MacRumors

Apple CEO Tim Cook today told investors that Apple is continuing to invest in augmented reality, and that the company is "high on AR in the long run." Cook's comments came after he was questioned about Pokémon Go, the hit augmented reality game developed by Niantic Labs, Nintendo, and The Pokémon Company.

Cook, who continually referred to "Pokémon" as "Pokemans," said Pokémon Go is a "testament to what happens to innovative apps," giving the App Store credit for empowering developers to "press a button" and "offer a product around the world." He went on to say that augmented reality offers a great commercial opportunity and great opportunities for consumers.

AR can be really great. We have been and continue to invest a lot in this. We're high on AR in the long run and we think there are great things for customers and a great commercial opportunity. The number one thing is to make sure that our products work well with other developer's products like Pokémon, and that's why you see so many iPhones in the wild chasing Pokemans.

Cook went on to say that he believes augmented reality "can be huge." "We'll see whether it's the next platform," he said. "Regardless, it will be huge."

In the past, rumors have suggested Apple has a secret research team working on augmented reality and virtual reality, exploring the AR/VR field and investigating how the company could embrace augmented or virtual reality in the future.

Apple has also made a number of augmented reality acquisitions, purchasing companies like Metaio, Faceshift, and Flyby Media. How Apple might incorporate augmented reality into its products remains a mystery, but there are applications related to Maps and Photos that could be on the horizon.

Earlier this year, Cook made similar comments about virtual reality, calling it more than just a niche product. "It's really cool and it has some interesting applications," he said.

During today's third quarter earnings call, Apple CEO Tim Cook told investors that he's "very optimistic" about prospective iPhone sales this fall, despite rumors suggesting the device will introduce only minor changes.

In response to a question about speculation that iPhone upgrade rates will be low in 2016 based on circulating rumors that the iPhone 7 will mark only a modest update to the iPhone 6s, Cook said he sees "so many signs that are positive" that point towards solid sales numbers.

I don't want to talk about new phones that aren't announced. That aside, what we have seen -- in past tense or in current tense -- on the upgrade rate is that the iPhone upgrade rate for the iPhone 6s is similar to the iPhone 5s. [...]

The iPhone 6 was significantly higher than that and it likely accelerated upgrades that would have been in the current year ahead of those. So what the future holds, we'll see, but I'm very optimistic about the future because I see so many signs that are positive.

As for the signs in question, Cook pointed towards an install base that has gotten "incredibly large," a switcher rate that continues to grow, a smartphone penetration rate that's only at 42 percent, changes coming in iOS 10, and the growing importance of the smartphone itself as it becomes "even more instrumental and important to people's lives."

On that last point, Cook said he expects AI to play a major role in turning the iPhone into an essential device that people can't live without. "As the iPhone becomes more and more your assistant, you're not going to leave without it," he said. "I see all of those things as vectors that are incredibly positive," he continued.

According to Cook, Apple will excel at AI because of the company's focus on user experience, which will drive people to adopt Apple devices. Apple is continually working to improve its virtual assistant Siri, and Cook's comments hint at Apple's continued focus on the service.

As the smartphone itself becomes more essential to customers' day-to-day lives, we think people will put more and more focus on what they're buying. The thing Apple does best is providing a killer user experience that's integrated across the entire product line, and that becomes more important and really plays to our advantage.

I think the deployment of AI technology is something we will excel at because of our focus on user experience. So I like that.

Apple will unveil its next-generation iPhone 7 this fall, likely in September. While the device is expected to have a design similar to the design of the iPhone 6s, it will feature camera improvements, a better processor, improved water resistance, no headphone jack, and more.

Apple today announced financial results for the third fiscal quarter (second calendar quarter) of 2016. For the quarter, Apple posted revenue of $42.4 billion and net quarterly profit of $7.8 billion, or $1.42 per diluted share, compared to revenue of $49.6 billion and net quarterly profit of $10.7 billion, or $1.85 per diluted share, in the year-ago quarter. As expected, the results represent the second consecutive year-over-year declines in quarterly revenue and iPhone sales.

Gross margin for the quarter was 38 percent compared to 39.7 percent in the year-ago quarter, with international sales accounting for 63 percent of revenue. Apple also declared a quarterly dividend payment of $0.57 per share, payable on August 11 to shareholders of record as of August 8. The company currently holds $231.5 billion in cash and marketable securities, partially offset by $68.9 billion in long-term debt.

