Apple (NASDAQ:AAPL) reported selling 50.76 million iPhones in its most recent quarter, generating $33.25 billion in revenue from such sales. On a year-over-year basis, unit shipments were down 1%, but thanks to a richer mix of iPhone 7 Plus devices compared to iPhone 6s Plus devices in the prior cycle, increases in average selling price helped drive iPhone revenue during the quarter up 1%.

Although it's obviously of some comfort that Apple's iPhone revenue grew, however modestly, rather than shrank, these results seem to reflect the relative lack of excitement for Apple's iPhone 7 generation of devices. Despite substantial technical improvements, the phones appear similar to prior-generation models -- a clear negative in a market where flashy aesthetics do count.

Apple's iPhone 7 Plus in Jet Black

Image source: Apple.

Despite that, Apple management provided some interesting context around its iPhone business that I think is worth discussing.

Channel-inventory dynamics

On each of Apple's earnings calls, management discusses trends in channel-inventory dynamics for its major product lines, including the iPhone. This information is important because it allows investors to get a sense of the true underlying demand for a product.

Remember that when Apple reports iPhone unit shipments, those aren't necessarily going directly to end customers; instead, they're being shipped into various distribution channels, and from there they are sold to end users.

If channel inventory is reduced, it suggests that end demand for said products was greater than what Apple shipped. If channel inventory grows, it means end demand for a product was less than what Apple shipped.

On the call, Apple CFO Luca Maestri reported a 1.2 million-unit reduction in iPhone channel inventory for the quarter. This, he said, compares to a 450,000-unit reduction in the same quarter a year ago.

"So, our iPhone performance was slightly better than last year on a sell-through basis," Maestri said.

More to the story than just channel dynamics

Although the channel-inventory story should give Apple investors a bit more confidence in last quarter's iPhone performance (although, even with those dynamics factored in, iPhone is still on a "slow growth" path), management made some interesting commentary with respect to iPhone performance by geography.

"We had very solid iPhone growth in four of our five operating segments, and experienced strong results in Western Europe, the Middle East, and our 'rest of Asia Pacific' segment, all areas of the world where iPhone sales were up double digits," Maestri said.

Additionally, CEO Tim Cook said that "based on the latest data from [market research company] IDC, we gained market share in nearly every country we track."

It's clear, though, that Apple is struggling in Greater China, where its revenues dropped 14% year over year -- and that's even as the company reported "strong double-digit revenue growth from both Mac and Services" in the region.

Cook attributed the weakness to a couple of factors. First, he noted a 5% currency devaluation that proved "not an insignificant headwind." Next, he said that the company's results "continued to be weak in Hong Kong, which has been hit a bit harder as the tourism market continues to slump."

And, finally, he noted that while the iPhone 7 Plus "did well" in the region, Apple's "previous-generation iPhones" underperformed.

Cook said that he believes that the company's performance in Greater China "will improve a bit more during this current quarter," though he doesn't expect a return to growth. And, naturally, he reiterated his view that "there's an enormous opportunity" ahead of Apple in the region.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.