One in every four iPhones sold in Q3 was an iPhone SE!

Apple's App Store revenues led the charge as the company revealed its better-than-expected financial results for the third quarter ending June 25.

Apple's App Store revenue hit an all time high even as Apple's overall revenue was $7 billion lesser than in Q3 of last year.

Wih a slowing smartphone market and a lack of enthusiasm for iPhone 6s and iPhone 6s Plus devices among traditional Apple fans, analysts expected Apple to post disappointing quarterly results. While Apple's finances didn't turn out to be as bright as they were last year, the company still managed to sell over 40 million devices globally and its App Store charts reached an all-time high.

Guess how many smartwatches Apple sold last quarter?

In the quarter ending June 25, Apple posted $42.4 billion in revenue,  $7.8 billion in net income and a value of $1.42 per diluted share. International sales yet again dominated over demand in North America and the company returned over $13 billion to investors through share repurchases. Given that Apple hasn't launched a major iPhone so far this year except the mid-range iPhone SE, the results would satisfy any phone maker in current market conditions.

However, according to Bloomberg, iPhone SE was a major contributor to Apple's positive earnings in the last quarter. Accounting for as much as 23% of all iPhone sales in the period, the first budget iPhone from Apple has kept the ship afloat and will continue to do so until iPhone 7 and 7 Plus take up the reigns.

“The customer demand for our products was significantly stronger than we had anticipated at the beginning of the quarter. We were not able to fulfil iPhone SE demand throughout the quarter. We have now been able to put in enough capacity to provide sufficient supply for the next quarter,” said Luca Maestri, Chief Financial Officer at Apple.

Apple hopes to sell 2 million Apple Watch 2s every month

Even though iPhone SE will affect Apple's per device profitability, it has helped widen Apple's user base from traditional markets to newer countries in Asia and Africa where the market for mid-range devices is strong. Bloomberg reports that while average price of iPhones was $660 last year, it has now come down to $595, thanks to strong sales of iPhone SE. “We are pleased to report third quarter results that reflect stronger customer demand and business performance than we anticipated at the start of the quarter. We had a very successful launch of iPhone SE and we’re thrilled by customers’ and developers’ response to software and services we previewed at WWDC in June,” said Tim Cook.

With a large number of smartphones with premium specifications now available at much cheaper prices than iPhones, Apple will have to bring in major upgrades to its next line of iPhones to maintain its appeal among users who have many more choices than before. Apple has forecasted a revenue of $45.5 billion and $47.5 billion in Q4 which it may base on the decent demand of iPhone SE and the arrival of iPhone 7 and 7 Plus handsets in September, and it would be interesting to see if iPhone 7 will be able to usher in record profits for the company like iPhone 6 did two years ago.

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As for the Apple Watch, Apple didn't mention it in its earnings call but an IDC report published last week stated that Apple displayed the worst quarterly performance in terms of sale of Apple Watches in the last quarter, bringing down overall performance of the smartwatch industry for the first time ever. Sales of Apple Watches went down from 3.6 million units in Q2 of last year to 1.6 million units in Q2 this year even as Samsung and Lenovo improved their quarterly performance marginally. Despite a fall in sales by over two million units, Apple still commands 47% of the smartphone market, down from 72% in Q2 of last year.

Back in June, Digitimes claimed that Apple has ordered 'higher than expected' second-generation Apple Watches and is planning to sell two million Apple Watches every month. 'Orders for the upcoming Apple Watch have been higher-than-expected, said the sources. Judging from the orders, the sources estimated that about two million units of the new Apple Watch could be shipped monthly,' said the report. 'Sales of the Apple Watch have been a disappointment, therefore, the recent pull-in of orders for the second generation from Apple is "rather aggressive," it added. Apple is expected to launch Apple Watch 2 along with iPhone 7 and iPhone 7 Plus handsets in an event which may take place on September 16.

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