Apple sold 40.4 million iPhones during the quarter, down from 47.5 million a year earlier, while Mac sales were 4.25 million units, down from from 4.8 million units in the year-ago quarter. iPad sales were also down once again, falling to 9.95 million from 10.9 million.

“We are pleased to report third quarter results that reflect stronger customer demand and business performance than we anticipated at the start of the quarter,” said Tim Cook, Apple’s CEO. “We had a very successful launch of iPhone SE and we’re thrilled by customers’ and developers’ response to software and services we previewed at WWDC in June.”

Apple's guidance for the fourth quarter of fiscal 2016 includes expected revenue of $45.5–47.5 billion and gross margin between 37.5 and 38 percent.

Apple will provide live streaming of its fiscal Q3 2016 financial results conference call at 2:00 PM Pacific, and MacRumors will update this story with coverage of the conference call highlights.

Conference Call and Q&A Highlights are available in reverse chronological order after the jump.

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Apple's iPhone 7 may not include a physical home button, instead adopting a touch-sensitive "3D Touch" home button, reports Mac Otakara [Google Translate]. Such a home button would be flush with the body of the iPhone and would not actually depress when a finger is placed on it.

Instead, when a user presses on the home button, haptic feedback will mimic a press, much like the Force Touch trackpad on Apple's most recent MacBooks. Through haptic feedback, iPhone users will feel the sensation of pressing on a button even though there's no actual button to press.

Mac Otakara's report refers back to an April home button rumor from Stormmedia and confirms its veracity, citing unspecified supply chain sources and saying there's a "high possibility" the rumor is accurate. We've heard the same home button rumor from DigiTimes and analysts at Cowen and Company. While none of these sources have track records accurate enough to unquestioningly say the rumor is true, the fact that it's a rumor we've heard multiple times now suggests it could be accurate.

A flush home button, when combined with rumors of improved waterproofing and the removal of the headphone jack, makes some sense. Without a physical button, there would be no way for water to get into the internals of the phone around the button, and it would also potentially improve the reliability of the Touch ID system.

Based on leaked part images and dummies, the removal of the home button will not drastically change the look of the iPhone 7.

Should Apple remove the physical home button in favor of a Force Touch or 3D Touch home button in the iPhone 7, the company will be one step closer to eliminating the home button entirely, something that's rumored for the 2017 iPhone.

Apple has purchased an unscripted television series based on the highly popular "Carpool Karaoke" segment from "The Late Late Show With James Corden," reports Variety. The upcoming television show will be distributed via Apple Music and is said to be seen as a way to "drive online activity" for the streaming music service.

It is not clear how closely the "Carpool Karaoke" show Apple has purchased will mirror the segment popularized by Corden. On The Late Late Show, Corden drives around and sings hit songs with celebrities and public figures that have included Michelle Obama, Selena Gomez, The Red Hot Chili Peppers, Demi Lovato, Gwen Stefani, and more.

According to Variety, the Carpool Karaoke show sparked a bidding war between multiple cable and subscription video outlets due to its success on The Late Late Show. Apple's Eddy Cue called the upcoming show the "perfect fit" for the Apple Music service.

"We love music, and 'Carpool Karaoke' celebrates it in a fun and unique way that is a hit with audiences of all ages," said Eddy Cue, Apple's senior vice president of Internet software and services. "It's a perfect fit for Apple Music -- bringing subscribers exclusive access to their favorite artists and celebrities who come along for the ride."

Apple has been making its first steps into original television programming as a way to promote its growing services segment. In addition to Carpool Karaoke, Apple is also working on "Vital Signs," a dark semi-autobiographical drama starring Dr. Dre, which will also be used to promote Apple Music. "Planet of the Apps," another TV show in the works, will serve to promote the App Store with stories about apps and the developers who make them.

In a recent interview, Apple iTunes chief Eddy Cue said Apple is "not trying to create original TV shows" to become a Netflix or Amazon Video competitor, but will "help" producers on projects that are designed to promote its existing products.

Apple is planning to unveil the second-generation Apple Watch in September or October, according to a new report from DigiTimes citing supply chain sources in a wider piece on weakening demand for tablets and wearables.

Component makers and Apple suppliers are said to be seeing "rather conservative orders" for the new Apple Watch despite its upcoming release date, information that directly conflicts with a June DigiTimes report that pointed towards "higher-than-expected" orders. Given the confusion over the second-generation Apple Watch in the supply chain, DigiTimes' information does not offer a clear picture of the demand Apple expects to see for the device.

