Apple chief Tim Cook said that the company’s results “reflect stronger customer demand and business performance that we anticipated at the start of the quarter”.
While the numbers were uninspiring in many ways, they were not as bad as some observers had anticipated, and so were actually met with some cheer. While its iPhone sales were down ahead of the anticipated launch of its next-generation flagship, the small screen iPhone SE has proved something of a hit.
iPhone shipments of 40.4 million were down 15 per cent year-on-year, with revenue of $24 billion down 23 per cent. But Cook noted that the company has been in the process of balancing its inventories, and iPhone sell-through – devices reaching customers – was down just 8 per cent.
Demand outstripped supply for iPhone SE, although this has moved toward a balance as the company started the latest quarter. With the aim of serving customers who want smaller phones as well as attracting new customers to the line, “in both cases, the strategy is working”, Cook said.
What will be important to the company will be the performance of the next-generation iPhone. While in terms of replacement cycles it aligns with iPhone 6, meaning there should be a plentiful supply of upgraders, there has been speculation that the company is only set to make incremental changes, which may dampen demand.
iPad shipments of 10 million were down 9 per cent, but revenue of $4.9 billion was up 7 per cent, as buyers focus on more expensive iPad products such as iPad Pro (average selling price increased to $490 from $415). After a run of uninspiring quarters for the tablet business, this came as a welcome change.
Little was made of Apple Watch, other than that watchOS 3 is due later this year. Unsurprisingly, the company was tight-lipped on hardware developments, other than that it “looks forward to even more exciting announcements in this space”.
Services revenue of $6 billion was up 19 per cent year-on-year. The growth was “broad-based”, Cook said, with App Store revenue up 37 per cent to a new all-time high, in addition to strong increases in Music, iCloud and AppleCare.
Cook said the expectation is that the Services business will be “the size of a Fortune 100 company next year”.
On a group level, the company reported a profit of $7.8 billion, down 27 per cent year-on-year, on revenue of $42.4 billion, down 14.6 per cent.