Apple reports earnings miss in Q216

Apple today announced financial results for its fiscal 2016 second quarter ended March 26, 2016. The Company posted quarterly revenue of $50.6 billion and quarterly net income of $10.5 billion, or $1.90 per diluted share. These results compare to revenue of $58 billion and net income of $13.6 billion, or $2.33 per diluted share, in the year-ago quarter. Gross margin was 39.4 percent compared to 40.8 percent in the year-ago quarter. International sales accounted for 67 percent of the quarter’s revenue.

Wall Street expected Apple to report earnings of about $2 a share on $51.97 billion in revenue, according to a consensus estimate from Thomson Reuters. Analysts also expected Apple to report iPhone shipments of about 50.3 million units in the second quarter, bringing in revenue of $33.23 billion for the product category, as per StreetAccount. Apple’s Q215 results: Profit of $13.6 billion, or $2.33 a share, on revenue of $58 billion.

“Our team executed extremely well in the face of strong macroeconomic headwinds,” said Tim Cook, Apple’s CEO, in a statement. “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.”

• iPhone: 51.193 million units, $32.857 billion revenue (vs. 61.170 million, $40.282 billion YOY / -16% units YOY, -18% revenue YOY)
• iPad: 10.251 million units, $4.413 billion revenue (vs. 12.623 million, $5.428 billion YOY / -19% units YOY, -19% revenue YOY)
• Mac: 4.034 million units, $5,107 billion revenue (vs. 4.563 million, $5.615 billion YOY / -12% units YOY, -9% revenue YOY)
• Services: $5.991 billion revenue (vs. $4.996 billion YOY / +20% YOY)
• Other Products*: $2.189 billion revenue (vs. $1.689 billion YOY / +30% YOY)

*includes sales of Apple TV, Apple Watch, Beats products, iPod and Apple-branded and third-party accessories.

The Company also announced that its Board of Directors has authorized an increase of $50 billion to the Company’s program to return capital to shareholders. Under the expanded program, Apple plans to spend a cumulative total of $250 billion of cash by the end of March 2018.

“We generated strong operating cash flow of $11.6 billion and returned $10 billion to shareholders through our capital return program during the March quarter,” said Luca Maestri, Apple’s CFO, in a statement. “Thanks to the strength of our business results, we are happy to be announcing today a further increase of the program to $250 billion.”

As part of the updated program, the Board has increased its share repurchase authorization to $175 billion from the $140 billion level announced last year. The Company also expects to continue to net-share-settle vesting restricted stock units.

The Board has approved an increase of 10 percent to the Company’s quarterly dividend, and has declared a dividend of $.57 per share, payable on May 12, 2016 to shareholders of record as of the close of business on May 9, 2016.

From the inception of its capital return program in August 2012 through March 2016, Apple has returned over $163 billion to shareholders, including $117 billion in share repurchases.

The Company plans to continue to access the domestic and international debt markets to assist in funding the program. The management team and the Board will continue to review each element of the capital return program regularly and plan to provide an update on the program on an annual basis.

Apple is providing the following guidance for its fiscal 2016 third quarter:
• 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

Apple’s Q316 revenue guidance of between $41 billion and $43 billion is light vs. FactSet estimate $47.4 billion.

Apple will provide live streaming of its Q2 2016 financial results conference call beginning at 2:00 p.m. PDT on April 26, 2016 at www.apple.com/investor/earnings-call/.

MacDailyNews Take: Big, painful, across-the-board miss.

56 Comments

  1. Interestingly they sold more iPhones than the street predicted, 51.1 million vs 50.3 million. The shortfall was in Macs, 4 million vs. 4.5 million. iPads did about what was projected.

    1. Besides, I do not agree with MDN on their comment; there is no miss at all, even a small miss; let alone big miss.

      Apple projected to have $50-53 billion of revenues, and it worked out as expected. Yes, within the lower level projection, but not a miss.

