Today is earnings day for Apple and the company just revealed its Q3 numbers. In a press release, it touted $53.3 billion in revenue with $11.5 billion in profit, thanks to sales of 41.3 million iPhones, 3.7 million Macs, and 11.6 million iPads. Head below to follow along with our live coverage of Apple’s earnings call with analysts…

As is tradition, Apple releases its earnings via a press release and then holds a call with CEO Tim Cook and CFO Luca Maestri, who shed more light on those earnings.

Tim Cook touted Apple’s Q3 2018 in the press release, saying:

The call is scheduled to begin at 2PM PT/5PM ET and will be live streamed on Apple’s investor relations website. Tim Cook will kick things off with a broad overview of the numbers, with CFO Luca Maestri then diving in for a deeper look. Things will wrap up with a Q&A from analysts. Head below for our full coverage of the call once things begin:

Tim Cook:

  • Tim Cook will get things started momentarily…
  • “Proud to report our best June quarter ever”
  • Rehashing numbers from release, 17 percent increase in revenue YOY, strongest rate of growth in the past 11 quarters
  • iPhone revenue up 20 percent YOY, active install base up double digits driven by switchers, first-time smartphone buyers
  • iPhone X was the most popular iPhone in the quarter, 98 percent customer satisfaction
  • “Stellar” record for Services, “we feel great about Services momentum,” on target to double 2016 Services revenue by 2020
  • Paid subscriptions from Apple and third-parties hit 300 million, revenue from subscriptions accounts for “significant and increasing” portion of Services
  • Almost 30,000 apps with subscriptions available in the App Store
  • Developers have earned over $100 billion from App Store since launch
  • Apple Music grew 50 percent YOY, AppleCare revenue grew at its ‘highest rate’ in 15 quarters, cloud services revenue up 15 percent YOY
  • Siri requests have exceeded 100 billion this year, number of Apple News articles read doubled YOY
  • Apple Pay had ‘well over 1 billion transactions’ during the quarter
  • Apple Pay coming to Germany later this year, 7-11 and CVS nationwide
  • More Apple Pay transactions last quarter than Square and PayPal
  • “Outstanding results in wearables, which comprises Apple Watch, AirPods, and Beats”
  • Wearables revenue hits $10B over last four quarters
  • Touting new features coming in iOS 12, watchOS 5, tvOS 12, and Mojave this year
  • Speed improvements, Screen Time, ARKit 2, macOS App Store redesign
  • 4 million people in beta testing for macOS and iOS
  • “Privacy is one of the most important issues of the 21st century,” Cook says; touts new features in Safari 12
  • Apple TV 4K drives growth for Apple TV sales, later this year Charter will offer Apple TV 4K to customers in 50 million households
  • “This fall iTunes will be home to the largest collection of Dolby Atmos-supported movies anywhere.”
  • As part of climate change commitment, Cook touts investment in China Clean Energy fund
  • “We couldn’t be more excited about the products and services in our pipeline.”
  • “We’re welcoming communities and offering learning opportunities through Apple Stores”

Luca Maestri:

  • Apple grew in each of its top 15 markets, China up 19 percent
  • iPhone ASP up to $724, up 20 percent YOY
  • Reduced iPhone channel inventory by 3.5 million
  • Customer sat for all iPhone models at 96 percent
  • 28 percent growth in services YOY, double digit Services growth in all geographic segments
  • Corporate iPhone purchase intent at 81 percent
  • “Apple Watch continues to be best-selling smartwatch.”
  • “AirPods continue to be a runaway set, selling as fast as we can make them.”
  • “Very happy to see double digit YOY growth in active install base for Mac.”
  • YOY Mac sales impacted by MacBook Pro refresh in Q4 instead of Q3
  • iPad unit sales grew for 5th consecutive quarter, double digit unit growth in China and Asia Pacific with new record in mainland China
  • Almost half of iPad purchases in Q3 was by customers new to iPad, active install base hits new all-time high
  • Salesforce and Capital One are deploying Macs based on employee preferences
  • “Great interest in Business Chat in Messages, lets customers get answers to questions and complete transactions directly in Messages.”
  • DISH Network rolling out support nationwide, Phillies testing Business Chat for drinks
  • Retail and online had a “great quarter” thanks to iPhone, iPad, Apple Watch, and HomePod
  • Over 250k ‘Today at Apple’ sessions hosted
  • $243.7 billion in cash plus marketable securities, retried $6 billion in debt during the quarter
  • Net cash position of $129.1 billion
  • Plan to reach net cash neutral over time
  • Returned over $25 billion to investors in the quarter, $3.7 in dividends and equivalents
  • 112.8 million shares repurchased
  • Luca outlining guidance for next quarter:
  • revenue between $60 billion and $62 billion, gross margin between 38 percent and 38.5 percent, operating expenses between $7.95 billion and $8.05 billion, other income/(expense) of $300 million, tax rate of approximately 15 percent before discrete items

Q&A:

  • Q: On track to hit Services target earlier than planned, what’s future of Services growth over next 3-5 years?