Rumors suggest the second-generation Apple Watch will see under-the-hood spec improvements and perhaps some minor form factor tweaks, but major changes to the device are not expected to be unveiled this year. Improved battery life, a faster processor, and built-in cellular capabilities are all features we could see in a new Apple Watch.

While we can't glean anything about supply from DigiTimes, the September or October timeframe is in line with past rumors. Previous information suggests Apple is perhaps planning to unveil a new Apple Watch alongside new iPhones, and new iPhone models are typically announced in September.

According to a recent rumor, the iPhone 7 and iPhone 7 Plus will be released on Friday, September 16, and if that's the correct launch date for the iPhone 7, we can likely expect to see the Apple Watch released on the same day. With a September 16 launch date, an unveiling event could potentially take place during the week of September 5th.

Apple today will release its fiscal third quarter earnings results, reflecting a three-month period that ended in late June, and the consensus among analysts is that the company will report a second consecutive decline in iPhone sales and overall revenue. That same scenario played out last quarter for the first time since 2003.

In fact, some analysts have forecasted that iPhone sales may be as low as 38 million to 40 million units, a decline of up to 20 percent compared to the year-ago quarter. If the estimates prove to be accurate, it would mark Apple's worst quarter of iPhone growth ever in the smartphone's nine-year history.

Apple itself provided guidance of between $41 billion and $43 billion in revenue, which would be up to 18 percent lower than the $49.6 billion in revenue it posted in the year-ago quarter. Wall Street expects revenue to be around the $42.1 billion mark, with earnings of $1.39 a share -- one analyst has EPS as low as $1.35.

iPhone accounts for around two-thirds of Apple's revenue, and an even greater portion of its profits, so the device's recent slide is concerning for investors -- reflected in the price of Apple shares, down around 21 percent from a 52-week high of $123.91. The good news for Apple is that many analysts believe it will "bottom out" in the June quarter and return to iPhone and revenue growth by the 2017 fiscal year.

But, until then, the bleeding is expected to continue. iPad sales are forecasted to decline for a tenth consecutive quarter, while market research firm IDC's estimated Apple Watch sales of 1.6 million in the June quarter would be 55 percent lower than the year-ago launch quarter. Mac sales are also projected to decline by up to 10 percent as buyers await a 2016 MacBook Pro and other new models.

As emphasized by Apple CEO Tim Cook, the recent decline in Apple's hardware sales has been offset by growth in the company's expanding services category, including the likes of Apple Music, Apple Pay, AppleCare, and licensing. That trend looks set to continue, as Above Avalon analyst Neil Cybart forecasts service revenue was $6.1 billion in the June quarter for 20 percent year-over-year growth.

Beyond the third quarter, attention has turned to tempered expectations surrounding the upcoming iPhone 7. The consensus among analysts is that a perceived lack of new features coming to the next-generation smartphone could result in a "mega upgrade cycle" for the so-called iPhone 8 rumored for 2017. Next year's model is already rumored to feature a new design with an OLED display and glass casing.

Apple will publish its third quarter earnings report at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time), and we will share the results shortly thereafter. MacRumors will then provide live coverage of the ensuing conference call with Cook and Apple CFO Luca Maestri at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time).

The US National Institute for Standards and Technology has released a new draft of its Digital Authentication Guideline, which sets the rules that all authentication software eventually follows. In the document, NIST deprecates the implementation of SMS as a method with which users validate a second level of security on various accounts, "no longer" allowing its use in future guidelines as it is considered not secure enough (via TechCrunch).

If the out of band verification is to be made using a SMS message on a public mobile telephone network, the verifier SHALL verify that the pre-registered telephone number being used is actually associated with a mobile network and not with a VoIP (or other software-based) service. It then sends the SMS message to the pre-registered telephone number. Changing the pre-registered telephone number SHALL NOT be possible without two-factor authentication at the time of the change. OOB using SMS is deprecated, and will no longer be allowed in future releases of this guidance.

The new guidelines also make a point for companies to ensure that two-factor authentication notifications aren't going through a VoIP service, which could be easily compromised. NIST also includes "limited use" of biometrics as a way for users to gain access to their second layer of authentication, meaning Apple could pivot to Touch ID as an alternative if SMS support for the security feature officially comes to an end.