Transcript: Apple CEO Tim Cook on the company’s 2017 Q3 earnings

Apple's second-quarter results for 2017 are in. Here's our transcript of the call.

Apple CEO Tim Cook and CFO Luca Maestri spoke with analysts during the company's Q3 2017 earnings call. Here's our ongoing live transcript of their remarks! If you want more info on Apple's results, we recommend checking out the awesome charts from Six Colors.

Cook's opening remarks

Tim Cook

Today we're proud to announce very strong results for our fiscal third quarter with unit and revenue growth in all of our product categories. We'll review our financial performance in detail and I'd also like to talk about some of the major announcements we made in June at our World Wide Developers Conference. It was our biggest and best WWDC ever and the advances we introduced across hardware, software, and services will help us delight our customers and extend our competitive lead this fall and well into the future.

For the quarter, total revenue was at the high end of our guidance range at 45.4 billion. That's an increase of 7% over last year, so our growth rate has accelerated in three successive quarters this fiscal year. Gross margin was also at the high end of our guidance and we generated a 17% increase in earnings per share.

iPhone results were impressive, with especially strong demand at the high end of our lineup. iPhone 7 was our most popular iPhone and sales of iPhone 7 Plus were up dramatically compared to 6s Plus in the June quarter of last year. The combined iPhone 7 and 7 Plus family was up strong double digits year over year. One decade after the initial iPhone launch we have now surpassed 1.2 billion cumulative iPhones sold.

Services revenue hit an all-time quarterly record of $7.3 billion, representing 22% growth over last year. We continue to see great performance all around the world, with double-digit growth in each of our geographic segments. Over the last 12 months, our services business has become the size of a Fortune 100 company — a milestone we've reached even sooner than we had expected.

We had very positive results for iPad with broad-base growth in units, revenue, and market share. iPad sales were up 15% year over year and grew across all of our geographic segments. We achieved our highest global market share in over four years, based on IDC's latest estimate of tablet market results for the June quarter. And in markets like China and Japan, over half of iPads sold were to people buying their very first iPad. Our iPad product lineup is stronger than ever. The new iPad we launched in March offers great value and performance and the all-new 10.5-inch iPad Pro, launched in June, features the world's most advanced display with ProMotion technology and is more powerful than most PC desktops. iPad is the perfect tool for teaching in new and compelling ways and our iPad results were especially strong in the U.S. education market where sales were up 32%, year over year, to over one million units. We believe coding is an essential skill that all students should learn. We're thrilled that over 1.2 million students of all ages are now using iPad and Swift Playgrounds to learn the fundamentals of coding, and over 1,000 K-12 schools across the U.S. plan to use Apple's Everyone Can Code in their curricula this fall. And for high school and community college students who want to pursue careers in the fast-growing app economy, we announced App Development with Swift, an innovative, full-year curriculum designed by Apple engineers and educators and provided free to schools to teach students to code and design fully functional apps gaining critical job skills in software development and information technology.

I'd like to turn now to Mac, which gained global unit market share and reached new June quarter unit sales records in mainland China and Japan. Mac revenue grew 7% year over year driven by the strength of the MacBook Pro and iMac, despite IDC's latest estimate of a 4% unit contraction in the global PC market. And with the refresh of almost our entire Mac lineup in June, we're off to a great start for the back to school season.

Sales of Apple Watch were up over 50% in the June quarter, and it's the number-one selling smart watch in the world by a very wide margin. Apple Watch is having a positive impact on people's health and daily lives, motivating them to sit less and move more. With features like built-in GPS and waterproofing, Apple Watch Series 2 is the perfect companion for hiking, running, and swimming.

We're also seeing incredible enthusiasm for AirPods with 98% customer satisfaction, based on Creative Strategies survey. We have increased production capacity for AirPods and are working very hard to get them to customers as quickly as we can, but we are still not able to meet the strong level of demand.

We made some big announcements during the June quarter that I'd like to quickly review. We launched a new investment in the future through our advanced manufacturing fund. We've earmarked at least $1 billion for this program aimed at helping our manufacturing partners develop innovative production capabilities and create high skilled jobs in the United States. We believe this can lay the foundation for a new era of technology driven manufacturing in the U.S. The first $200 million from the fund has been committed to Corning to support R&D, capital, equipment needs, and state-of-the-art glass processing. And as we announced it WWDC, we have a very exciting fall ahead, with stunning advances in iOS 11, macOS High Sierra and watchOS 4. iOS 11 will make iPhone better than ever, with Apple Pay peer-to-peer payments, an even more intelligent and natural Siri, new expressive messages with full screen effects, richer and more powerful maps, enhanced Live Photos, memories, and Portrait Mode effects, and much much more. iOS 11 will also take the iPad experience to a whole new level with features such as a customizable dock, multi-touch drag and drop, powerful new multitasking, more efficient QuickType, and great new markup and scanning capabilities.

One of the most exciting and most promising announcements from WWDC was the introduction of ARKit, a new set of tools for developers to create augmented reality apps. It's still early in the beta period, but it's clear that ARKit has captured the imagination of our developer community. We think ARKit will help the most creative minds in the industry tap into the latest computer vision technologies to build engaging content. We believe AR has broad mainstream applicability across education, entertainment, interactive gaming, enterpris,e and categories we probably haven't even thought of. With hundreds of millions of people actually using iPhone and iPad today, iOS 11 will become the world's biggest augmented reality platform as soon as iOS 11 ships.

With iOS 11, we're also bringing the power of machine learning to all Apple developers with CoreML, enabling capabilities like face detection, object tracking, and natural language interpretation. CoreML lets developers incorporate machine learning technologies into their apps with all the processing done right on device, so it respects our customers data and privacy. For Mac, we provided a peek at the immersive gaming, 3D, and virtual reality experiences made possible with the upcoming release of macOS High Sierra and the amazingly powerful new iMac Pro. We're proud to make the best personal computers in the industry and are very excited to deliver even more innovation in the months to come.

Apple Watch will become more intelligent than ever this fall with watchOS 4, featuring a proactive Siri watch face, personalized activity coaching, and an entirely new music experience. watchOS 4 also introduces GymKit, a groundbreaking technology platform to connect workouts with cardio equipment.

We also previewed HomePod, a breakthrough wireless speaker for the home that delivers amazing audio quality and uses spatial awareness to sense its location in the room and adjust the audio automatically. Visitors to our listening room at WWDC were blown away by the HomePod's incredible sound, which is unlike any other wireless home speaker on the market. With deep knowledge of music, HomePod is designed to work with your Apple music subscription to help you enjoy the music you already love as well as to discover great new music based on your personal preferences. As an intelligent home assistant, HomePod is a great way to send messages, set a timer, get updates on news, sports, and weather, or control smart HomeKit devices by simply asking Siri to turn on the lights, close the shades, or activate a scene.

We can't wait to deliver all of these powerful innovations in the months to come, and we might even have some others to share with you later in the year. Now for more details on the June quarter results, I'd like to turn the call over to Luca.