7 takeaways from Apple’s surprisingly good Q3 earnings

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Apple made $7.8 billion in profit last quarter.
Photo: Jim Merithew/Cult of Mac

Apple shocked investors with better than expected earnings for Q3 2016 today, despite some ominous signs that some analysts claimed signaled we’ve reached peak Tim Cook.

Thanks to the booming App Store business and other Services, Apple raked in an impressive $42.2 billion in revenue, which Tim Cook says, “was way better than we expected from so many different points of view.”

Here are the most important takeaways from today’s earnings call:

iPad on the up-and-up

The total number of iPad units sold each quarter has been slipping for over a year now, but in Q3 2016, revenue was up 7% year-over-year. Unit sales were still down, but the iPad Pro’s price tag has given Apple a nice boost of profits.

Apple’s services are huge

Selling content through iTunes, iBookstore, Apple Music and the App Store is becoming a bigger money maker than ever for Apple now that it has 1 billion active devices. Service revenue grew 19 percent year-over-year and App Store revenue was the highest ever. The category is growing so fast, Apple says it will be the size of a Fortune 100 company next year.

Tim is clueless about Pokémon

When asked whether Pokemon Go has changed his view of the future, Tim Cook sounded like a total dad and pronounced it “pokey-man” not once, but three different times. He did reveal though that Apple is still high on augmented reality.

“We think AR will be huge,” Cook said, “[Pokemon GO] proves that AR can be really great. We have been and continue to invest in AR and think it could have some interesting commercial uses.”

The iPhone SE is no flop

It looks like many iPhone users prefer a smaller screen size, as long as it comes with some decent hardware too. Tim Cook revealed that demand for the iPhone SE outpaced supply throughout the quarter and Apple didn’t hit a balance until recently. Because of the extra demand, iPhone sales only dropped 8% YOY, which is much better than Apple predicted it would do 3 months ago.

Mac continues to grow

Even though the rest of the PC market is shrinking, the Mac install base grew to a new all-time high at the end of Q3.

Apple Pay is dominating

3 out of 4 contactless payments in the US are now made with Apple Pay. The contactless payments service is live in 9 markets, including 6 of Apple’s top 10 markets. The success of Apple Pay has brought in a significant amount of revenue to Apple’s Service.

“The revenue growth from Apple Pay is astronomical but the base is very small,” said Tim. “For today, Apple Pay is very much about a great feature for our customers so they can pay in a private and secure way.”

India Stores are coming

“India is now one of our fastest growing markets,” Tim told investors. iPhone sales are up 51% YOY in the country and retail stores are definitely on the way now that Apple has cleared all the hurdles. Apple says its still optimistic that both India and China will become strong growth markets for iPhone.