Trust the magic pipeline and other key takeaways from Apple’s Q3 earnings call

Last quarter was bright but the future's even brighter, according to Apple.

Last quarter was bright but the future’s even brighter, according to Apple.

Even Apple execs sounded pleasantly surprised as they revealed last quarter’s mostly higher-than-expected numbers Tuesday. But in what’s become something of a refrain in Cupertino, they couldn’t stop themselves from vague and knowing references to the incredible products waiting in the magical Apple pipeline.

Trust us, they seemed to say: Last quarter’s net profit of $7.7 billion — fueled by robust sales of iPhones, MacBooks and a surprisingly strong showing in the iTunes Software and Services category — was totally great, but wait till you see what we’ve got up our sleeves.

“We’re expecting a very busy fall,” said Luca Maestri, Apple’s chief financial officer. “We’re very excited about what’s in the pipeline.”

What else did Apple executives have to say during Tuesday’s Q3 earnings call? Here’s our take on everything you need to know from the latest numbers talk.

Keep calm and believe in our magical, mythical pipeline

Both Tim Cook and Luca Maestri made it abundantly clear that the future will be bright. While this quarter showed some amazing returns, mostly exceeding Apple’s own expectations (except for the iPad category), Cupertino remains confident that the new products coming down the pipe will drive financial results even higher than before. The iPhone 6? Updated Macs? Maybe even the technological unicorn known as (maybe) the iWatch? Unsurprisingly, Apple is keeping a lid on all this, but they’ve alluded to the killer product pipeline so many times that when they deliver, it had better be awesome.

iPad’s good, but it’s going to get better

Cook pointed out that Apple has already sold 225 million iPads, staking a bold claim on a category that didn’t even exist until four years ago. “We still feel the category as a whole is in its early days,” he said, adding that he still see opportunities for significant innovation for tablets. He also commented on the high rate of iPad usage (as opposed to sales) in education, enterprise and government, noting that more than half of new iPad owners this quarter were buying their first tablet. The education market, he said, is 85 percent iPad when it comes to tablet sales, and the BRIC countries (Brazil, Russia, India and China) are snapping up iPads like crazy, too.

Beam us up: Apple is pushing hard in enterprise

The executives focused quite a bit on Apple’s hooks into the business and government world. Cook sounded totally bullish on the company’s recent partnership with IBM, saying it will enable the creation of mobile-first enterprise apps, which will help drive iOS adoption by companies. “I honestly feel like the opportunity is huge,” Cook said.

On the health front, medical device company Medtronic has developed more than 175 internal iOS apps running on 16,500 iPhones to manage sales, increase productivity and even keep sales materials up to date. And at NASA, scientists, researchers and flight crews are using more than 26,000 iPhones to keep the sky full of spaceships. Maestri noted that enterprise was instrumental in making a record June quarter for Mac sales, with 4.4 million Macs sold, as compared to 3.68 million last year.

Apple is a serial polygamist

Cook described both the Beats Electronics acquisition and the Apple-IBM partnership as great marriages, ones that bring a wide range of expertise and technology to the Apple family. IBM will bring mobile enterprise solutions, which should prop up flagging iPad sales. Cook praised the Beats deal as a brilliant acquisition that gives Apple a music-subscription service and a highly successful headphones and audio retail business, while also bringing in proven music business talent like Jimmy Iovine and Dr. Dre.

“You can only do so many partnerships well,” Cook said, although he thinks Apple’s strong executive team could manage more deals. Still, he promised the company will only pursue acquisitions and partnerships that make sense and help Apple “make great products that are great for our customers.”

In all, Apple has made 29 acquisitions this year (five of which have occurred since March), though Cook says Apple isn’t jumping into bed with just anyone. “We’re always looking in the acquisition space but we don’t let our money burn a hole in our pocket,” Cook said.

It’s the ecosystem, stupid

The biggest surprise, even for the team at Apple, is just how much the iTunes ecosystem is kicking ass and taking names. In the first nine months of this fiscal year, iTunes software is the fastest-growing part of Apple’s business. The category, called iTunes Software and Services, has shown a 20 percent year-over-year growth in the App Store.

“iTunes software and services are growing the most, almost doubling,” said Cook. “[It's] very, very exciting what we’re seeing there.”

Apple’s not the only one excited about the growth of the all-important ecosystem: Devs are getting paid, with $5 billion going to developers since January alone. ($20 billion has been paid out since creation of the App Store.)

The world is changing (and that’s good for Apple)

With price drops in global components as well as new carrier strategies that encourage consumers to trade in their smartphones more often than before, the changing economy is — so far — working out pretty well for Apple and its investors.

Additional reporting by Lewis Wallace and Buster Hein.

  • andrewi

    Two words for why the store works. No DRM.

    Steam already did it for games.

About the author

Rob LeFebvreAnchorage, Alaska-based freelance writer and editor Rob LeFebvre is Cult of Mac's Culture Editor. He has contributed to various tech, gaming and iOS sites, including 148Apps, VentureBeat, and Paste Magazine. Feel free to find Rob on Twitter @roblef

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