Apple Drops Billions In Revenue, Reports Blame The iPhone

Apple Drops Billions In Revenue, Reports Blame The iPhone

Apple has reported billions of dollars loss in revenue and net income in its second quarter earnings report. And many are blaming depleting iPhone sales for the company’s results.

Emma Mackenzie
Posted by Emma Mackenzie

On Tuesday, the tech giant said it had achieved a revenue of $US50.6 billion ($AUS65.32 billion), which is nearly eight billion down from its revenue the year prior, a nine per cent shift, according to CEO Tim Cook. Net income also dropped from $US13.6 billion ($AUD17.56 billion) to $US10.5 billion ($AUD13.55 billion).

Still, Cook remained optimistic. “Despite the pause in our growth, our results reflect excellent execution by our team in the face of ongoing macroeconomic headwinds in much of the world and difficult year over year comparisons,” he said in a conference call.

Stocks for Apple have also dropped 73 cents – 0.69 per cent – according to the American Stock Exchange NASDAQ. However at one point during the after-hours trading, Business Insider is reporting the company’s shares dropped a whopping 7.36 per cent.

The drop in iPhone sales is what the media and many analysts are pointing the blame to. iPhone sales make up around 68 per cent of the company’s revenue, according to the company’s first quarter results.

In the second quarter of the financial year, Cook said the company had sold 51.2 million iPhones. US publication Wired reports this is down 16 per cent from the first quarter of the year.

However, Cook said this was “consistent in the range of our own expectations, but lower than the exceptional year ago quarter”.

He said the iPhone sales come from three sources – people that upgrade from previous models, customers that switch from Android and first-time smartphone users.

While noting the rate of upgrade for this quarter was lower than when the iPhone 6 came out, Cook said they’re still seeing a high number of customers switching over from Android – more so in the past quarter than they have before.

Cook said 67 per cent of the product’s sales were international, which Business Insider said the strength of the US dollar hindered other sales around the globe.

“The smartphone market, as you know, is currently not growing. However, my view of that is it’s an overhang of the macroeconomic environment in many places in the world, and we’re very optimistic that this too shall pass,” Cook said.

Speaking to analysts, Wired said smartphone sales are slowing around the world, and while the iPhone is not a bad phone by any means, there are other, cheaper phones getting just as good.

“The phones we have right now are good enough, to the point where I don’t need a premium phone to do everything I need to do,” said Gartner analyst Tuong Nguyen. “Even if I got a mid-tier phone, that’s probably more than I need.”

Too, the Sydney Morning Herald says this is a troubling reason for Apple’s drop. “For years, analysts have warned that the smartphone market is becoming saturated, meaning that most people who would want to buy a smartphone already have one.”

Still, Apple’s predictions for the third quarter of the year are:

  • revenue between $41 billion and $43 billion
  • gross margin between 37.5 percent and 38 percent
  • operating expenses between $6 billion and $6.1 billion
  • other income/(expense) of $300 million
  • tax rate of 25.5 percent