Highlights from Apple’s Q2 2016 Earnings

Apple logoApple announced its Q2 2016 earnings, and as expected, the results were a mixed bag. Decline was the buzzword for the day with the strong performances of the Services division offset by a drop in iOS device sales. To find out more about Apple’s quarterly performance, read on for our easy-to-digest summary of the earnings report and subsequent conference call.
As expected, Apple’s Q2 2016 earnings were disappointing with the first-ever decline in iPhone sales and the first year-over-year revenue decline since 2003. The news wasn’t all negative with some positive reports from the company’s Internet Services business, which is performing well thanks to consumer interest in Apple Music. These financial tidbits are just a small part of what Apple announced –read on for some highlights from the financial side of Apple’s business.

  • Tim Cook confirmed that “It was a challenging quarter for the company.”
  • Apple now has $232.9 billion in cash and marketable securities.
  • Apple increased its capital return program by $50 billion with a total buyback of $250 billion.
  • Apple has made 15 acquisitions in the past financial year and is actively on the lookout for new companies and technologies.
  • International sales accounted for 67 percent of the company’s quarterly revenue.
  • Despite a decline in iPhone sales, Apple still had a record number of switchers from Android in the first two financial quarters of 2016.
  • iPhone SE demand was stronger than expected.
  • Tim Cook: “Demand has been very strong and exceeded supply at this point, but we’re working hard to get iPhone SE into the hands of every customer who wants one as quickly as possible.”
  • The upgrade rate for the iPhone 6s has been higher than the 5s cycle two years ago, but it is still lower than the iPhone 6 cycle.
  • iPhone owners are incredibly loyal with a 95% loyalty rate, according to a Kantar Survey. It’s the highest measured satisfaction rate for any smartphone.
  • Though some markets are saturating, there is only a 42 percent smartphone penetration in the global handset market. Room for smartphone adoption are possible in emerging markets such as India where iPhone sales were up 56 percent.
  • Apple Services revenue jumped 20 percent to its highest ever mark of $6 million, while App Store revenue was up 35% year over year, beating last quarter’s record.
  • Apple Music now has 13 million paying subscribers, up 2 million since February.
  • Apple Pay is growing, increasing fivefold compared to a the same quarter last year. There is now more than 10 million contactless locations in Apple Pay countries, 2.5 million in the U.S. alone. The service is adding about 1 million new users a week.
  • Mac continues to attract new customers with over half of Mac buyers new to the platform. In China, over 80 percent of customers were first-time buyers.
  • Revenue in the “Other Products” category is up 30% thanks to sales of the Apple Watch.
  • Customers are happy with Apple Watch; a recent survey measured 94% customer satisfaction.
  • Cook: “We’re really excited about the first year of Apple Watch. We’ve learned a lot, and it has an exciting future.”
  • iPad sales are stagnant, but that is expected to change with the debut of the 9.7-inch iPad Pro.
  • Cook: “In the June quarter, we expect to see our best iPad revenue compare in over two years.”

Overall, the quarter was not a strong one for Apple. The company sold 51 million iPhones in the quarter, down from 61 million in the same quarter last year. Revenue also dropped from $58 billion in 2015 to $50.6 billion in 2016. Despite an optimistic conference call, Apple expects this downward decline to continue with revenue of $43 billion forecasted for the upcoming Q3 2016. What do you think of Apple’s Q2 2016 results? Let us know in the comments.