It’s official: Apple, the company with the highest market value in the world, concludes a bad year with a significant decline in revenue and a drop in iPhone sales, resulting in a fall in share prices.
iPhone sales slump caused company revenue to plummet
Apple has already published a warning regarding a decline in revenue and the official results have validated earlier forecasts: In the first quarter of 2016, the company suffered a 13 percent drop in revenue, going from $58 billion in revenue in the same quarter in 2015 to revenues of $50.8 billion in Q1 of 2016.
Looking at net income, we see a profit of $10.5 billion, an impressive number at first glance. But this number also embodies a significant drop of 22.8 percent compared to the same quarter in 2015.
Over the past decade, Apple has completed its transition from a computer manufacturer to a technology company thanks to products like the iPod, Apple TV, Apple Watch, iPad and above all, Apple’s flagship product the iPhone. The smartphone was launched in 2007 and is the main driver of the company’s growth and responsible for most of its revenue.
In the last quarter, Apple recorded sales of 51.19 million iPhones compared to 62 million units in the comparable quarter of last year, which is a decrease of 16.3 percent in sales.
The decline was felt in all of the company’s regions except for Japan. In comparison, the company has experienced a 26 percent decrease in sales in China.
The results immediately affected Apple’s share price; Although the price of shares was $104 at the end of the trading day on Monday, the stock dropped below $100 on Tuesday and has fallen as far as $96 per share. In other words, the company lost nearly $40 billion of its market value, which stood at $575 billion. These numbers are not expected to be better in the second quarter of 2016, in which Apple expects an additional decline of 13 percent in revenue.
Apart from the iPhones, the company has also experienced a drop in iPad sales from 12.62 million in the previous quarter to 10.2 million units; and Mac sales decreased from 4.56 million to 4 million units.
Anyone looking for a bright spot in Apple’s financial report can find it in the company’s services section, which includes the Apple Music service and App Store. Apple’s revenue from services grew by 20 percent to nearly $6 billion, a much higher figure than revenue from Apple’s classic products such as iPads or Macs. Compared to the previous quarter, the company has also recorded a rise in revenue from additional products such as the Apple TV, the Apple Watch, the different iPods and its Beats service.
Commentary: The iPhone that caused Tuesday’s decline could be the impetus for growth tomorrow
The company’s main source of growth is undoubtedly the iPhone. The iPhone 6S, which the company launched in 2015, wasn’t innovative enough to spur a wave of upgrades from the company’s previous devices. That being said, Apple is expected to unveil the iPhone 7 in September. According to reports, the device will boast a new design and some far reaching updates such as its lack of a headphone jack. A powerful device with a strong sense of hype around it, like in the good days of old for Apple, could mark a turnaround and return to steady growth for Apple.