Apple’s Q2 Results Miss on iPhone Sales Drop

The company suffered its first quarterly revenue decline in 13 years as its flagship smartphone appears to be nearing saturation point.
Katie Kuehner-HebertApril 27, 2016

Apple’s 13-year run of quarterly revenue growth has come to an end as the company was unable to offset a 16% drop in sales of its flagship iPhone.

Apple reported Tuesday that it sold 51.2 million iPhones in its second fiscal quarter that ended March 26, down from 61.2 million in the same quarter a year ago but above analysts’ estimates of about 50 million devices.

The company’s revenue fell 12.8% to $50.6 billion from a year earlier, and net income dropped 23% to $10.5 billion, or $1.90 per diluted share. Analysts’ estimates averaged $2 per share and $51.97 billion in revenue, according to Thomson Reuters I/B/E/S.

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Apple had forewarned investors of its first-ever drop in iPhone sales but its shares still plunged more than 8% after hours Tuesday, wiping out a two-month rally. In trading Wednesday, they were down more than 6%, at $97.85.

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“There’s no question that Apple’s best days are behind it,” Toni Sacconaghi, an analyst at the Bernstein brokerage firm, told the New York Times. “The company grew at astronomical rates, and it’s now so big that its ability to grow at those rates doesn’t exist anymore.”

Neil Saunders, chief executive of research firm Conlumino, told Reuters that Apple “needs to come up with a radical new innovation or product rather than just the current incremental improvements to existing products. This is the only way in which it will reinvigorate sales growth.”

Apple CEO Tim Cook said in an earnings call that the company’s future is “very bright” and there are more products in the pipeline that are likely to sell very well, including the iPhone SE, released in March.

A new iPhone model is expected to be released this fall, but the Los Angeles Times said analysts are concerned that, like last year’s iPhone 6s, “the newest model won’t be radically different from its predecessors, which could keep prospective buyers on the sidelines.”