  • Cook: We’re thrilled with results, very broad-based. Double digit growth in all geo segments. In terms of next leg, given momentum we’re seeing, we feel great about our current Services, but also thrilled about pipeline with new services. With this combination, we feel great about hitting our objective or doing better.

  • Q: Trends within iPhones sales? ASPs were above expectations, what do you think customers want and what’s the elasticity of demand?

  • Cook: If you look for the cycle, we’ve had, on an average weekly basis, growth of units in mid single digits and ASP in double digits. iPhone X is the most innovative smartphone on the market, we priced it at a level that represents that value. We couldn’t be happier with how this is going. I think in this cycle, we’ve learned that customers want innovative products.

  • Cook: If you look at it on a geographic basis, the top 3 selling phones in China were iPhones and iPhones makes up 3 of the top 5 smartphones in U.S., U.K., and Japan. It’s clear we picked up global marketshare.

  • Q: Color on China? iPhone is doing well, but there are concerns about effects of trade war?

  • Cook: This the fourth consecutive quarter of double digit growth in China. There are lots of good things happening in China. In terms of tariffs themselves, our view is that they show up as a tax on the consumer and wind up resulting in lower economic growth and sometimes can bring about unintended consequences. It’s clear that several [trade agreements] are in need of modernizing, but tariffs are not the approach to doing that. We’re encouraging dialog to do that.

  • Cook: None of our products affected by tariffs so far, but there is a fourth tariff which includes goods valued at $200 billion. We’re evaluating that one and will share our views with the administration.

  • Cook: We’re optimistic this will get sorted. There’s a mutuality between the US and China that serves as a magnet to bring each together. The world needs both to prosper for the world to do well. That said, I can’t predict the future but I am optimistic.

  • Q: Original content strategy? Color on Oprah Winfrey partnership?

  • Cook: We’re very excited to work with Oprah and we think her talent connects with audiences around the world. We think we can do some great original content together. As you know, we hired two highly respected TV executives last year and they have been working on a project we’re not ready to share the specifics of yet. I couldn’t be more excited about what’s going on there and we’ve got great talent that we’ve sourced from different places.

  • Cook: Cord cutting is only going to accelerate, accelerate at a faster rate than people thought. We’re happy to be working on something, but not ready to talk in depth today.

  • Cook: Well over 50 million Apple Music listeners when you combine paid with free trial. It appears to us that we took leadership in North America during the quarter and we have the leadership position in Japan. The key thing in music is to grow the market, because if you add everyone up that is providing subscription music today, it’s less than 200 million around the world. It does seem there’s an extraordinary opportunity for growth in the market. I think if we put our emphasis there, we’ll be a beneficiary of that.

  • Q: How should we model iPhone ASPs going into the fourth quarter?

  • Maestri: We do not provide guidance for units or ASP for any product category, but we provide revenue guidance and the range implies 16 to 19 percent growth. We expect strong iPhone growth, Services, and Wearables. On iPhone ASP, we are exiting the June quarter at a higher level than the past and that’s important to keep in mind.

  • Q: Color on the health of the smartphone market? Replacement cycles? Effects of battery replacement program?

  • Cook: I think the smartphone market is very healthy; best market in the world to be in for someone in the business that we’re in. Whether it grows 1 or 2 percent or 5 or 6 percent or 10 percent, or shrinks, it’s a great market because it’s just huge.

  • Cook: Some replacement cycles are lengthening, I think the major catalyst for that was the subsidy plans becoming smaller percentage of sales around the world. For us, we have to come out with a great and innovative product.

  • Cook: In terms of batteries, we have never done an analysis of how many people decided to get a cheaper battery than get a new phone. It’s about treating the users and customers well.

  • Q: Strategically, how does Apple’s ecosystem play in terms of the connected home market?

  • Cook: The home business is bigger than the HomePod and Apple TV. Everyone has their iPhone, iPad, and Mac at home. I use Siri everyday to control my lights. Home is important, work is important, movement between the two is important, health is important. We’re focused on all of it.

  • Q: Do products like AirPods, Apple Watch, Beats attract new people to the ecosystem, or are they targeted towards existing iPhone market?

