadgets have been released, which he said means "there's a lot of headroom left for upgraders." Cook added that equipment installation plans (EIP) from wireless carriers, which allow customers more freedom to upgrade their phones, "could actually help the upgrade rate" on the iPhone.
"We are very focused on growing iPhone," Cook concluded, indicating the company believes it can continue to expand its iPhone business.
In the eight years that Apple has been selling the iPhone, the device has grown into the company's primary profit driver. In its most recent quarter, the iPhone comprised 63 percent of Apple's overall sales, up from 53 percent in the year-ago period.
According to estimates from Re/code, Wall Street investors had expected Apple to report shipping around 49 million to 50 million iPhones in its fiscal third quarter.
Apple's quarter, which ended June 27, is generally a slower one for iPhone sales, since Apple released its new iPhone 6 and 6 Plus around nine months ago, and the company isn't expected to introduce new iPhones until September.
In April, Apple reported selling 61.2 million iPhones during its fiscal second quarter. In the same quarter a year ago, Apple said it sold 35.2 million iPhones.
As for the company's finances, Apple reported quarterly revenue of $49.6 billion and quarterly net profit of $10.7 billion. Those numbers are up from revenue of $37.4 billion and net profit of $7.7 billion. The company's gross margin clocked in at 39.7 percent, up slightly from the 39.4 percent Apple reported in the year-ago quarter.
In its coming quarter, Apple said it expects revenue between $49 billion and $51 billion and a gross margin between 38.5 percent and 39.5 percent.
Although Apple began selling its Apple Watch during the period, the company did not provide sales figures for the device. The company lumped revenues from the device in with its iPod, Apple TV and Beats accessories businesses--sales in that "other products" category rose 49 percent to $2.64 billion.
Cook told the WSJ that Apple Watch "sell-through" was better than the iPad and iPhone during the same period of time. He also pointed out that the Watch is only available in a relatively small number of retail outlets.
During the company's conference call, Cook said that Apple recently caught up with Apple Watch demand and is now expanding sale of the gadget to a total of 19 countries. He said 94 percent of Apple Watch owners wear and use it regularly. "We believe that the possibilities of Apple watch are enormous," Cook said.
Cook added that Apple's Watch sales were higher in June than they were in previous months, indicating sales momentum.
According to research firm Strategy Analytics, global smart watch shipments grew 457 percent annually to hit a record 5 million units in the second quarter of 2015. The firm said Apple Watch captured fully 75 percent of the market during the period.
"We estimate that Apple sold 2.5 million Apple Watches in the June quarter based on the limited information provided by the company. This was below our estimate of 4.7 million," wrote BTIG's Piecyk. "Tim Cook indicated on the call that sales ramped throughout the quarter, but we decided to cut our September estimate to 5.0 million watches sold from 8.9 million and our December quarter estimate to 10.0 million from 13.9 million. It's difficult to forecast this product, for sure, but we are still optimistic about the potential for a higher attachment rate as we enter the holiday season."
And what of the iPad? Apple said iPad shipments declined around 18 percent--which the WSJ noted was the company's sixth straight quarter of year-over-year declines.
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This article was updated with additional information on July 22.