Apple Posts Another Record Quarter, but iPhone Sales Flatten

Apple reported $75.9 billion in revenue in Q1 2016, but iPhone sales, at approximately 75 million units, were flat compared with a year ago.  

Apple, earnings, revenue, Q1 2016 revenue, iPhones, iPads, Apple Watch, Macs

Although Apple chalked up $75.9 billion in first-quarter revenue, a new record for the company, its sales of 74.7 million iPhones—little changed from the 74.5 million sold in the same quarter a year earlier—has analysts concerned.

The $75.9 billion in revenue for the company's fiscal 2016 first quarter, which ended Dec. 26, is up 2 percent from $74.6 billion in the same quarter one year ago, while the company's net income of $18.4 billion, which set another quarterly record, rose from $18 billion one year ago. Earnings rose to $3.28 per diluted share, up from $3.06 in the same quarter a year ago.

"Our team delivered Apple's biggest quarter ever, thanks to the world's most innovative products and all-time record sales of iPhones, Apple Watches and Apple TV," Tim Cook, Apple CEO, said in a statement. "The growth of our services business accelerated during the quarter to produce record results, and our installed base recently crossed a major milestone of 1 billion active devices."

Apple reported that $29.3 billion of its first-quarter revenue was generated in the United States, with another $17.9 billion coming from Europe. Greater China brought in $18.37 billion in revenue, while Japan brought in $4.79 billion. The remaining $5.4 billion came from the rest of the Asia-Pacific market, according to the company.

First-quarter sales of iPads dropped to 16.1 million units from 21.4 million in the same quarter one year ago, while Mac sales slipped to 5.3 million this quarter, compared with 5.5 million one year ago.

Financial analysts surveyed by Thomson Reuters had estimated that Apple would report earnings of $3.23 per share for the quarter on revenue of $76.6 billion, according to a Jan. 26 report by The Wall Street Journal.

Despite Apple's record revenue and net income for the quarter, several analysts told eWEEK that the numbers show that sales of the company's flagship iPhones are not growing as they have in the past.

"While Apple had a relatively good quarter in terms of overall revenue performance, it's clear that weakening demand for iPhones will impact the company in the coming years," Brian Blau, an analyst with Gartner, told eWEEK in an email reply to an inquiry. "That weak demand will set expectations that Apple may not be as profitable or even as popular in the future, and that alone has many worried about what will happen if iPhones can no longer drive the revenue and profits."

On the other hand, Apple "has a wide variety of products in the market, and we can assume there are many more planned, in addition to the large resource base they can tap for research and development and expansion efforts," Blau said.

Rob Enderle principal of Enderle Group, told eWEEK: "iPhone growth is now clearly slowing and there is new weakness on Mac sales while the iPad continues to drop as well."

This trend "showcases that they desperately need to diversify and they need a hit to make up for the downturn, but that the Apple Watch and Apple TV aren't filling the gaps," wrote Enderle. "This is one of the ugliest quarters I've seen for the company. They are trying to get investors to see them as more diversified, but with the vast majority of the revenue tied to the iPhone and the other areas also showing weakness, they likely won't be very successful."