Apple Q2 2016

Yesterday Apple released it’s Q2 earnings report of the fiscal year 2016 and it marks the first time in Apple’s history where they saw a decline in iPhone sales and total revenue. Apple reported a total revenue of $50.6 billion and a total profit $10.5 billion for January 2016 to March 2016 quarter. Comparing this with last year’s Q2 earnings:

  • Revenue: $50.6 billion in 2016 vs. $58 billion in 2015 (a 12.75% decline)
  • Profit: $10.5 billion in 2016 vs. $13.6 billion in 2015 (a 22.79% decline)

Additionally, Apple fulfilled its expectation of a year-over-year decline in iPhone sales and revenue. As reported, Apple sold  51.2 million units this quarter compared to 61.2 million units sold in Q2 2015. iPad sales also decreased to 10.2 million units from 12.6 million units in Q2 2015. This also affected the Mac lineup as well which saw the drop in sales to 4 million units compared to 4.6 million units in Q2 2015.

Apple’s prior quarter (Q1, 2016) did much better compared to now in which they reported a total revenue of $75.9 billion followed by iPhone sales of 74.8 million units, iPad sales of 16.1 million units and Mac sales of 5.3 million units.

Here is the overview of the numbers of earnings for Q2 2016 vs Q1 2016 vs Q2 2015:

  • Revenue: $50.6 billion vs. $75.9 billion vs. $58 billion
  • iPhone: 51.2 million vs. 74.8 million vs. 61.2 million
  • iPads: 10.2 million vs. 16.1 million vs. 12.6 million
  • Macs: 4 million vs. 5.3 million vs. 4.6 million

In terms of Apple’s operating segment, China (which has been the growth market for Apple) saw a decline in revenues by 26% year-over-year change, while Asia Pacific saw a decline by 25%. Additionally, the US market revenue declined by 10% year-over-year change while Europe revenue saw a decline by 5%. However, Japan’s market revenue saw an increase by 24%.

Apple's Q2 2016 Earning

Here are the comments made by Apple’s CEO, Tim Cook:

“Our team executed extremely well in the face of strong macroeconomic headwinds,” said Tim Cook, Apple’s CEO. “We are very happy with the continued strong growth in revenue from Services, thanks to the incredible strength of the Apple ecosystem and our growing base of over one billion active devices.”

and Apple’s CFO, Luca Maestri:

“We generated strong operating cash flow of $11.6 billion and returned $10 billion to shareholders through our capital return program during the March quarter,” said Luca Maestri, Apple’s CFO. “Thanks to the strength of our business results, we are happy to be announcing today a further increase of the program to $250 billion.”

In the report, Apple has also provided guidance for the next quarter (Q3) of fiscal year 2016 where they are expecting the revenue to be between $41 – $43 billion, gross margin to be between 37.5% – 38%, expenses between $6 – $6.1 billion, other income/expenses of $300 million and a tax rate of 25.5%.

This has left the investors worried as Apple has already made it clear that is expecting the next quarter to follow the same earnings pattern with further decrease and no improvements might be seen until the upcoming iPhone 7 is released. Even the new flagship product to be introduced this September won’t be expected to provide much boost to Apple’s financial performance, according to analyst expectation.

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