News
CEO Tim Cook talks up services growth, insists iPhone business is healthy and strong.
Apple late on Tuesday reported declines in fiscal second-quarter revenue and profit, driven by the strength of the U.S. dollar and lower device shipments.
Apple generated revenue of US$50.56 billion (€44.63 billion) in the three months to 26 March, down from $58.01 billion in the same quarter a year earlier. Net profit was down 22% year-on-year to $10.5 billion.
In geographic terms, revenue fell in every region except Japan (see table).
Unit shipments were down across the board.
Apple shipped 51.19 million iPhones, down from 61.17 million in fiscal Q2 2015. iPad shipments fell to 10.25 million from 12.62 million, while Mac shipments came in at 4.03 million, down from 4.56 million.
Revenue from services, which includes its various Internet services and Apple Pay, grew to $5.99 billion from $5 billion.
"Our results reflect excellent execution by our team in the face of ongoing macroeconomic headwinds in much of the world, and difficult year-over-year comparisons," said Apple CEO Tim Cook, during the company’s quarterly results call.
He explained that the year-on-year dip in iPhone shipments was due mainly to the exceptionally strong reception of the iPhone 6, which was unveiled in late 2014 and was the first big-screen iPhone.
"The iPhone 6 addressed a new segment of the market for the first time and also addressed the biggest complaint of iPhone owners, namely the small screen," said Radio Free Mobile founder Richard Windsor, in a research note.
"Consequently, there was a lot of pent up demand for the device and many users also switched from Android to iOS. This phenomenon is now over and iPhone demand has normalised," he said.
Cook explained on the results call that iPhone sales come from three sources: existing users upgrading to the latest version; those switching from a rival OS like Android; and those buying their first smartphone.
"As we look at these three sources of iPhone sales, we see a business that is healthy and strong," he insisted.
Meanwhile, Apple still does not break out Apple Watch shipments, but Cook said that Apple Watch sales during its first year have "exceeded sales of iPhone in its first year."
Apple shipped 5.4 million iPhones during the device’s first four quarters.
Looking ahead to the fiscal third quarter, Apple expects revenue of $41 billion-$43 billion. That compares to revenue of $49.6 billion in fiscal Q3 2015. Gross margin is expected to be between 37.5% and 38%, compared to 39.7% a year earlier.
Apple CFO Luca Maestri explained on the results call that the revenue guidance includes a $2 billion inventory reduction programme, which reflects the company’s concerns about the economy. The introduction of the lower-cost iPhone SE is also expected to weigh on smartphone average selling prices (ASPs), he said.
Nevertheless, "our expected demand is greater than the revenue range implies," Maestri said.