      In the next quarter Apple will also not miss as they seem to be able to accurately estimate how things how — result between $41 billion and $43 billion is expected.

  2. Not sure what to say – very frustrated with yet another questionable quarter under Tim Cooks guidance, great job Tim the stock is under 100 again – your investors will be very pleased with the stock appreciation the last couple of years.

    1. The stock repurchase program is more about keeping the cost of the dividend down and the stock from tanking than it is about returning money to shareholders!

    2. Funny how most company’s are reporting a down quarter due to economic conditions but you single out in true doofus style Tim Cook to blame. Apple still makes more money than any other company on earth but not good enough for you? There will always be lows along with the highs. This too shall pass.

      1. peterblood71:

        Come on. These are huge dips YOY. Compare it to Google lr Facebook. This is an alarming drop. This is what happened:

        -iPhone is stagnent (combination of lack of innovation at Apple and stalled growth of smartphones)
        -Apple Watch nose dive. Apple surely thought by now that the Apple Watch would be driving many billions in revenues. It hasn’t taken off.
        -Had Apple launched a breakthrough Apple TV with Apps as channels where users can build their own programming, this product would have driven hard their bottom line.

        Jobs would have better refreshes of the iPod; more innovative iPhones; revolutionary TV, and skipped the watch.

        1. Everyone is experiencing these dips. You f course like to single Apple out. The sales they do have kicks everyone else hard in the nuts. Since no sales figures are released for Apple Watch and it has 75% market share (sales are actually thought to be very respectable and I love mine) I’d suggest you’re a biased Apple Hating idiot pretending you know sales figures.

          You really are a buffoon if you think Apple hasn’t tried really hard to preempt and update the cable TV space to more consumer friendly. Entrenched players are making that difficult but if you were the slightest bit informed you’d know that.

          Unless you are in contact with the dead you are also presumptuous of what Jobs may or may not have done. Even in his day big paradigm shifts took years and didn’t occur on the yearly schedule jugheads like you expect. People like you who contribute nothing except fatuous criticism expect everything and impossible standards from others. You think you know information you don’t have, think you know what dead people may have done, and you draw specious conclusions out of thin air – which is what mostly exists between your ears. Your voice is only one a Mother Troll could love. Grow up.

    3. “another questionable quarter”

      How so? Apple hit within their guidance. Not sure why people are going ape-shit over this? They obviously know more about the market than you or the rest of these fools complaining here.

  3. No mea culpa from Tim Cook, just praise for the hard work and efforts of his executive team. Tim Cook blames nefarious forces organized against Apple and takes no responsibility. I expected nothing less. Keep it real, Tim.

  4. A few more like these and Timmy the Flower won’t be fighting to get cross-dressers into women’s public bathrooms, he’ll be fighting for his job.

    Steve made the wrong choice.

    Tim, go run for office where you’ll never get elected.

    Elon, take the Apple Board’s inevitable offer.

    1. Right on – Tim needs to go and quickly, it is very obvious with a 10 or less PE that Wall Street does not care for him either and will do everything in their power to drive down the stock – think about it

  5. This is what happens when the economy is heading for the cliff, even companies like Apple can’t make as much money as they have in the past.

    This is only going to get worse in the future.

    1. by that I mean, when the iPod market was saturated, which is what the iPhone market is approaching..  came out with the “one more thing” during Jobs’s historic Second Reign. People forget that period where Apple destroyed Microsoft. I hope to see the genius spark of originality return to Tim Cook’s .

      1. The iPod market didn’t “saturate” it was being superseded by another device… the smartphone. Apple saw that happening and made a very smart preemptive move into that market to make up for the future decline of iPod sales – that decline didn’t happen until 2009.

        There is nothing at this moment in time that is replacing the smartphone. This quarter’s fall has everything to do with last year being propped up by back-ordered iPhone 6 units being fulfilled well into the quarter. (Remember, Apple doesn’t count a sale until the device has shipped.)

