January 26, 2016 Last Updated 8:28 am

Apple earnings another record, but dark clouds now on horizon as revenue falls in Americas

Apple issues a guidance warning as company indicates revenue for the next quarter will come in below results from the same quarter a year ago

The Q1 2016 earnings report for Apple is out, and while it is not a complete miss, investors are going to find a lot of data here to worry about. Earnings per share was a beat, coming in at $3.28 versus expectations of $3.23. But revenue was slightly softer than forecasted, though not by much, to be honest.

“Our team delivered Apple’s biggest quarter ever, thanks to the world’s most innovative products and all-time record sales of iPhone, Apple Watch and Apple TV,” said Tim Cook, Apple’s CEO. “The growth of our Services business accelerated during the quarter to produce record results, and our installed base recently crossed a major milestone of one billion active devices.”

That was about all Apple said in their press release, the shortest such release I’ve seen. Apple’s press release for its Q1 2016 earnings could have been mistaken for the summary statement for any Amazon earnings press release, which not only is unbelievably long, but still manages to be vague about actual unit sales numbers.

iPhone sales for the holiday quarter were 74.779 million units, another impressive number, but barely ahead of last year’s numbers. Why? Is the end of subsidized sales from US carriers starting to have an effect? Is the user base stagnating?


iPad sales, though, came in at 16.122 million, not only below forecasts, but the eighth straight quarter that sales failed to meet the same comparison quarter from the prior year. iPad sales are, in other words, in the tank.

Apple had launched a new model, the iPad Pro, which features a larger display and upgraded specs. But the tablet was certainly never going to appeal to consumers, as highly priced as it is. And so the big question is when does Apple eliminate the iPad revenue and sales unit line the way it did the iPod? At 16 million units, though, sales are probably still too high to give up completely.

Nonetheless, the 21 percent decline in iPad sales has to continue to worry Apple CEO Tim Cook (or maybe he has resigned himself and is moving on).

Mac sales also slumped a bit, falling a couple of percent in the quarter. But with PC sales also falling, the company’s market share continues to grow, the company said in its investor conference call.

Let’s face it, Apple really had little to offer most consumers this holiday period except an upgrade of their iPhone or an Apple Watch.

The one thing that might have gotten consumers ready to loosen their wallets Apple is adamantly against: providing sufficient storage. Instead, new iPhones and iPads are thinner, still with the same battery life, and with the same insufficient storage. Apple is, if anything, a very stubborn company.

Revenue from the US and Canada actually fell in this quarter, down 4 percent. China still provided growth, up 14 percent. But last quarter growth year over year was 99 percent. Japan sales are also a problem area, with revenue down 12 percent compared to the same quarter a year ago.

Investors were initially pleased with the earnings, but are now taking the stock down a bit, below $100 a share as they begin to digest the data. (The conference call revenue warning is not helping the stock, either. Now trading down 1 percent in after hours trading.)

Conference call notes:

CEO Tim Cook stressed the problems Apple is having with currency fluctuations. So, too, did Apple CFO Luca Maestri.

“In the December quarter alone, the foreign exchange impact was $5 billion to our revenue line,” Maestri said.

Of course, this wouldn’t have been a problem had sales in the US been strong, but growth in markets where the currency is declining means sales have to be that much stronger to compensate.

(Another point: Apple pays its employees in the currency of the country they work in. Wouldn’t that mean that Apple costs should be going down?)

Cook touted Apple’s sales in China, pointing out that many other companies were seeing declines. He admitted, however, that Apple is now seeing declines in sales there, though they remain committed to the Chinese market.

Cook mentioned the iPad Pro and the new Apple TV, but did not mention actual sales numbers. He also did not provide hard numbers for the Apple Watch, simply saying they were strong.

$215.7 billion in cash, with over 90 percent now sitting outside the US.

With 1 billion in active devices, Apple’s services business has grown to record levels, $5.5B in the quarter.

Guidance for Q2: $50-53B in revenue. That would be below last year! ($58B in Q2 2015) Also, Apple says iPhone sales will more than likely decline compared to the same quarter last year.

The reaction:

Financial Times:

Apple is trying to fix the reality distortion field. For decades it helped Steve Jobs inspire developers and customers. Now it is backfiring; the shares have fallen a quarter since July and were stagnant after-hours on Tuesday even following record quarterly results.

Business Insider: Apple delivers disappointing outlook


Apple’s iPhone has officially entered a slow-growth period.


Apple posted its slowest growth in iPhone sales since its 2007 introduction of the smartphone, and forecast that revenue in the current quarter would fall for the first time in over a decade.


The slowdown in iPhone sales, which account for roughly two-thirds of Apple’s revenue, raises questions about Apple’s growth. Sales of the iPad have been falling for two years, and sales of Mac computers, a recent area of strength, fell in the most recent quarter.

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