Apple just completed its Q3 2018 earnings call. Here are my five key thoughts on the quarter:

1. Even Apple isn’t immune to the growing trend of longer replacement cycles. iPhone shipments were flat YoY indicating that their sales growth is slowing. However, iPhones still make up more than 50% of product revenues. How is Apple doing that?
2. Because consumers are still buying their newest and most expensive iPhones, even ten days of XS series sales were a success. The whopping $793 ASP is a major jump from $606 in Q3 2017. Compare that to the minor $11 jump from $595 in Q3 2016. The company simply is doing a better job than any other OEM in keeping its user-base tied to their products. Smartphone innovations have been weak over recent years, and 5G phones will likely only be fully viable around 2020 at scale. This all indicates that iPhone's won’t be the growth driver that it used to in the past and something has to change.
3. A year ago, the worry was Apple was in for a decline in China. There was also hand ringing that Europe was potentially in trouble of slowing. Today the company’s key regions were very close in revenue growth. Americas are seeing 19% growth, Europe 18%, and China 16%. This means the iPhone brand has held up nicely vs. Huawei, Oppo, vivo, Samsung and others while pushing the limits on higher ASPs. However, we are seeing strong growth by these companies in developing markets.
4. Even Apple knows that it’s unsustainable to keep raising their ASP like this YoY. The next big move for the company will be to refocus their offerings to their ecosystem and services and away from its devices. An indicator for this is their announcement that iPad, Mac and iPhone sales unit numbers will not be broken out in the future. The company will now focus on better weaving a story not build on shipments but one of revenues, ecosystem, services, and customer satisfaction.
5. Speaking of services, the company saw a 17% YoY increase to almost $10 billion, well on its way to the $14 billion target by 2020. We are already seeing Apple going deeper into the TV service market with their announcement to launch a TV streaming service in the near future. Apple will continue to innovate outside of their products as they realize that their growth can only be substantiated by bolstering their service offerings. They now have the user base and device buy-in and are looking towards growth opportunities in TV, health, and mobile payments.