Earlier this week Apple (NASDAQ: AAPL) reported financial results for its fiscal 2016 second quarter ending March 26, 2016. While the company reported quarterly revenue of $50.6 billion and net income of $10.5 billion, Apple’s quarterly totals represent a decline year-over-year, the first decline in 13 years, according to The Verge.
Highlights from its earnings report for the second quarter of its 2016 fiscal year include:
- Quarterly revenue $50.6 billion, compared to $58 billion, year-over-year
- Quarterly net income of $10.5 billion, compared to $13.6 billion, year-over-year
- Operating cash flow of $11.6 billion
- Apple has more than 1 billion active device users
- iPhone sales in India were up 56 percent from a year ago
- Returned $10 billion to shareholders through capital return program during the quarter
- Board approved an increase of $50 billion to the company’s program to capital return program
Image courtesy of Apple
Unit sales and revenue were down, year-over-year, for iPhones, iPads, and Macs, but revenue for services, which includes apps, media, payments and Apple Music’s nine-month-old subscription streaming music service, was substantially higher ($6 million compared to $5 million).
“Our team executed extremely well in the face of strong macroeconomic headwinds,” said Apple CEO Tim Cook in a press release. “We are very happy with the continued strong growth in revenue from Services, thanks to the incredible strength of the Apple ecosystem and our growing base of over one billion active devices.”
In its earnings press release, Apple provided guidance, representing another drop in income year-over-year, for the third quarter of its fiscal year:
- Revenue between $41 billion and $43 billion
- Operating expenses between $6 billion and $6.1 billion
- Gross margin between 37.5 percent and 38 percent
In the Q2 earnings call, Cook said the Services category generated “very strong growth.”
“Services was our second largest revenue-generating category during the quarter,” Cook said. “…the March quarter Services revenue was our highest ever. Services revenue jumped 20 percent to $6 billion. Appster revenue was up 35 percent to beat last quarter’s all-time record, and Apple Music continues to grow in popularity with over 13 million paying subscribers today. We feel really great about Apple’s first subscription business, and our music revenue has now hit an inflection point after many quarters of decline.”
Insider Take:
If this is the first quarter that Apple has seen a decline year-over-year, it is merely a blip on the radar for Apple. After all, the tech giant had net income of $10.5 billion and could still afford to return $10 billion to shareholders during the quarter. Most companies would love to have a “bad” quarter like that.
What’s next for Apple? The Verge said Apple has teams researching new products that involve virtual reality and cars. With 13 million paying subscribers for Apple Music, this is another area for potential growth for Apple and a way for it to move away from its dependency on Apple product sales and to increase the opportunity for long-term recurring revenue.
Based on the company’s success with its first subscription product, Apple may look for other subscription opportunities within its current products.
~ Dana E. Neuts, Senior Staff Writer, Subscription Insider
