Call.

Today's call is being recorded.

At this time for opening remarks and introductions, I would like to turn the call over to Nancy

Paxton, Senior Director of IR.

Please go ahead.

Good afternoon, and thanks to everyone for joining us.

Speaking first today is Apple's CEO, Tim Cook, and he'll be followed by CFO, Luca Maestri.

After that we'll open the call to questions from analysts.

(Forward-Looking Cautionary Statements) I'd now like to turn the call over to Tim

for introductory remarks.

Today we're proud to report our best June quarter revenue and earnings ever thanks to

the strong performance of iPhone, services and wearables.

We generated $53.3 billion in revenue, a new Q3 record.

That's an increase of 17% over last year's result, making it our seventh consecutive

quarter of accelerating growth, our fourth consecutive quarter of double-digit growth

and our strongest rate of growth in the past 11 quarters.

Our team generated record Q3 earnings per share of $2.34, an increase of 40% over last

year.

We're extremely proud of these results and I'd like to share some highlights with you.

First, iPhone had a very strong quarter.

Revenue was up 20% year-over-year and our active installed base grew by double-digits,

driven by switchers, first time smartphone buyers and our existing customers whose loyalty

we greatly appreciate.

iPhone X was the most popular iPhone in the quarter once again, with a customer satisfaction

score of 98% according to 451 Research.

Based on the latest data from IDC, iPhone grew faster than the global smartphone market,

gaining share in many markets including the US, Greater China, Canada, Germany, Australia,

Russia, Mexico and the Middle East and Africa.

Second, we had a stellar quarter in services which generated all-time record revenue of

$9.5 billion fueled in part by double-digit growth in our overall active installed base.

We feel great about the momentum of our services business and we're on target to reach our

goal of doubling our fiscal 2016 services revenue by 2020.

Our record services results were driven by strong performance in a number of areas and

I'd like to briefly mention just some of these.

Paid subscriptions from Apple and third parties have now surpassed $300 million, an increase

of more than 60% in the past year alone.

Revenue from subscriptions accounts for a significant and increasing percentage of our

overall services business.

What's more, the number of apps offering subscriptions also continue to grow.

There are almost 30,000 available in the App Store today.

The App Store turned 10 years old this month and we set a new June quarter revenue record.

The App Store has exceeded our wildest expectations, igniting a cultural and economic phenomenon

that has changed how people work, learn and play.

Customers around the world are visiting the App Store more often and downloading more

apps than ever before.

And based on third party research estimates, the App Store generated nearly twice the revenue

of Google Play so far in 2018.

The app economy is thriving and thanks to the App Store, it's generating jobs for tens

of millions of people around the world.

Our developers have earned over $100 billion from the App Store since its launch and we

couldn't be more proud of them and what they've accomplished.

We're hearing lots of developer excitement around our upcoming OS releases, which I'll

talk about more in a moment, and can't wait to see what they can come up with next.

We've experienced rapid growth in our App Store search ad service and as we announced

earlier this month, we are expanding our geographic coverage to Japan, South Korea, France, Germany,

Italy and Spain.

We're also seeing strong growth in many of the other services as well.

Just a few examples, Apple Music grew by over 50% on a year-over-year basis.

AppleCare revenue grew at its highest rate in 18 quarters, partly due to our expanded

distribution initiative.

Cloud services revenue was also up over 50% year-over-year.

Our communications services are experiencing record usage.

We've hit all-time highs for both the number of monthly active users of Messages and the

number of FaceTime calls made with growth accelerating from the March to June quarters.

Siri requests have already exceeded 100 billion so far this fiscal year, and the number of

articles read on Apple News more than doubled year-over-year.

Apple Pay continues to expand with well over 1 billion transactions last quarter, triple

the amount from just a year ago, with growth accelerating from the March quarter.

To put that tremendous growth into perspective, this past quarter, we completed more total

transactions than great companies like Square and more mobile transactions than PayPal.

Apple Pay is now live in 24 markets worldwide with over 4,900 bank partners and we look

forward to adding Germany later this year.

We're excited to share that in the US, eBay is beginning to enable its sellers to accept

Apple Pay and CVS Pharmacy and 7-Eleven will roll out Apple Pay acceptance in locations

nationwide this fall.

Transit is another important area of growth and Apple Pay can be used with iPhone and

Apple Watch to quickly and conveniently ride public transit in 12 metropolitan areas.

Apple Pay Cash, our peer-to-peer payment service, is already serving millions of customers across

the US less than eight months following its launch.

Our third highlight of the quarter is the outstanding results in wearables which comprises

Apple Watch, AirPods and Beats and was up over 60% year-over-year with growth accelerating

from the March quarter.

Our wearables revenue exceeded $10 billion over the last four quarters, a truly remarkable

accomplishment for a set of products that has only been in the market for a few years.

Apple Watch delivered record June quarter performance with growth in the mid 40% range,

and we're thrilled to see so many customers enjoying AirPods.

It reminds me of the early days of iPod when I started noticing white earbuds everywhere

I went.

A number of other notable events in the quarter, we expanded distribution of HomePod to three

additional markets and we added new immersive listening features with support for HomePod

stereo pairs and a new multi-room audio system.

In June, we hosted an extremely successful developers' conference that previewed many

major advances coming this fall to our four operating systems, iOS, macOS, watchOS and

tvOS.

Developer and customer reaction has been very positive and we have over 4 million users

participating in our new OS beta programs.

Starting with iOS 12, Siri will take a major step forward with Siri Shortcuts, which deliver

a new, much faster way to get things done and allow any app to work with Siri.

