Apple is not only growing fast, it's also growing in all the right places. The company reported that revenue in China -- the region with the most immediate potential for smartphone growth -- was up 70 percent from the same period a year ago, to $16.1 billion. Apple currently has 17 stores in China, and is on track to have around 40 locations there by the middle of next year.
The quarter was a spectacular showing for chief executive Tim Cook, whose bet on the super-size smart phones was a departure from the smaller screens preferred by the company’s iconic co-founder, the late Steve Jobs. The company's stock jumped more than 5 percent in after-hours trading to as much as $115 per share after the company's report.
The sales figures are all the more impressive because they come at a time when the worldwide market for expensive smartphones is dropping. According to research from the Consumer Electronics Association, the average selling price of a smartphone has fallen from $440 to an expected $275 in just five years.
The full price of the cheapest iPhone is $649. In fact, the average price of an iPhone actually went up, thanks to the popularity of the iPhone 6 Plus, which starts at $749. That's right; Apple's actually getting us to pay more for our phones. (Of course, most are purchased at subsidized prices through wireless carriers).
The company is also beginning to appeal to new smartphone customers and managing to poach some converts from its rival, Google.
"We saw more new customers to iPhone than we'd ever seen before," Cook said in a conference call with reporters and analysts. "And we saw a higher rate of Android switchers than in the three previous launches."
The tech giant also reported record sales for its iTunes and App Stores, and an increase in Mac sales.
But Apple couldn't buck the industry trend toward slower sales for tablets. Sales of its iPad unit dropped 18 percent from the same period last year. Cook conceded that the demand for the iPad may be getting "cannibalized" by lightweight laptops and larger-screen phones.
Steve Koenig, the director of industry analysis at the Consumer Electronics Association, forecasts that tablet revenue across the world will drop in 2015, as larger-screened phones gain popularity in the U.S. and around the world.
Still, Cook said he is "very bullish" on the iPad over the long-term. He pointed to the potential for tablets to be used in offices, touting Apple's enterprise-focused partnership with IBM. But he also said that the tablet market is fairly young, and that no one in the industry has a full grasp on how frequently consumers will choose to replace those devices.
"I'm not projecting something very different next quarter, or the next," Cook said. "I'm thinking over the long run."
The decline of the iPad places more importance on the success of the iPhone, which now accounts for nearly 69 percent of Apple's revenue as the company looks to further expand its product line.
Cook said during the earnings call that Apple will begin to ship its next major product, the Apple Watch, in April.
The watch, which Apple first showed alongside the iPhone 6 and iPhone 6 Plus last fall, is the first all-new gadget that Apple has explored since Jobs's death in 2011. The smart watch will be a companion to the iPhone, with a price tag of at least $349 on its own. The wearable device will give iPhone users another screen on which to read messages and track fitness information. It will also be able to use Apple's new payment service, Apple Pay, which lets people pay by simply tapping their gadgets on special sensors installed at cash registers.
Scott Kessler of S&P Capital IQ said that he thinks Apple is clearly well-positioned as it heads into that launch, but cautioned that the watch may not be a blockbuster right away. "We’ve gone on record that it’s a seminal product," he said. "We’re not sure it’s going to happen right out of the gate; it’s a very different kind of product."
Correction: A previous version of this post incorrectly stated the number of Apple retail stores in China. It had 17 as of February, 2015