With how well Apple has been doing in recent years, most expected the first quarter of 2016 to be another success. After all, Apple stock has continued to grow for years now and they continue to dominate the smartphone and tablet market. Unfortunately, the first quarter of 2016 was not kind to Apple.
According to Apple’s quarterly report released this week, the first quarter revenue for 2016 was $50.55 billion, which is down by 13% from their $58 billion quarter last year. Not only that, but profit was down as well–Apple reported a profit of $10.52 billion compared with $13.57 billion the previous quarter.
In addition to this, Apple reported that iPhone sales were just 51.19 million for Q1 2016. This represents a significant drop from the 61.17 million units sold last quarter. iPad sales were down for the ninth straight quarter as well. The Apple Watch generated $6 billion in sales during its first year, which might seem significant–except it’s just a drop in the bucket when compared to the company’s $233 billion revenue overall for last year. Sales for the Mac line of computers were down, too.
Given the sharp sales decline across the board, some may assume that Apple is in bad shape. That’s not really the case, though. Apple currently is said to have cash on hand of over $200 billion. They have announced plans to return roughly $250 billion to shareholders by April 2018. They will also be buying back roughly $175 billion in stocks.
Both Apple’s cash on hand and buyback program point to the company continuing to be very financially secure. In fact, Apple CEO Tim Cook told Wall Street Journal this week that it was “a very challenging quarter,” but that Apple is not in decline.
I am inclined to agree with Cook’s assessment of the news. With how hot Apple’s iPhone has been since debuting in 2007, slowed growth was inevitable. Factor in that Apple’s current iPhone is so good that upgrading yearly is no longer absolutely necessary, and it’s easy to see why demand for new iPhones might be down. Other manufacturers are dealing with the same problem of slowed growth in the smartphone and tablet market, as well.
What will be telling is Apple’s revenue and profit for the remaining 2016 quarters. Continued sharp decline will not bode well for the company. At this point, though, there’s nothing to be worried about.