Sales of Apple Inc.’s iPhone might have faltered in the fiscal third quarter, but the tech giant continues to build out its shopping and fashion ecosystem, which extends from the nearly ubiquitous smartphone to Apple Pay to the Apple Watch.
The company’s third-quarter profits slipped 27 percent to $7.8 billion, or $1.42 a diluted share, but still came in ahead of the $1.38 per share analysts projected. Sales for the three months ended June 25 fell 14.6 percent to $42.36 billion, with international sales accounting for 63 percent of total turnover.
The tech giant’s iPhone sales fell to $24 billion in the quarter, down 23.3 percent from a year earlier.
Chief financial officer Luca Maestri said Apple sold 40.4 million iPhones in the quarter, with growth in Russia and other countries such as Japan, Turkey, Brazil, India, Canada and Sweden. Maestri also said there was momentum among business customers, referring to U.S. corporate buyers.
Chief executive officer Tim Cook emphasized that iPhone demand was comprised of upgraders, switchers and those new to smartphones and also said sales of the new lower-priced iPhone SE was popular in developed and emerging markets. “Overall, we added millions of first-time smartphone buyers in the June quarter and switchers accounted for the highest percentage of quarterly iPhone sales we have ever measured,” he said.
Aside from addressing iPhone sales, Cook primarily echoed comments that he has shared recently, including forthcoming updates that he discussed at the Apple developer conference in June, such as plans to bring Apple Pay to Safari.
This means that retailer web sites will be able to add a “Pay With Apple Pay” button and customers will not have to enter credit or debit card information. Previously, Apple Pay was exclusively available for apps.
“Users can easily make secure and private purchases when shopping on participating web sites,” said Cook, who added that “tens of millions” of people had used Apple Pay at stores and in apps, and that estimated monthly active users were up more than 450 percent compared with a year ago. He said research found that three out of four contactless payments in the U.S. are made with Apple Pay and that there are more than 11 million contactless-ready locations in the countries in which Apple Pay is available, including three million in the U.S.
Apple Pay’s move to the mobile web is expected to have a major impact on mobile commerce.
Demandware’s recently released Mobile Shopping Focus Report showed that phones are now the top device driving e-commerce traffic, accounting for 45 percent of traffic globally and 47 percent in the U.S.
By the end of this year, Demandware projected shoppers will create more baskets on mobile than any other device. Currently, a quarter of orders are placed on phones.
This trend places increased importance on Apple and its iPhone — the first point of contact many shoppers have with brands.
Cook also pointed to the Apple Watch and again emphasized reports that it was the best-selling smartwatch in the world. He said that J.D. Power ranked it the highest in customer satisfaction among all smartwatches.
A recent report from IDC stated that even though Apple Watch was the clear market leader, after having shipped an estimated 1.6 million watches in the second quarter of 2016, smartwatch sales overall had shown a year-over-year decline of 32 percent. The researchers did acknowledge that consumers have been holding off in anticipation of hardware and software improvements in the fall.
Cook said that this fall, Watch OS 3 will let customers update their Apple Watches with an enhanced user interface, significantly improved performance and new fitness and health capabilities. “We’re just getting started with the Apple Watch and we look forward to even more exciting announcements in this space,” Cook said.
Overall, Cook said he was optimistic about the future, as the smartphone — and its increasing ability to utilize artificial intelligence — was becoming more instrumental and essential to people’s lives.
“As the phone becomes more of your assistant, you aren’t going to leave without it,” he said. “I see these all as vectors that are incredibly positive.”