Apple beats expectations with Q3 earnings but iPhone sales nosedive

Apple released its financial results for its fiscal 2015 third quarteron Tuesday nightbeating expectations for revenue and earnings.

Apple’s Q3 results for the April to June period showed revenue of US$49 billion andUS$10.7 billion in profit, with international sales accounting for 64% of the quarter’s revenue – that’s an increase from the year-ago quarter when the tech giant took in US$37.4 billion and a net profit of US$7.7 billion.

Apple’s year-over-year growth rate was up 33% from the first half of 2015, and earnings per share (EPS) were up 45%.

Apple’s Q3 period is the first to include initial user numbers of its streaming service Apple Music and the first to includeinitial Apple Watch sales.

Actual figures on Apple Music's user numbers weren't revealed, however during the analyst call this morning Tim Cook said the number of people using thetrial period is in the millions. He saidthe numbers are growing "substantially" every day. He also said users of the worldwide radio station Beats 1 is also seven figures.

On the Apple Watch,Cooksaid hospitals and researchers are gathering data using the Watch and that June sales were higher than April and May. Apple didn’t specifically detail Watch sales but it did report that the revenue of its ‘other services’ – which includes the Watch, iPhone, iPad and Apple TV – was US$2.6 billion in Q3. Cook said the growth of the Watch has offset the iPod, iPad and accessories decline.

Performance sales of the iPhone grew by 35% compared to last yearwith 45.7 million iPhones sold, almost three times the rate of growth of the smart phone market overall. However, they've declined significantly from Q2 this year when it sold over 61.1 million units. The report also noted27% of the install base upgraded to a 6 or 6 Plus.

Services revenue generated over US$5 billion, setting a new all-time record for the company.

Today’s Q3 results follow last quarter’sUS$58 billion in revenue when it made US$16.8bn in Greater China, almost US$1.8bn more than the entire recorded music industry in 2014. Today it was revealed revenue in the area was down on Q2 toUS$13.2 billion.Tim Cook said China will be Apple’s largest market at some point with an aim to get 40 stores in the territory.“We have our pedal to the metal”, he said.

App Store revenue in China has doubled year-on-year with Forbes reporting developers in China created 250,000 apps for China App Store.

Apple now has $202.8 billion in cash. Around 89% of it is outside the US. Luca Maestri, Apple’s chief financial officer said: “We generated very strong operating cash flow of $15 billion, and we returned over $13 billion to shareholders through our capital return program.”

Apple forecasts revenue between US$49 billion to US$51 billion for the current Q4.