CEO Tim Cook had a lot to say during Apple's second-quarter earnings call.
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On Monday, Apple turned in yet another impressive quarter, exceeding analyst expectations largely due to record demand for the iPhone. During the subsequent earnings call, Cook shed some light on how he sees Apple's business.
Below are five of the most important quotes from that call.
The iPhone 6 still has room to grow
For the iPhone, Apple's last two quarters have offered historic sales numbers. The tech giant'sfiscal first quarterwas the best in the iPhone's history, and the second quarter was the second best. From October through the end of March, Apple sold 135.7 million iPhones.
This might incline investors to wonder about the future. Having sold so many iPhones in the recent past, can Apple continue to perform? Or will iPhone sales decline as record demand for the iPhone 6 dissipates? Cook noted that only about one-fifth of iPhone owners have an iPhone 6 or iPhone 6 Plus, and that there's still ample opportunity to grow the business.
Our current estimate is that about 20% of the active installed base has upgraded to [an iPhone 6] or [iPhone 6 Plus]. ... As I look at that number, that suggests there's plenty of upgrade headroom ... we [also] want to keep inviting over as many [Android] switchers as we can. So between both of those and the first time buyers as well, it seems really, really good right now [for the iPhone].
No Apple Watch numbers
Apple had previously said it didn't plan to disclose sales numbers for the Apple Watch, at least not initially. Apple held firm to that commitment to the call, speaking instead in vague generalities. Cook stuck to heaping praise on the product and the buzz surrounding it.
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I feel really great about it. The customer response, literally, from what I've seen, is close to 100% positive. And so it's hard to imagine it being better.
The iPad is being cannibalized
Apple's quarterly results were strong almost across the board, with one notable exception: the iPad. Demand for Apple's tablets continues to decline. During the call, Cook was asked about the possibility that Apple's other products -- in particular, the larger iPhone 6 Plus -- were cannibalizing the iPad.
Have we had cannibalization? The answer is yes. We're clearly seeing cannibalization from iPhone and on the other side, from the Mac ... as I've said before, we've never worried about that. ...That will play out, and at some point, it will stabilize. I'm not sure precisely when, but I'm pretty confident that it will.
The emerging middle class fueled Apple's results
In the second quarter, Apple saw record demand from Asia. Demand from mainland China was particularly strong, with quarterly revenue surging 71% on an annual basis. Other East Asian countries (excluding Japan) also posted impressive results, with revenue up 48%.
Apple's products are more expensive than many of the gadgets they compete against, and many consumers in East Asia have significantly less disposable income than their counterparts in the West. Naturally, this has inclined many to presume that Apple's foreign demand would be limited to top earners. Not so, according to Cook.
If you look in the emerging markets, our revenues were up 58% [annually]. And this accounted for just slightly less than 40% of the company's revenue. If you look at BRIC within the emerging markets, BRIC countries were up 64% [annually]. And so as I look at that, without having market research data on the demographics...it's clear to me that it has to be coming from the middle class, because the upper income earners -- there's only so many of those. And you can't grow those kind of numbers without getting significantly into the middle class.
Hints about Apple's next product?
Apple has been widely rumored to be working on a more advanced version of the Apple TV, one with support for apps and other services. Apple doesn't use its earnings calls to announce new products, but Cook hinted at what could be the company's next priority. When asked about Apple's new partnership with HBO -- one that allows it to sell HBO's content through Apple TV -- Cook suggested big changes could be on the horizon.
Where could it go? I don't want to speculate, but you can speculate probably as good as I can about where that can go. I think we're on the early stages of just major, major changes in media that are going to be really great for consumers, and I think Apple could be a part of that.
The article 5 Things Apple Inc.'s Management Wants You to Know originally appeared on Fool.com.
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