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. Americans, being Americans, tend to overlook the international considerations here. The US dollar has been much higher than expected over much of the quarter. This means that Apple products have been more expensive outside the US than competitive products from Samsung etc.

    This higher price extends to music and apps.

    The exchange rate is beyond Apple’s control.

    Before you criticise Apple management you need to calculate the impact of the high US dollar. That is not a trivial calculation.

    But you can check Apple’s UK store and use the currency app on your phone to convert iPhone, Mac, iPad and app prices from GB £ to US $. The results will surprise you and you may wonder how Apple sells anything at all outside the US at the moment.

    1. As an American living and working in Korea I can definitely vouch for this. It hurts so much when I send money home to the US The exchange from KR Won to US Dollars doesnt go near as far as it used to.

  2. as someone else posted the biggest miss was in number of Macs sold

    I can say from personal experience that I decided not to upgrade earlier this year. I had accidentally cracked the screen on my 15″ late 2013 MacBook Pro in January, and was facing a “repair / replace” decision. I researched the entire line up and was unable to find any reason to spend the $3500 it would cost for a comparable – comparable, not better – machine from Apple and the one I have is 2.5 years old! If Apple doesn’t get it together my next machine may be another Windoze box – booooo

  3. If Apple were a space ship, the market would expect it to go faster than the speed of light, eventually. Simply dropping the stock because of a miss is short sighted. The shorts earned a penny today. The concept of x% yeald year over year, is a fallacy. That is only reasonable for a window of time.

    Apple’s quarter is 500 times what it was in 2003, yet that’s the year they compare it too. The mighty have fallen. The only thing that is rising right now is property values in what I beleove to be another bubble.

    What we should be able to accept, is an Apple organization that is both sustainable and profitable.

    Apple is very healthy. To think otherwise is pure lunacy.

  4. We’ve been here before. Apple Watch hasn’t produced. The car isn’t confirmed. iPhone 7 news doesn’t sound life changing. Mac form factors not evolving. Rose Gold not compelling. Mac Pro not very Pro but in price anymore.

    I think Phil Schiller’s passed his sell-by date. The new products don’t have any buzz. Apple isn’t pushing the envelope face enough.

    Innovating when you’ve achieved near perfection is really tough.

    Apple isn’t alone: Google and Microsoft also missed.

    Conclusion: the problem is Wall Street.

  5. Steve Jobs believed in social issues but was not a warrior for social justice. Tim Cook is a warrior for social justice. That’s fine. Go be an activist, community organizer, or a politician. If you want to be the CEO of the greatest tech company that has ever existed, follow the lead of your predecessor and be a CEO first.

    One of the reasons that works is because you can inspire fierce brand loyalty when you have no political issues dividing you and your customers. But Tim is involved in possibly the most divisive issue this country has seen in fifty years. He has every right as a citizen to say and do whatever he wants to fight for his version of social justice. And that is also one of the worst things he can do as CEO of Apple.

    We should never even know that you are involved in social or political issues. We should hear about one day and think, “Wow, he’s a great CEO and he did all of this behind the scenes. Cool.” That’s how the CEO of Apple does things.

    I was an Apple stock holder for about 10 years. About a year after Steve died, I got out. Looks like I made the right call. I know someone who has never owned a PC (Microsoft). He has used Macs exclusively since 1987. For the first time in his life, he’s considering a PC.

  6. I think there is an evolving cult of self admiration amongst the heads at Apple. You can see it in
    their self congratulatory looks and hear them reference each other with awe during Events. Watch the first row next time. Any time someone says “Eddy Cue” with a worshipful tone you know we are in deep trouble.

  7. The “screen” has gone as far as it possibly can – big, small and everything in-between, hi-def, higher-def, touch, swipe, gesture. Nothing much earth-shaking can be done any longer with devices that have screens. There’ll always be room to tinker around quite profitably, but the screen well as a “wow!” delivery system is now generally dry. Apple has dominated the screen era. The challenge now is whether Apple can come up with something non-screened that can take the world by storm again.

    1. As long as the majority of humans use vision primarily, I doubt the screen is anywhere near the end of its era. Perhaps tech like Air gestures that Samsung and Sony are developing independently or Google’s Project Soli which embeds a radar emitter/detector on a chip to detect hand shape and motions will be the next frontier.

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