Apple Beats Earnings Estimates But Posts 3rd Consecutive Quarter Of Year On Year Revenue Declines

Shares of Apple dropped over 2 percent in afterhours which came after the Cupertino, California based company posted its 3rd consecutive quarter of year over year revenue declines with its Q4 2016 fiscal earnings report on Tuesday following the closing bell, even despite strong demand for Apple’s latest iPhone 7 and impressive gains in Apple’s service business category.

Apple posted Q4 fiscal earnings of $ 1.67 EPS, slightly beating the $1.65 estimate from Factset on quarterly revenue of $46.9 billion and quarterly net income of $9 billion.

However, in the year ago quarter, Apple had a stronger EPS of $1.96 on higher revenue of $51.5 billion and net income of $11.1 billion.

During the conference call, Apple CEO Cook remained upbeat about the Q4 fiscal quarter results and described 2016 as an overall successful year for Apple.

“Our strong September quarter results cap a very successful fiscal 2016 for Apple,” said Tim Cook,  CEO of Apple.

“We’re thrilled with the customer response to iPhone 7, iPhone 7 Plus and Apple Watch Series 2, as well as the incredible momentum of our Services business, where revenue grew 24 percent to set another all-time record” Cook said

Cook explained that demand for the iPhone 7 is outstripping supply, especially for iPhone 7 Plus.

For the quarter, Apple sold 45, 513 million iPhones, down from 48,046 million in the same year ago quarter.

Sales of Apple’s iPhone account for 62 percent of the total revenues generated by Apple on average.

“iPhone sales were up year over year in 33 of our top 40 markets. As you know, iPhone customers are the most satisfied and loyal customers in the world and fiscal 2016 saw more customers switch from Android to iPhone than ever before” Cook said.

Even though sales were down in China in fiscal Q4, Apple’s CFO Luca Maestri said during the conference call that Apple would return to growth in China in the next December quarter.

CEO Cook said he’s hopeful that India will become a growing market for Apple.

“Our iPhone sales in India were up over 50 percent in fiscal 2016 compared to the prior year and we believe we’re just beginning to scratch the surface of this large and growing market opportunity” CEO Cook said.

Apple’s Services Revenue Grows 24 Percent

Apple’s service category which incudes iCloud, iTunes, Apple Music, and the App Store saw robust quarterly growth.

“We had a record setting quarter for services with revenue growth accelerating by 24 percent reaching 6.3 billion. App store revenue continued to skyrocket where music revenue grew by 22 percent thanks to the growing popularity of Apple Music” Cook said.

Cook also pointed out that Apple had 82 percent market share in tablets over $200 while Apple Pay transactions were up over 500 percent year on year for the Q4 fiscal quarter.

“In fact, we completed more transactions in the month of September than we did across all of fiscal 2015” Cook said.

Q1 2017 Guidance

For Apple’s guidance in the next Q1 2017 (December quarter), Apple provided revenue guidance between $76 billion and $78 billion.

Gross margin between 38 percent and 38.5 percent. Operating expenses between $6.9 billion and $7 billion.  Other income/expense of $400 million and a 26 percent tax rate.

Written By:

Johnathan Schweitzer

@SchweitzFinance

schweitz31@gmail.com

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