And according to tear downs margins are considered pretty high. Not as high as their other products, but they are certainly not selling at a loss.
I too find it funny talking about a failure of a product that had ~1B in revenue (more than the MS Surface tablets in the same quarter), and where Tim Cook said the sales were back loaded, i.e. accelerating.
Anecdotally I'm seeing more and more Apple Watches around.
EDIT
I guess the Apple haters like down voting facts. Here are some sources from yesterdays earnings call:
From the earnings call transcript (http://www.imore.com/this-is-tim-transcript-q3-2015):
On the Watch, our June sales were higher than April or May. I realize that’s very different than some of what’s being written, but June sales were the highest. The Watch had a more of a back-ended kind of skewing.
From the CFO (http://www.sanluisobispo.com/2015/07/21/3730284_apple-strong...):
But Chief Financial Officer Luca Maestri told The Associated Press that revenue from the watch amounted to "well over" that $952 million increase. He said the watch sales were offset by declining revenue from iPods and accessories, which are also lumped into that segment.
Of course they do, and Apple has the highest margins in the business and never sells near cost. Apple Watch probably has margins in the mid to high 30% just like all other Apple products do around launch.