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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.”
Apple Posts Another Record Quarter, but iPhone Sales Flatten
Jan Dawson, chief analyst of Jackdaw Research, called the results “tough for Apple” because the figures show barely any growth for iPhone sales and for total revenue year-over-year. “Currency impacts seem to have been very significant, and that effect will hopefully soften over the coming quarters, but there’s no doubting this is a tough set of results, and one of Apple’s most disappointing sets of results in recent memory.”
Ironically, the numbers are only disappointing for Apple due to its usual sales successes, wrote Dawson. “Having said all that, the quarterly results (and even the results forecast for next quarter) are still astonishingly good on a stand-alone basis—most companies would kill for these numbers. But given the context of Apple’s recent performance and growth, this is not what investors were hoping (though it is what analysts have increasingly been forecasting).”
Another mobile analyst, Dan Maycock, said that though the figures are down for Apple, that the company is far from in trouble. “I think Apple has been down before, but they have a good deal of things in their pipeline so they’ll be right back with the next major product release.”
Sales of iPhones “may have dipped, showing signs of saturation, with net new customers giving way to sales coming from upgrades, but no major rival has risen up to really challenge their place in the marketplace with any smartphone alternative being some years out,” wrote Maycock. “Given that, I think they’re in a fine position regardless of how much softness there is coming out of last year.”
A year ago, Apple reported its then-best-ever quarter, posting $74.6 billion in revenue and $18 billion in net profits for the first fiscal quarter of 2015 due to a consumer frenzy of sales of its iPhone 6 and iPhone 6 Plus smartphones, Mac computers and sales of apps and more in the company’s App Store. The $74.6 billion in revenue was a 30 percent increase over the $57.6 billion in revenue posted for the same quarter in 2014, while the $18 billion in net profit was up 37 percent from the $13.1 billion net profit that was posted in the same quarter in 2014.