            1. First of all, I’m not wrong. The PMP market did not saturate – it didn’t have time to. People stopped buying them because as smartphones advanced they gained all the functionality of a portable media player. Sales declined not due to everyone who wanted a portable media player already had one, i.e. saturation, it was because they could simply use their smartphones as a PMP. iPod sales started to decline almost 2 years AFTER the iPhone was released. And right about the time Android started coming on the market.

              And as I said, Apple was extremely prescient in understanding that shift years before it happened. They knew smartphones would one day replace PMPs and they did something about it.

              Your example of Blackberry has nothing to do with your argument. Blackberry was a smartphone. It died because they were unable to keep up with the times. Just as Nokia, Motorola and Microsoft.

              The smartphone is the apex of personal computing and communication, which is why it has become the single biggest consumer product on the planet. There is nothing on the horizon that has the potential to replace the smartphone – and I’m talking about the device in general, not a single company’s product.

            2. I imagine if we were to have the conversation in real life, it would pretty much end with you sticking your fingers in your ears and yelling, “La la la la la la. I can’t hear you! La la la la la.”

              LOL

        1. Someone who gets it. You can’t simply invent new things to supersede the previous things you sell, it all depends on timing and opportunity. I would have more respect for these critics who demand new products could offer up exactly what they should be. What is this replacement for the iPhone exactly or what product unrelated to it should the company be exploiting.

          Yes the company isn’t exactly setting the world alight with innovative products at the moment and updated Macs is something they seem to be decidedly sluggish in launching but it’s difficult to see anything that would be transformative to the results at this point. My main worry would be if they are holding back on launching big changes in their products in the MacBook update, through fear of failure or a preference for trying to milk what they have because they dont see a cost/benefit advantage, which would be worrying. 2017 will probably provide the answer in that regard and also perhaps determine whether it’s an unimaginative Cook that’s holding things back or whether the so called innovators within the company are failing to replicate that inspiration that Jobs provided by offering up such advances in the products to offer him. Or alternatively is it simply that room for big advances in their fundamental product sector simply isn’t there at present to be exploited. The good news is Services for that will Inevitably be the area ripe for expansion as hardware and software plateau.

  6. And now a whopping 10% increase in the dividend. Wow. Just wow. Stock down 30+%, buybacks having absolutely NO EFFECT thereon, and a dividend settling out 30% below MSFT, 60% below ATT (for comparison). There is every reason to buy Apple’s products, yes . . . but absolutely no reason to support the company from an investor standpoint. Its enormous earnings cash pile (mostly abroad) is sitting dead in the water and doing NOTHING to expand the company or increase the development speed and quality of its products. Sound bitter here? Hell, yes. Admittedly. Thought about selling everything AAPL this morning, but foolishly did not. I let my heart rule my head. Will NOT happen again. (Down 7.5% right now, a little over 300K for me and my family just today.)

    Advice to everyone: Buy Apple products, to be sure. But stay away from the AAPL equity. FAR, FAR, FAR AWAY.

      1. Um, DUDE . . . you have no idea of the size of the REST of our portfolio, now do you? Besides, at an average purchase price of $1.71 per share, we have done far better with AAPL over the years than most investors with any other equity. How ’bout you? Committed–REALLY committed–to anything in your financial life? ‘Tis easy to judge anyone’s game from the sidelines.

        1. Dude, if you have so much money, and you know Apple shares have hit incredible highs in the past, then who cares?

          You will earn back your $300K and more.

          Unless you are a slimy show off and liar with ‘so much money’ yet worried about a respectively tiny $300K loss.

  7. The beleaguered Apple under timid tim “the zero trick pony CEO” cook misses earnings on all counts. It’s time to send t2 (timid tim) marching back to HP, where he always belongs, in a parade of tar and feather. Sub $80 here AAPL comes.

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