The iPhone Is Now Bigger in China Than in Europe

China has now surpassed Europe as Apple's second-largest market.
Workers set up a giant advertisement for Apple's iPhone 6 in Beijing. China.
Workers set up a giant advertisement for Apple's iPhone 6 in Beijing. China.Ng Han Guan/AP

As expected, Apple is smashing records again. The world's most valuable company sold a whopping 61 million iPhones during its second fiscal quarter compared to 42.7 million phones from the same period a year ago, according to Apple's latest earnings report released today. Most importantly for Apple's future, a big chunk of those sales were to customers in China, which has now surpassed Europe as Apple's second-largest market.

Apple reported $13.6 billion in profit and $58 billion in revenue, handily beating both its own guidance for the quarter---between $52 billion and $55 billion---and Wall Street’s expectation of $56.1 billion. Of that $58 billion, $16.8 billion came from sales in the greater China region, according to the company---a 71 percent year-over-year increase. Sales in Europe were $12.2 billion.

"We’re seeing a higher rate of people switching to iPhone than we’ve experienced in previous cycles," said Apple CEO Tim Cook during the company’s earnings call this afternoon. Cook called this latest report Apple's best March quarter ever.

Apple has been aiming to secure a foothold in the Chinese market for some time now, but the proliferation of cheap and locally made Android phones---especially from Xiaomi, currently the world's third-largest smartphone maker---caused some skeptics to argue this could be an all but unattainable goal for the company. When the budget-minded iPhone 5c came out in the fall of 2013, it was thought that the device would address this concern. That assumption turned out to be very wrong, as sales of the iPhone 5c lagged behind the iPhone 5s since its arrival in China. Now, as Apple's Q2 2015 earnings have indicated, there's no longer any doubt where demand in the region actually lies: in more premium phones like the iPhone 6 and 6 Plus.

Big, Bigger, Biggest

In keeping with an ongoing trend, iPad sales were lukewarm; Apple moved 12.6 million units, which represented the smallest piece of the Cupertino company’s revenue pie this quarter at $5.4 billion---a decline in sales of nearly 23 percent. On the other hand, Apple did sell a respectable number of Macs even as PC shipments continue to slide industry-wide, a boost likely helped by the release of new MacBook Airs and the MacBook Pro in March. The company sold 4.6 million Macs, 11 percent more than it sold in the same period last year. Notably, this segment produced a seemingly less impressive 1.8 percent increase in revenue for Apple, but this could change in the next quarter if the new Retina-screened Macbook takes off.

Another surprise tidbit during the earnings call was Cook’s revelation that Best Buy would begin to accept Apple Pay, the company’s mobile payments service, in-app as of today, and that retail stores would be fully equipped to support Apple Pay later this year. The electronics chain was a known member of MCX, the consortium of top US retailers that had been planning to roll out its own mobile payments system, called CurrentC, sometime in 2015. Last year, some members of the coalition actively blocked the use of Apple Pay in their stores in anticipation of CurrentC’s arrival, but later eased up as Apple Pay's popularity has grown.

With another quarter gone by, Apple is dominating on almost all fronts---smartphones, computers, and mobile payments. Not to mention that this quarter was too early to start counting Apple Watch sales. Apple is big. But with the world's largest country now showing a surging appetite for its products, "big" may soon take on a whole new meaning.