  • Cook: Some customers are attracted to the iPhone by the Apple Watch; the reverse of that is also true. It’s not always a linear path. I see these things as being somewhat fluid and different for each user.

  • Speed improvements, Screen Time, ARKit 2, macOS App Store redesign

  • 4 million people in beta testing for macOS and iOS

  • DISH Network rolling out support nationwide, Phillies testing Business Chat for drinks

  • Over 250k ‘Today at Apple’ sessions hosted

  • Net cash position of $129.1 billion

  • Plan to reach net cash neutral over time

  • Returned over $25 billion to investors in the quarter, $3.7 in dividends and equivalents

  • 112.8 million shares repurchased

  • revenue between $60 billion and $62 billion, gross margin between 38 percent and 38.5 percent, operating expenses between $7.95 billion and $8.05 billion, other income/(expense) of $300 million, tax rate of approximately 15 percent before discrete items

  • Cook: We’re thrilled with results, very broad-based. Double digit growth in all geo segments. In terms of next leg, given momentum we’re seeing, we feel great about our current Services, but also thrilled about pipeline with new services. With this combination, we feel great about hitting our objective or doing better.

  • Cook: If you look for the cycle, we’ve had, on an average weekly basis, growth of units in mid single digits and ASP in double digits. iPhone X is the most innovative smartphone on the market, we priced it at a level that represents that value. We couldn’t be happier with how this is going. I think in this cycle, we’ve learned that customers want innovative products.

  • Cook: If you look at it on a geographic basis, the top 3 selling phones in China were iPhones and iPhones makes up 3 of the top 5 smartphones in U.S., U.K., and Japan. It’s clear we picked up global marketshare.

  • Cook: This the fourth consecutive quarter of double digit growth in China. There are lots of good things happening in China. In terms of tariffs themselves, our view is that they show up as a tax on the consumer and wind up resulting in lower economic growth and sometimes can bring about unintended consequences. It’s clear that several [trade agreements] are in need of modernizing, but tariffs are not the approach to doing that. We’re encouraging dialog to do that.

  • Cook: None of our products affected by tariffs so far, but there is a fourth tariff which includes goods valued at $200 billion. We’re evaluating that one and will share our views with the administration.

  • Cook: We’re optimistic this will get sorted. There’s a mutuality between the US and China that serves as a magnet to bring each together. The world needs both to prosper for the world to do well. That said, I can’t predict the future but I am optimistic.

  • Cook: We’re very excited to work with Oprah and we think her talent connects with audiences around the world. We think we can do some great original content together. As you know, we hired two highly respected TV executives last year and they have been working on a project we’re not ready to share the specifics of yet. I couldn’t be more excited about what’s going on there and we’ve got great talent that we’ve sourced from different places.

  • Cook: Cord cutting is only going to accelerate, accelerate at a faster rate than people thought. We’re happy to be working on something, but not ready to talk in depth today.

  • Cook: Well over 50 million Apple Music listeners when you combine paid with free trial. It appears to us that we took leadership in North America during the quarter and we have the leadership position in Japan. The key thing in music is to grow the market, because if you add everyone up that is providing subscription music today, it’s less than 200 million around the world. It does seem there’s an extraordinary opportunity for growth in the market. I think if we put our emphasis there, we’ll be a beneficiary of that.

  • Maestri: We do not provide guidance for units or ASP for any product category, but we provide revenue guidance and the range implies 16 to 19 percent growth. We expect strong iPhone growth, Services, and Wearables. On iPhone ASP, we are exiting the June quarter at a higher level than the past and that’s important to keep in mind.

  • Cook: I think the smartphone market is very healthy; best market in the world to be in for someone in the business that we’re in. Whether it grows 1 or 2 percent or 5 or 6 percent or 10 percent, or shrinks, it’s a great market because it’s just huge.

  • Cook: Some replacement cycles are lengthening, I think the major catalyst for that was the subsidy plans becoming smaller percentage of sales around the world. For us, we have to come out with a great and innovative product.

  • Cook: In terms of batteries, we have never done an analysis of how many people decided to get a cheaper battery than get a new phone. It’s about treating the users and customers well.

  • Cook: The home business is bigger than the HomePod and Apple TV. Everyone has their iPhone, iPad, and Mac at home. I use Siri everyday to control my lights. Home is important, work is important, movement between the two is important, health is important. We’re focused on all of it.

  • Cook: Some customers are attracted to the iPhone by the Apple Watch; the reverse of that is also true. It’s not always a linear path. I see these things as being somewhat fluid and different for each user.