My top five takeaways from Apple’s record result

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There were hits and misses as Apple reported record earnings and revenue for the three months to June 30 this morning NZ time.

The company saw net profit surge 38% to $US10.7 billion as turnover jumped 33% to $US49.6 billion.

Sales in China doubled (where, perhaps insultingly, there were only token efforts to counterfeit the Apple Watch).

Cash reserves swelled to a record $US203 billion.

Still, there were more downside than upside surprises, and Apple shares [NAS:AAPL] fell as much as 7.8% in after-hours trading, giving back some of their gains after a big run-up over the past few weeks.

My top five takeaways:

1.  The iPhone 6/6 Plus continues to be a total win for Apple 
The big-screen models have pulled in punters from the Android camp, helping to fuel a 38% increase in iPhone sales over the year-ago quarter to 47.5 million.

But although a June quarter record, iPhone sales still fell short of some analysts' expectations. And Things aren’t so flash if you look at sequential quarters; in fact iPhone sales were down 25% from the previous quarter – but a tail off is usual after new models have been in the market for a while (the iPhone 6 was released in September). Still, it’s notable iPhone inventory reduced by 600,000 during the quarter, indicating sales have leapt ahead of projects and the company is selling more units than its making.

2. Cook coy on Apple Watch sales
Apple CEO Tim Cook said Watch sales were ahead of internal projections and off to “a great start”, but would not give any numbers (a contrast to the iPhone 6 and other flagship product releases, where the company has been quick to release sales figures). As NBR reported earlier,The US business press has piled into the void, with one report claiming Apple Watch sales have tailed off 90% since launch and are now as "few" as 10,000 a day. Mr Cook rebutted that story buy saying Apple Watch sales were higher in June than May or April (whatever the heck sales were in April). And while the Watch is widely available online (including now New Zealand), the Apple boss noted it’s so far only in 680 retail locations, or less than 1% as many as the iPhone.

Whatever they were, Watch sales were buried in an “other” category that also included iPod, Apple TV and Beats accessories sales. Collectively, “other” revenue was up 49% to $US2.64 billion.

3. Another iPad shocker.
Apple’s tablet sales fell about 18% in unit terms (to 10.9 million) – the sixth-straight quarter of year-over-year declines. No one’s quite sure why the iPad is in such a funk. Yes, there’s competition from cheaper Androids, but it’s perhaps simply that a lot of people are happy with their one or two or three-year-old tablet. Unlike the iPad, there’s no gotta-have feature with the latest models, and none of the peer-pressure to upgrade.

4. Mac sales rise as PC sales fall
Mac sales rose 9.5% (to 4.8 million) during the quarter when the PC market as a whole fell around 9%. Apple is winning business from a tired PC industry and, to a degree, enjoying a halo effect from iPhone sales. But the Mac boom has possible come at the expense of iPad sales.

5. Record service sales
Revenue from the App Store is still modest in the great scheme of things (see chart below) but it’s up 59% year-on-year. Mr Cook said Watch apps helped. But just having more iPhones and Apple TVs in the market would have been the biggest driver. Apple CarPlay (which connects your iPhone to a car’s existing dashboard display, if supported by a car maker) is going to help here too in the year ahead.

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