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Apple Q3 2019 earnings call insights: iPhone takes back seat, Wearables grab the limelight

Following the announcement of better-than-expected second-quarter earnings on Tuesday, Apple (NASDAQ: AAPL) executives including CEO Tim Cook, CFO Luca Maestri and Senior Director of Investor Relations Nancy Paxton took part in the Q3 2019 earnings conference call.

Here are the key topics touched upon during the conference call. Click here for the full transcript of the earnings call. 

earnings conference call
Image by rawpixel from Pixabay

At the conference call that took place on Tuesday, it was pretty much evident that the executives wanted to drive conversations away from its flagship product iPhone, to growth areas such as Wearables and Services, which delivered 48% and 13% revenue growth in Q3.

And why not? The smartphone accounted for less than half of its total revenues in Q3, something we probably haven’t seen before.

Apple (NASDAQ: AAPL) reported yet another quarter of disappointing product sales as it announced third-quarter earnings results on Tuesday.

There were a lot of discussions involving “outside iPhone” and “non-iPhone” metrics, which were frankly quite impressive. It may be said the product that drove revenues for a decade for the company is now weighing on it. 

As usual, the company stayed mum about the upcoming iPhone models, expected to be out in September. However, while discussing the competition with the onset of 5G technology, CEO Tim Cook said “we’re in sort of the extremely early innings of it,” possibly suggesting it won’t be part of the upcoming models.

Apple iPhone losing shine to Samsung in smartphone war

The better-than-usual 4Q guidance was also attributed to strength in “non-iPhone” segments. Of course, the fourth quarter will possibly include only a couple of weeks of the new iPhones sales, but the company completely sidestepped from providing any commentary on this. “Wearables” was the keyword for the strong projection.

Apple Wearables and Services

Apple said its Wearables and Services segments together currently constitute the size of a Fortune 50 company, thanks to the devoted investments flowing into this area. In services, the company witnessed a few records – including all time-records for Apple Care, Apple Music, and cloud services.

apple products vs services 3Q19

The company also achieved a new third-quarter revenue record for the App Store. Interestingly, the growth in services was broad-based geographically, with double-digit growth in all five regions.

Last year, Tim Cook had vowed that the services revenues would double between 2016 and 2020. The CEO said the company is on track to achieve the same.

READ: Samsung dips on weak memory chip price in Q2

Meanwhile, the management said the newly launched services – Apple Card, Arcade and TV+ – may only start contributing to the top-line only by next year, as they will have an upfront trial period.

China

Despite currency headwinds, the management said, performance in China improved in Q3, helped by VAT reduction by the government. This could come as a big relief, given it is a key market for Apple. Improved growth in emerging markets hints at better success in penetration into new regions. However, the uncertainties relating to the US-China relations will continue to loom over its operations.

Get access to timely and accurate verbatim transcripts that are published within hours of the event.

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