Apple Reports Second Quarter Results
Plus Jim Cramer's View Kif Leswing / Business Insider : This is one big example of the market conditions that are holding Apple down Benjamin Mayo / 9to5Mac : Following earnings decline, AAPL opens down 8%, market cap shrinks by $40 billion Michael Essany / Mobile Marketing Watch : Wall Street Pounces on Apple M.G. Siegler / 500ish Words : Pray, The Sequel — Apple's Q2 2016 — The bullet points: Jonny Evans / Computerworld : Steve Jobs was an alien, and other myths Jason Snell / Six Colors : Picking apart Apple's Q2 2016 numbers Philip Elmer-DeWitt : Here's Tim Cook on Apple's China problem Evan Selleck / iPhone Hacks : Starting things off with a joke about how doomed Apple … István Fekete / iPhone in Canada Blog : Apple Controls 15.3% of Global Smartphone Market: IDC Dan Frommer / Re/code : Apple's incredible growth streak is officially over Gabriel Beltrone / Advertising & Branding : Ad of the Day: The World Is Weeping Over the Beauty of This Video Shot on an iPhone 6S Kevin Kelleher / TIME : Why Apple Needs To Do Something Huge Soon Aaron Pressman / Fortune : What the Analysts Are Saying About Apple's Tough Quarter Ali Mohammed / iBlogApple : Apple's Q2 2016 Earning Released: A Disappointing March Quarter PYMNTS.com : Tim Cook Shares Apple Pay Stats — Sort Of Rina Marie Doctor / Tech Times : Apple Q2 Earnings See First Quarterly Revenue Drop Since 2003 Jason Snell / Six Colors : Apple Q2 2016 results: Going down! Matt Krantz / USA Today : Apple misses by a mile: Wipes out $43B USA Today : Apple's iPhone-driven bull run may be over Rene Ritchie / iMore : This is Tim: Apple's CEO on the company's 2016 Q2 earnings Micah Singleton / The Verge : Apple sold 51.2 million iPhones and 10.3 million iPads in the first three months of 2016 CNBC : Apple investors brace for worst earnings in 13 years Rohit KVN / International Business Times : Cupertino-based technology behemoth Apple on Tuesday announced … Josh Horwitz / Quartz : Now comes the hard part for Apple in China Duncan Riley / SiliconANGLE : What goes up must come down: after 13 straight years Apple sales and revenues are declining Jules Wang / Pocketnow : In-depth: a perspective and crystal ball on Apple's quarterly revenue tumble Blair Hanley Frank / InfoWorld : iPhone sales plummet in the world's biggest smartphone market Madeline Buxton / Refinery29 : Apple Just Made History, But Not For The Reason You Think Brian Fitzgerald / Wall Street Journal : Apple Q2 Earnings and Analyst Call: What's Next for iPhone - Live Coverage Jesse Hollington / iLounge : Notes from Apple's Q2 2016 earnings call Reuters : Apple's 9-year iPhone juggernaut stops with first sales decline Tiernan Ray / Tech Trader Daily : Apple Cutting $2B of Inventory Given Macro Environment Chris Barylick / O'Grady's PowerPage : Apple releases Q2 2016 numbers, reports $10.5 billion profit, but first decline in revenue in over a decade Kif Leswing / Tech Insider : Tim Cook hints that Apple is ready to open the wallet to buy big companies (AAPL) Matt Burgess / Wired.co.uk : Apple revenue falls for first time since 2003 as iPhone struggles Dave Mark / The Loop : That's one hell of a curve MacDailyNews : Apple reports earnings miss in Q216 AppAdvice.com Latest : Apple Suffers its First Quarterly Revenue Drop Since 2003 Brandon Russell / TechnoBuffalo : Apple's iPhone sales drop in latest earnings report Gregg Keizer / ITworld.com : Financial analysts forecast first-ever year-over-year decline in iPhone sales Shawn Knight / TechSpot : Apple earnings decline for the first time in 13 years Adrian Kingsley-Hughes / ZDNet : Here's how Apple's 13-year growth streak came to an end John Falcone / CNET : Apple's iPhone 7 problem AppleInsider : Apple adds $50B to capital return program, increases quarterly dividend by 10% Yahoo Tech : Apple's iPhone Upgrade Program is now online, so you can get your Apple fix at home Brett Howse / AnandTech : Apple Announces Q2 Fiscal Year 2016 Results: iPhone Sales Slowed But Services Gain Jordan Kahn / 9to5Mac : Apple's Q2 numbers: iOS sales, 13m Apple Music subs, record Android switchers, Apple Pay growth, more Julian Chokkattu / Digital Trends : Apple sees first year-over-year revenue decline in 13 years on falling iPhone, Mac sales C. Custer / Tech in Asia : Apple's China revenue drops sharply in record-breakingly poor earnings Nathan Ingraham / Engadget : Apple iPhone sales and revenue finally decline Aaron Pressman / Fortune : What Else Went Wrong For Apple Besides Predicted iPhone Slump Andy Weir / Neowin : Apple Q2 2016 results: iPhone sales down 16% YoY, iPad down 19%, Mac down 12% Greg Sterling / Marketing Land : Apple posts revenue miss of $50.6 billion but sells more iPhones than expected Tweets: Benjamin Mayo / @bzamayo : A word is missing from Apple's press release title today.pic.twitter.com/fv2Niabgd0
Context & Ripple Effects
This is the quarter that ended Apple's thirteen-year growth streak: Q2 2016 brought the company's first quarterly revenue decline since 2003, with iPhone unit sales down roughly 16% year over year and Tim Cook fielding pointed questions about China. The market's verdict was immediate — AAPL shed about $40 billion in market cap on the open.
The related coverage shows this was not a one-off dip but the start of an arc: the decline deepened in Apple's Q3 2016 report, which showed revenue down 15% YoY with iPhone units falling to 40.4M, and by mid-2019 the iPhone had dropped below half of Apple's total revenue for the first time since 2012 — the pivot point where the services business this quarter quietly seeded became the growth engine.
First-order effects
- Apple responds to the miss by expanding its capital return program by $50 billion and raising the quarterly dividend 10% — returning cash to shareholders becomes the immediate answer to a shrinking top line.
- Wall Street reprices AAPL on the news, erasing roughly $40 billion of market capitalization and putting direct pressure on Cook to show a path beyond iPhone unit growth.
Second-order effects
- Cook signals Apple may be prepared to acquire large companies, opening the door to using the balance sheet for M&A rather than only buybacks as the growth lever.
- Suppliers and channel partners exposed to iPhone volumes face a second consecutive down quarter after the Q3 2016 decline, forcing component makers to plan around a flat-to-shrinking Apple hardware base.
Third-order effects
- If the pattern holds, Apple structurally re-rates from a unit-growth hardware company to a services-and-installed-base company — a shift later confirmed when iPhone fell below half of Apple's revenue in 2019 and services reached $19.6B quarterly revenue with 860M paying subscribers by 2022.
- A maturing smartphone market concentrates competition on share shifts rather than market expansion, making Apple's ~15.3% global smartphone position and its pricing power the durable battleground instead of unit sales.
The trend: This quarter marks the start of Apple's decade-long transition from iPhone-unit-driven growth to a services-led earnings model built on its installed base.