Apple Earnings Beat Estimates But iPhone Sales Lag

With the iPhone being the main driver of Apple's growth, the sales slowdown raises concerns about the company's future performance.
Katie Kuehner-HebertJanuary 27, 2016

Apple’s first-quarter earnings beat Wall Street estimates, but revenue growth and iPhone sales are showing signs of slowing.

The company said on Tuesday that it earned $3.28 per share on $75.9 billion in revenue for the first quarter. Analysts had expected Apple to report earnings of about $3.23 a share on $76.54 billion in revenue, according to a consensus estimate from Thomson Reuters.

iPhone sales totaled 74.8 million in the quarter, missing expectations of about 75.46 million, and CEO Tim Cook said on the company’s earnings call that he expects iPhone  sales to decline in the second quarter.

CFO Insights on Inflation, Workforce Challenges, and Future Plans 

CFO Insights on Inflation, Workforce Challenges, and Future Plans 

Download our 2022 survey report for a high-level view of finance team projections and strategies, directly from our executive readers.

“The iPhone has always been the main growth driver of the company, with iPad sales stalling, and if that engine starts to slow down it does not bode well for its future performance,” TechCrunch said. “To be fair, growth engines inevitably hit a saturation point, but this is something that Apple has been able to maintain since it launched the iPhone in 2007.”

The smartphone accounts for 68% of Apple’s revenue and iPhone revenue has never declined year-over-year.

“Apple is far from needing a turnaround, but many investors are awaiting new products that will revive the growth of the past two years,” Time commented. “Even with a new model due this fall, the impact of iPhone growth is tapering over time, and placeholder products like Apple TV and Apple Watch, while growing, aren’t making up for slowing sales of more important products.”

In an analysts’ call, Cook focused on new areas of growth, such as services like Music, Pay and iCloud for the 1 billion Apple devices that were used last quarter. CFO Luca Maestri said those services generated $31 billion last fiscal year and $9 billion last quarter alone, a 24% increase from the year-ago period.

The company expects second-quarter revenue between $50 billion and $53 billion, while the average analyst estimate had been for $55.61 billion.

“In Q2 last year, the company recorded $58 billion in revenue  meaning Apple’s upcoming quarter could be the first negative growth quarter in recent memory,” TechCrunch noted.

4 Powerful Communication Strategies for Your Next Board Meeting