Apple Q3 2016 Earnings: iPhone Sales Down, Again

The iPhone sales decline is real: For the second quarter in a row, Apple has sold fewer iPhones than a year ago. Apple sold a total of 40.4 million iPhones during its fiscal Q3 of 2016, which ended on June 30. During the same quarter last year, the company was still able to sell 47.5 million iPhones.

Apple announced these numbers as part of its Q3 earnings release Tuesday, which were in line with muted investor expectations.

During the most recent quarter, Apple generated revenue of $42.4 billion compared to $49.6 billion during the same quarter last year. Net profits came in at $7.8 billion, compared to $10.7 billion a year ago. This equals earnings per share of $1.42, compared to $1.85 for fiscal Q3 of 2015

Analysts had expected earnings per share of $1.40 and revenue of $42.2 billion. The fact that Apple beat expectations on earnings gave its stock a 5 percent boost in after-hour trading.

These results follow a pretty bleak second quarter, and things don’t necessarily seem to get better for Apple: The company’s guidance for its fiscal fourth quarter, which will end on September 30, forecasts revenue to come in between$45.5 billion and $47.5 billion, compared to $51.5 billion during Q4 of 2015.

A continuing bright spot for Apple is its services business: The company generated close to $6 billion in revenue with Apple Music and other services during the most recent quarter, compared to around $5 billion a year ago. This means that services are now Apple’s second-biggest revenue driver, ahead of both Mac and iPad sales.

 

A slowdown in iPhone sales this year was always likely. Market research firm Gartner predicted that smartphone sales would slow this year worldwide, and the inevitable announcement of a new iPhone in September has only helped sales slow even more. A slowing of smartphone sales is a rocky road that companies like Samsung and Google can maneuver, but Apple relies on the iPhone for around 60 percent of its overall revenue.

Most rumors suggest the “iPhone 7” is not going to be a significant upgrade to the existing iPhone 6S model, and Apple might not even opt to call it the iPhone 7 as a result. The next iPhone is expected to include a bigger camera bump, the removal of the headphone jack, and improved antenna lines.

Cook also hinted at bigger plans for Apple TV: One shouldn’t confuse the current-generation Apple TV with Apple’s plans for the living room, he argued. “Think of that as sort of building the foundation for what we believe can be a broader business over time.”

Apple doesn’t break out sales of Apple TV, but lumps the device together with Apple Watch, iPod and other device sales. That category declined 16 percent, generating a total of $2.2 billion in revenue.

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