We believe this will make Siri even more useful and significantly expand its adoption.

We've also designed performance improvements across iOS 12 to make everyday tasks faster

and more responsive.

Camera launches up to 70% faster.

The keyboard appears up to 50% faster and apps can launch up to twice as fast.

We've always been about empowering users to get the most from our product, but not about

spending all of their time using them and so we're adding tools to iOS 12 to help our

customers understand and take control of the time both they and their families spend interacting

with their iOS devices.

Activity reports will provide information on the amount and nature of time spent on

iPhones and iPads and screen time will enable parents to monitor and limit their children's

activity from their own iOS devices using Family Sharing in iCloud.

Developers will be able to build even more intelligent apps with just a few lines of

code using the power of machine learning with Core ML 2 and Create ML.

We've also included our third release of ARKit in only one year.

With ARKit 2, iOS 12 will provide an even more powerful platform to make dynamic AR

apps, integrating shared and persistent AR experiences, object detection and image tracking.

We believe AR can enable profound experiences and Apple is uniquely positioned to provide

the best AR experience because of the seamless integration of our hardware and software.

The new capabilities of ARKit 2 will build on the potential of the thousands of AR apps

already available in the App Store that are changing the way iPhone and iPad users see

and experience the world.

Turning to Mac, we want to empower our developers to bring their innovative apps from the iOS

ecosystem to the Mac with minimal effort.

Though iOS and macOS are different, they've shared common foundations from the very beginning,

so we've taken key frameworks from iOS and adapted them to specific Mac behaviors like

using a mouse or track pad, resizing windows, copy and paste and drag and drop.

We've started with some of our own apps, so this fall, News, Stocks, Voice Memos and Home

will be available on the Mac for the first time with macOS Mojave and we'll be bringing

these great new tools to our developers next year.

We believe this will dramatically broaden the ecosystem to benefit all Mac users, creating

even more great reasons to choose Mac.

Also this fall, the Mac App Store is getting a full redesign with rich editorial content

to help customers discover great Mac apps from our developers.

We believe privacy is one of the most important issues of the 21st century and we're always

working to make our products more private and more secure for our users.

As we announced at WWDC, beginning this fall, Safari will prevent share buttons and comment

widgets on webpages from tracking users without their permission.

Safari already protects personal data as users browse the web so they won't be re-targeted

by ads.

For Apple Watch, users will see a significant expansion of features and functionality in

watchOS 5.

Apple Watch will become an even stronger companion for fitness, communication and quick access

to information with features including new workouts, activity sharing competitions, auto

workout detection, advanced running features, walkie-talkie, podcast and third party apps

on the Siri watch face.

For Apple TV, we've seen major growth in sales since the introduction of Apple TV 4K last

fall as video providers around the world choose Apple TV 4K to deliver their subscription

services.

Later this year, Charter Communications will begin offering Apple TV 4K to its customers

in nearly 50 million US households, providing access to live channels and tens of thousands

of on-demand programs via the Spectrum TV app on Apple TV 4K, iPhone and iPad.

And tvOS will take the cinematic experience of Apple TV 4K to the next level this fall

with support for Dolby Atmos audio and new features to easily find popular shows and

movies.

Apple TV 4K already offers customers the largest collection of 4K HDR movies and this fall,

iTunes will be the home to the largest collection of Dolby Atmos-supported movies anywhere.

I'm proud that our team's hard work has an impact even beyond these innovative industry-leading

products and services.

We're always working to leave the world better than we found it and as part of our commitment

to address climate change and increase the use of renewable energy in our supply chain,

we recently announced a first of its kind investment fund in China.

Initially, 10 suppliers will join us in investing nearly $300 million over the next four years

into the China Clean Energy Fund.

The fund will invest in and develop clean energy projects totaling more than 1 gigawatt

of renewable energy in China, the equivalent of powering nearly 1 million homes.

We're seeing great momentum in our Everyone Can Code and Everyone Can Create initiatives.

More than 5,000 schools and community colleges are now teaching Everyone Can Code and more

than 350 schools have committed to incorporating Everyone Can Create into their curricula for

the upcoming school year.

Coding skills are opening doors for students and job seekers around the world as tremendous

growth in the app economy creates opportunity everywhere we look.

We're also teaming up with leading educators for blind and deaf communities across the

United States who will start teaching Everyone Can Code this Fall.

Looking ahead, we couldn't be more excited about the products and services in our pipeline

as well as limitless applications for augmented reality and machine learning technology.

We're working with key partners in the enterprise to change the way work gets done with iOS

and Mac.

We're welcoming communities and offering learning opportunities at our retail locations through

hundreds of thousands of Today at Apple sessions each quarter.

We're expanding our reach into emerging markets and seeing strong double-digit growth in revenue

and we're making great progress toward our goal of significantly expanding our services

business.

And now, for more details on the record June quarter results, I'd like to turn the call

over to Luca.

We're very pleased to report the financial results of our best June quarter ever.

As we have done in every quarter this fiscal year, we set new quarterly records for both

revenue and earnings per share, with revenue up 17% year-over-year and EPS up 40%.

We generated $53.3 billion of revenue with year-over-year growth in all of our geographic

segments and new June quarter records in the Americas, Europe, Japan and rest of Asia Pacific.

We grew in each of our top 15 markets, with especially strong performance in the US, Hong

Kong, Russia, Mexico, the Middle East and Africa, all places where revenue was up by

more than 20%.

Gross margin was 38.3%, flat sequentially, as cost improvements and foreign exchange

offset the seasonal loss of leverage.

Net income was $11.5 billion, up $2.8 billion or 32% over last year and it was also a new