The Apple Pay/Amex Global Adventure

In some sense, it’s no surprise when Apple posts a successful quarterly earnings report. They didn’t get to be the world’s most valuable company by making a habit of choking during earnings season. However, when it comes to Apple “success,” it is measured somewhat differently than it is for anyone else.

As Q3 demonstrated, merely selling tens of millions of phones and generating billions in revenue won’t necessarily impress investors who’ve grown to the alternate reality version of success Apple has spent the last decade creating. Apple didn’t beat the analysts' estimates and took a serious punishment from investors as a consequence.

The goods news this time around is that it seems Apple has beaten The Street’s estimates for its last financial quarter of 2015.

Apple reported profit of $1.96 per share on $51.5 billion in revenue — beating analysts’ expectations of $1.88/$51.1 billion by a notable, if not exceptional, margin. Those figures also represent a 22 percent jump in revenue since this time last year and a 31 percent increase since last quarter.

CEO Tim Cook, on a call with investors, called the Q4 performance a “very strong finish to a record-breaking year.”

“We completed our fiscal year in September, and we are proud to report revenue of $234 billion, an increase of 28 percent and $51 billion over 2014,” Cook noted. “This is our largest absolute revenue growth ever. To put that in some perspective, our growth in one year was greater than the full year revenue of almost 90 percent of the companies in the Fortune 500.”

Cook and Apple CFO Luca Maestri then ran through the highlights of Apple’s immediate past and future, including big news for Apple Pay, an update of the firm’s aggressive push into the enterprise, a few calming words about China and some data snippets about the firm’s favorite moneymaker: the iPhone.

So, what thrills and chills in the latest Apple earnings might you have missed if you couldn’t quite make it all the way through the hour-plus-long call with investors that followed the Q4 earnings release?


Apple Pay And Amex Are Taking On the World

“We are thrilled to announce today that we are partnering with American Express to bring Apple Pay to eligible customers in key global markets so even more people can experience the easy, secure and private way to pay,” Tim Cook announced during yesterday afternoon’s call. “Apple Pay will be available to eligible American Express customers in Canada and Australia this year and is expected to expand to Spain, Singapore and Hong Kong in 2016.”

It seems Apple Pay is about to make its next great international leap forward, powered by American Express. By the end of this year, Amex members in Australia and Canada will be able to use Apple Pay at existing NFC-compatible terminals.

Now, it’s possible to use Apple Pay in Canada today — for customers with U.S.-issued cards. Similarly, Australians can also tap into Apple Pay via a U.S. card and a special compatibility case. But the latest move will be the first time Apple Pay will be available in either country with a locally issued card. Provided, of course, the card was issued by American Express.

Going with American Express offers Apple a unique opportunity, particularly in Australia where it will essentially play catch-up with already available Android Pay. Apple has faced some difficulty cracking the Aussie market when banks nationwide seemed content to say “no thanks” to Cupertino, rather than agree to offer up half their fee income to Apple.

The American Express expansion was Cook’s most specific piece of data on Apple Pay, though he did have a generally positive attitude about it and referenced rapid growth.

“Apple Pay is seeing double-digit growth in transactions month after month, and we continue to add major businesses, including Starbucks, which will roll out Apple support to all its U.S. stores in 2016. Apple Pay now supports merchant rewards programs. We also look forward to announcing several popular retailers coming online in the next few weeks.”

Cook did not offer much more in the way of specifics — either about those popular retailers or about that double-digit growth in transactions. PYMNTS' latest data on Apple Pay adoption and usage indicates that while transactions may reflect a small uptick from last quarter, double-digit growth seems elusive.

But while Apple didn’t have a lot to say about Apple Pay, Tim Cook did speak about the company's new, and apparently expanding, businesses in working with other businesses.

Apple Looks To The Enterprise To Drive Future Growth

If you didn’t know that Apple has a rather rapidly growing enterprise mobile/computing business, don’t feel bad. Tim Cook also apparently thought that information would be surprising.

“I doubt that many people knew that we had a $25 billion enterprise business that we quietly built in not too many years,” Cook noted during the investor call. “Our penetration is low, but we have significant actions going on to really deepen that. So, sort of everywhere I look I see significant opportunity.”

During his remarks, CFO Maestri further called out Apple’s specific recent partnerships with Cisco and IBM, noting that Cisco is currently in the process of optimizing its network for iOS devices, as well as the initial round of 55 enterprise-specific apps — which include specific mobile applications for health care, financial services and travel, among many others — that IBM has already rolled out.

