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You are here: MacNN Forums > News > Mac News > Analysts expect first-ever YOY drop in AAPL Q2 revenues

Analysts expect first-ever YOY drop in AAPL Q2 revenues
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Apr 26, 2016, 04:03 PM
Later today, Apple will posting its revenue and earnings for the company's fiscal second quarter of 2016, which ended on March 31. Following warnings from analysts and the company alike that 2016 would be a "tough compare" year following the iPhone 6 (since it was the first "phablet-sized" iPhone line, releasing much pent-up demand), the iPhone maker is expected to report its first year-over-year drop in revenues since 2003. Sales of the iPod, and later iPhone, buoyed the company's fortunes and pushed it to new quarterly records for the past 13 years.

Following a robust and record-setting holiday quarter (the company's fiscal Q1 2016), Apple has told investors to expect between $50 billion and $53 billion in revenue this quarter, compared to $58 billion in the year-ago quarter. While sales of the Apple Watch, iPad Pro, Mac, and in particular revenues from the overall "services" sector of the company (such as the iTunes Stores) may help beat generally-gloomy analyst expectations of around $52.3 billion, factors beyond simple iPhone sales -- such as foreign currency headwinds -- are hurting expectations.

While the decline is a modest 10 percent in an industry that has seen similar drops in computer shipments, from analysts' perspectives, any drop in iPhone sales beyond the "must beat" 50 million units mark would trigger worries that iPhone demand has peaked, despite a healthy loyalty and upgrade percentage and the high profitability of the device. The impact of the iPhone SE will not be known until the next fiscal quarter due to it having debuted in April, but recent reports of the device attracting switchers in North America and developing markets may help boost hopes for a return to growth -- or at least a mitigation of the usual June-quarter slump -- for next quarter.

As usual, Philip Elmer-Dewitt of Fortune magazine has compiled a chart of analyst expectations, with independent analysts as usual a bit more bullish on Apple than the Wall Street pundits, but the broad consensus is that Apple will report $52.2 billion in revenue (down 10 percent year-over-year), with earnings per share (EPS) of about $2.02. Sales of the iPhone are expected to have declined around 15 percent yoy, while iPads will decline 20 percent yoy, and Mac sales will remain relatively stable but down to 4.5 million units from the 5.5 million reported during the holidays.

The impact of the Apple Watch and other areas of the company could play a factor in overall revenues. Analysts in the Fortune roundup believe Apple will have sold around $3 billion in the wearable, in line with previous estimates of around $12 billion in sales for calendar 2015. The company doesn't break out sales of Apple Watch, but revenue from it can be inaccurately estimated from the growth of the "Other Products" category (which also includes things like the Apple TV) it is reported under.

Apple generally releases a summary statement on its quarterly finances shortly after the markets close at 4PM ET, and will conduct a conference call with analysts and investors to discuss the results at 5PM ET. MacNN will provide live coverage and analysis of the call.
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Apr 26, 2016, 07:48 PM
Headline: "Analysts expect first-ever YOY drop..."
First paragraph: "...expected to report its first year-over-year drop in revenues since 2003."
Year Apple founded: 1976
Year Apple became publicly traded: 1980

Last I checked, first drop since 2003 for a company that's been reporting results since 1980 does not equal "first-ever" even by a wide margin. Nor first since Steve Jobs returned as iCEO, nor even first in the modern Apple era (the iPod launched in 2001, the iMac in 1998). Just the first in a very long time by tech company standards.
Charles Martin
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Apr 26, 2016, 08:39 PM
The article *very clearly* states that this drop is the first *since 2003,* so I'm really not quite sure what your point is. If you're trying to say this is a blip on the radar (well, two blips -- next quarter is going to be bad as well) for a 40-year-old company, then yes that's true.

But Wall Street is about *expectations* as much as (sometimes more than) results, and when Apple has missed expectations at any point in the past as it did today, the stock gets punished.

Apple is still the most profitable company in the world, and is still weathering the worldwide economic conditions and general industry trends better than any other company.
Charles Martin
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