Apple sales fall for second straight quarter

That rut has now extended into its second quarter: Apple sold 40.4 million iPhones this past quarter, about 7 million fewer than it did previous year.

Apple reported revenue of 42.4 billion U.S. dollars (£32.2bn) as it beat analyst expectations and responded to the company’s first earnings decline in 13 years in the previous quarter of the year. Overall results were slightly better than forecast by Wall Street analysts, who said consumers just aren’t as excited about the newest iPhone models.

Speaking about Apple’s services business, Cook stated that they saw strong increases in Apple Music, iCloud, and AppleCare, with a growth of 19% to a record $6 billion in services revenue, up nearly $4 billion year-over-year to $21.3 billion in total.

Chief Financial Officer Luca Maestri told Reuters in an interview that Apple’s performance had topped his expectations in a quarter weighed down by tough foreign exchange rates and hard comparisons with blockbuster iPhone 6 sales from the previous year.

Since growth is what Wall Street likes to see, Apple executives are increasingly touting the purchasing power of the company’s massive customer base – almost 600 million owners of Apple devices who spend an average of $68 a year on apps, music and other services, according to estimates by Credit Suisse. “We understand China well and we remain very, very optimistic about the future there”.

As iPhone sales level off, Apple is attempting to use such services to wring more revenue out of its existing base of users.

In the earnings call, Cook repeated how the Apple Watch is the “best-selling smartwatch in the world”, and how the iPhone SE’s demand outstripped supply.

Up to Tuesday’s close, Apple’s shares had fallen about 8.2 percent since the start of the year. Apple is partnering on the project with a team of veteran Hollywood producers and musician/entrepreneur will.i.am. It also demonstrates Apple’s desire to create original programming as a way of drawing more people to purchase music and videos on iTunes and Apple TV.

It’s also been reported that Apple has secured rights to the Carpool Karaoke segment of The Late Late Show with James Corden in the US that sees James Corden driving around with a celebrity guest and singing songs. In one change, Apple is reducing its commission on apps that are sold on a subscription basis. But an iPhone sales bump isn’t likely until Apple releases successors to the 6S and 6S plus later this year.

Following the financial results, Apple’s share prices rose to over $100 per share because Tim Cook told investors the company is investing in different areas. A year earlier, sales were $51.5 billion. Apple doesn’t challenge competitors in the low-price end of the smartphone market, but brands like Huawei that initially find success with less-expensive phones often later challenge Apple with more premium models. Apple’s iCloud storage service, meanwhile, has a host of online competitors.

The drop marked the first back-to-back quarterly sales declines since 2002, according to Bloomberg data. But some analysts are warning of tepid sales even then, citing industry rumors that Apple may wait until 2017, the tenth anniversary of the iPhone’s release, before making dramatic improvements to its signature smartphone.

“The growth was broad-based with App Store revenue up 37 percent to an all-time high”, Cook said in a conference call.

Still, the collective hardware sales and revenue from Apple’s other services and products totaled $42.4 billion.

Advertisement

Maestri confirmed Apple sold fewer watches, but he said a recent report by research firm IDC, which estimated Apple Watch shipments fell 55 percent, was “not in the ballpark”.