“We’ve been continuing to change and improve iOS with more and more enterprise features,” Cooked noted in his remarks to an analyst about the continuing development of Apple's evolution into an enterprise (as well as a consumer) brand. “I would describe it as a sort of continuation of that cadence, perhaps with a little more intensity. From a go-to-market point of view, we will be working with IBM and Cisco, and we’re already working with 75 mobility partners that are principally in the U.S. but that's expanding to international as well.”

Overall, Cook noted, Apple has seen 40 percent growth in its enterprise business this year and expects to see it evolve into a major growth driver in the future.

Much the way it sees China.

And yes, the company is aware of the conditions and the concerns but nonetheless...

Apple Remains Bullish On China

All in, China put up big numbers for Apple in the closing quarter of its financial year. Greater China remained the company’s second-largest market after the U.S. — bringing in 24 percent of sales in the quarter (a big jump from 13.7 percent a year ago). Cook further noted that Chinese revenue has doubled since last year and that Apple's footprint in mainland China is set to expand from 25 physical retail locations to 40 by the end of the year. Other big numbers out of China: $12.5 billion in total revenue, and iPhone sales were up 120 percent.

Cook also called out China’s growth potential.

“If I look at China, as I’ve said before and to make the point again, we see an enormous change in China over the next several years ... If you look back five years, China's middle class had about 50 million people in it; if you look ahead five years, it will have 10 times that number in it."

Cook also responded to investor concerns about the Chinese marketplace, noting that Apple’s apparent reliance on the Chinese mainland as a market might be misplaced, given the apparent slowing of the Chinese economy.

“The economic question which I know there’s been a lot of attention on: frankly, if I were to shut off my Web and turn off the TV and look at how many customers are coming into our stores, regardless of whether they’re buying and how many people are coming online — and in addition, looking at our sales trends — I wouldn't know if there was any economic issue at all in China,” Cook noted.

“I don’t know how unusual we are with that. I think that there's a misunderstanding, probably particularly in the Western world, about China's economy,” he continued. “That doesn’t mean we’ll never have a problem there because of the economy, but in the areas we’re currently operating in, it is hard to tell a difference at a consumer level. I mean, you really can’t tell the difference, especially if you look at our daily and weekly numbers.”

Cook further noted that while the economic situation that is getting so much press today is temporary, Apple is planning for decades ahead when China will be the world’s largest cell phone market — and possibly the largest developer market as well.

And about those phones…

The iPhone: The Magic Marches On

Apple sold 48.05 million iPhones during the final quarter, up from about 38 million at the same time last year. That very slightly missed analysts' projections of 48.75 but didn’t seem to cause alarm.

Apart from the raw numbers sold, Apple was also touting exactly how many customers it had stolen away from Android.

“We recorded the highest rate on record for Android switches last quarter at 30 percent. We also look at the number of people who have upgraded that were in the installed base prior to iPhone 6 and 6 plus, and that number is in the low 30 percentages,” Cook told one investor who asked if Apple was concerned about an increasingly mature cell phone market. “So, we feel like we have a very open field in front of us. Our performance in emerging markets, though it is quite good and our revenue is good, our market share is low and the LTE penetration in these markets is quite low.”

However, when it came to forecasting its revenue for next quarter — the typically big spending Christmas quarter — Apple’s estimates were a shade more conservative than the analysts. Apple is predicting revenue between $75.5 billion and $77.5 billion. That is an uptick from the $74.6 billion of the same time last year, but analysts are calling for $77 billion at the low end.

Despite the conservative (or sane, depending on one’s outlook on analyst predictions) outlook, Apple expressed enthusiasm for the upcoming season.

“We are heading into the holidays with our strongest product lineup yet,” Cook said in a statement.

However, when it came to handing out specific numbers for some of that lineup, including high-profile new editions, such as the Apple Watch, Apple Music and Apple TV, Team Cupertino didn’t have much in the way of specifics, just a lot of enthusiasm for forthcoming innovations.


Wall Street’s reaction to the latest Apple figures has been a bit bumpy since the release early yesterday afternoon in the East. Apple’s stock initially ticked up on the better-than-predicted performance, before taking a downturn on China-related news on Apple’s future. That trend, however, seems to have evened out some in after-hours trading, with Apple up a little over 1 percent.



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Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.