Apple Revs, Profits Decline, Poor iPhone Sales Blamed

Due to sagging iPhone sales, Apple revenue fell for a second quarter in a row. Year-over-year, it declined 14.6% to $42.36 billion. It also saw profit fall 27% during the fiscal third quarter, the tech giant said Tuesday.

On the bright side, that revenue number was “near the high end of our guidance range,” Apple CEO Tim Cook told analysts on an earnings call. This “reflected stronger customer demand,” Cook said. Specifically, “we had a very successful global launch of the iPhone SE. “Overall, we added millions of first-time smartphone buyers during the quarter,” Cook added.

Apple reported net income of $7.8 billion during the period that ended on June 25, while earnings per share fell from $1.85 to $1.42. For the first time in 13 years, Apple failed to report quarterly growth, last quarter.

Instead, the tech giant saw revenue fall 13% to $50.6 billion during its fiscal second quarter.

At the time, Cook blamed the performance on what he called “strong macroeconomic headwinds.” Along with a windy world economy, sagging iPhone sales were chiefly to blame.

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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.

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 agreed. “We believe shares of AAPL could achieve upside of over 50% from current levels by the iPhone 7 launch in September,” Munster wrote in a recent note.

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

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