Apple's Earnings Fail, Poor iPhone Sales Blamed

For the first time in 13 years, Apple failed to report quarterly growth.

Instead, the tech giant said Tuesday that revenue fell 13% to $50.6 billion during its fiscal second quarter, while net income fell 22% to $10.5 billion during the period, which ended in March.

Tim Cook, Apple's CEO, blamed the performance on what he called “strong macroeconomic headwinds.” Along with a windy world economy, sagging iPhone sales are chiefly to blame.

Last year, the company enjoyed a sales surge driven by the launch of the iPhone 6S and 6S Plus. Now, even if Apple had some fancy new phone to sell -- which it doesn't -- most consumers are not ready for an upgrade.

This past quarter, domestic iPhone revenue fell 18% year-over-year, and 26% in China. That's a big problem, considering that phone sales have consistently comprised about two-thirds of Apple's business.

Partly as a result, Apple is expecting sales between $41 billion and $43 billion, next quarter -- off of the $47 billion that analysts were expecting.

Apple has reason to be optimistic, however. During the fourth quarter, the tech giant said its active-install base surpassed a billion devices for the first time ever.

From iPhones to iPads to Macs to Apple Watches, the number of gadgets syncing with Apple’s services increased by a healthy 25%, year-over-year.

Stateside, Apple's share of smartphone users is expected is expected to account for a 43.5% share in 2016 -- up slightly from 43.3 in 2015, by eMarketer’s estimation. Android, by comparison, will see its share of U.S. smartphone users rise slightly to 52.0% up from, 51.7% the previous year.

Looking ahead, analysts say Apple's biggest and best hope lies in the success of its next iPhone.

“Clearly, Cook & Co. have a few tough quarters ahead until we get to the buildup around iPhone 7 later this year, which is what bulls (including ourselves) are focused on to turn this ship back into growth waters,” Daniel Ives, a senior analyst at FBR, explained in a recent note to investors.

Piper Jaffray analyst Gene Munster agrees. “We believe shares of AAPL could achieve upside of over 50% from current levels by the iPhone 7 launch in September,” Munster wrote in his own note.

Of course, that’s extremely optimistic, considering signs that the global smartphone market is maturing.

Next story loading loading..