Apple's (NASDAQ:AAPL) fiscal fourth quarter earnings report exceeded analyst expectations for both revenue and earnings, but the stock was little changed in after-hours trading on Tuesday. iPhone and iPad unit sales came in slightly below expectations, but not to a significant extent.
On the subsequent earnings call, CEO Tim Cook and CFO Luca Maestri highlighted a number of trends affecting Apple's business. Below are five of the most important quotes from that call.
The Mac continues to outperform
Apple derives the bulk of its revenue from iPhone, but the Mac remains a solid business for the company. In fact, the Mac was Apple's second-largest segment last quarter, accounting for about 13% of Apple's total revenue. During the call, Cook highlighted the performance of the Mac, noting its record quarterly sales.
"We sold an all time record [of] 5.7 million Macs, continuing to defy the negative trend in the global personal computer market which IDC estimates contracted by 11%."
Apple has quietly built a respectable enterprise business
Apple has traditionally focused its efforts on consumers, and the overwhelming majority of its sales still come from consumers rather than businesses. But in recent quarters, Apple has made a concentrated effort to court enterprise customers, modifying iOS to make it more attractive to businesses, and partnering with other firms to help drive sales. During the call, Cook quantified Apple's success.
"We estimate that enterprise markets accounted for about $25 billion in annual Apple revenue in the last 12 months, up 40% over the prior year."
Chinese consumers are flocking to the App Store
Apple's Services segment is now its third-largest business. It includes Apple Pay and AppleCare (among other services), but revenue from third-party apps sold through the App Store remains the largest growth driver. During the call, Maestri broke down the performance of Apple's app business.
"We generated over $5.1 billion in [Services] revenue, a new all-time record, and an increase of 10% over last year mainly due to strong growth from apps. The revenue from the App Store increased 25%, and the number of transacting customers grew 18%, also setting an all-time record. Services growth was particularly impressive in China, where the App Store revenue grew by 127% year-over-year."
Apple expects iPhone to grow next quarter
Last January, Apple turned in a stunning earnings report that featured monstrous iPhone sales. In total, Apple sold 74.5 million smartphones in its 2015 fiscal first quarter, generating record revenue in the process. That figure will be hard to top, and when Apple turns in its next earnings report in January, some analysts fear the iPhone business may have contracted. During the call, Cook clarified Apple's outlook.
"We believe that iPhone will grow in [the fiscal first quarter] and we base that on what we are seeing from a switcher point of view. We recorded the highest rate on record for Android switches last quarter at 30%. We also look at the number of people that have upgraded, that were in the installed base prior to iPhone 6 and 6 Plus. And that number is in the low 30 percentages."
Early upgrade programs could benefit Apple in two ways
Two-year contracts are increasingly a thing of the past. In the U.S., smartphone buyers are turning to installment plans that allow them to upgrade early. During the call, Cook highlighted how the development could benefit Apple's business.
"Some of these upgrade programs that are in the market -- they sort of began to look more like subscription businesses in terms of where they operate ... we think that in the aggregate, that they reduce upgrade cycles ... also, the iPhone that has been sold to someone else hits the price point that we're not hitting today largely ... [that] could help further fuel the services revenue which we did quite well on last quarter."