Editor’s note: Torrid sales of the iPhone propelled Apple (Nasdaq: AAPL) to its highest-ever first quarter revenue with emerging markets – especially China – driving sales. And look for that success to continue, says Technology Business Research analyst Daniel Callahan.

HAMPTON, N.H. – Phenomenal sales of the iPhone in 1Q15 allowed Apple to strengthen its leadership of the mobile device market and grow its revenue to $58 billion, an impressive feat in what is typically a soft quarter for Apple.

The iPhone remains the company’s compass and its engine, with unit shipments climbing 40% year-to-year to 61.2 million and iPhone revenue climbing 55% year-to-year to $30.3 billion. In addition to the stellar success of the iPhone, continued success in emerging markets, particularly China, is driving revenue growth. Emerging market revenue growth climbed 63% year-to-year, and rapid growth in China – revenue climbed 71% year-to-year due to demand for the iPhone 6 Plus – echoes Apple’s earlier success in the U.S.

TBR believes the iPhone 6 Plus has become the cornerstone device for Apple in China, and the primary reason that iPhone ASPs climbing $62 to $659 allows Apple to buck declining ASP trends globally. Rising ASPs and streamlined supply chain led to Apple growing gross margin 150 basis points to 40.8%.

The ongoing success of the iPhone continues to draw in new users to its ecosystem, and iPhone sales are bolstering sales of related business, particularly apps and other mobile software. In tandem with record iPhone unit shipments in a first calendar quarter, Apple’s AppStore reached all time record revenue driving Apple’s services segment to $ 5 billion, a year-to-year growth of 9% in 1Q15.

TBR believes Apple will continue create new services that benefit from the ability to be delivered to a massive and loyal iPhone customer base.

Apple’s Mac PC segment generated record second quarter revenue, growing 2% year-to-year to $5.6 billion yet again outpacing the global Windows PC market. TBR believes Mac success is tied to the iPhone’s popularity allowing Apple leverage the iPhone to grow the Apple ecosystem in other product segments. In contrast, the iPad segment remained in decline, with waning consumer interest dragging unit shipments down year-to-year, causing revenue to fall 29% year-to-year to $5.4 billion.

TBR believes the iPad’s declines are largely due to the appeal of the iPhone 6 Plus, especially in emerging markets where a smartphone is often a consumer’s primary computing device.

Apple Watch has received praise from critics, and demand is outstripping supply

The Watch has received positive reviews, which helped stoke consumer demand to a fever pitch. However, the supply chain has become complicated, even for those that preordered the device. While hyped for months for shipments to begin on the 24, TBR believes many consumers will not receive their Watch until August 2014. While TBR believes Apple anticipated meteoric demand for the Watch, it will uncharacteristically be challenged to meet this demand. TBR believes the wholly new form factor is rife with new manufacturing processes that complicate Apple’s usual supply chain management prowess. While TBR expects Apple to ramp up production and distribution in 2Q15, the Watch’s availability will remain a work-in-progress, limiting its ability to contribute to revenue, profit and customer growth.

Apple will sustain revenue growth between iPhone releases by building a larger base of streaming and content services

While the iPhone 6, particularly the 6 Plus, are in high demand in APAC, TBR believes sales of the devices will progressively slow in developed markets that drive the majority of revenue and gross profit volume in 2015. While Apple will rely on maturing markets in APAC to sustain revenue and profit growth, Apple will seek to establish revenue streams that supplement iPhone and Mac PC sales in the U.S. and Europe. The extraordinary amount of gross profit Apple generated from its iPhone in 4Q14 allows the company to create new ways of engaging with customers and expanding the current Apple experience. The profits will also allow Apple to offer full-fledged services on first iteration, and the sheer number of iPhones will allow Apple to quickly proliferate and monetize such services across a large number of users.