Apple has officially posted its Q2 2016 earnings results with $50.6 billion in revenue and $10.5 billion in profit from the January to March quarter. Apple’s guidance last quarter first pointed to a year-over-year decline in iPhone sales for the quarter following the holiday season citing global economic issues and inflated iPhone 6 demand due to supply constraints the year earlier. Apple’s updated 4-inch iPhone SE and 9.7-inch iPad Pro launched at the end of March.
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.
Here’s Apple’s breakdown of iPhone, iPad, and Mac sales from the quarter:
- iPhone: 51.1 million units
- iPad: 10.2 million units
- Mac: 4 million units
For iPhone sales, that’s an 18% year-over-year drop and a 19% drop for iPads.
Apple CEO Tim Cook had this to say:
“Our team executed extremely well in the face of strong macroeconomic headwinds,” said Tim Cook, Apple’s CEO. “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.”
And Luca Maestri, chief financial officer, said this:
“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. “Thanks to the strength of our business results, we are happy to be announcing today a further increase of the program to $250 billion.”
Apple’s Q2 results compare to the prior quarter’s $75.9 billion in revenue, 74.8 million iPhone sales, 16.1 million iPad sales, and 5.3 million Mac sales. In the same quarter a year ago, Apple reported $58 billion in revenue, 61.1 million iPhones sold, 12.6 million iPads sold, and 4.5 million Macs sold. Apple reported $18.4 billion in profit in the prior quarter and $13.6 billion in profit in the year ago quarter.
China, which has been a growth market, dropped 26% year-over-year in terms of revenue while Asia Pacific dropped 25% year-over-year. Total Apple revenue dropped 13% year-over-year. The US and EU dropped 10% and 5% year-over-year, respectively.
Apple’s guidance for the next quarter falls between $41 billion and $43 billion. Tim Cook also shared that iPhone SE is currently supply constrained, meaning sales could climb when Apple catches up with demand, and Apple Music now has more than 13 million subscribers. Apple also saw its highest number of Android switchers during H1.
Read on for Apple’s full Q2 earnings report, and stay tuned as we await Apple’s quarterly conference call at 2 p.m. PT/ 5 p.m. ET to discuss these results. Tim Cook and Luca Maestri are expected to deliver prepared commentary on the earnings results then field questions from analysts participating on the call.
A word is missing from Apple's press release title today. pic.twitter.com/fv2Niabgd0
— Benjamin Mayo (@bzamayo) April 26, 2016
Apple Reports Second Quarter Results
CUPERTINO, Calif.–(BUSINESS WIRE)–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.
“Our team executed extremely well in the face of strong macroeconomic headwinds,” said Tim Cook, Apple’s CEO. “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.”
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. “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 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/. This webcast will also be available for replay for approximately two weeks thereafter.
This press release contains forward-looking statements including without limitation those about the Company’s estimated revenue, gross margin, operating expenses, other income/(expense), tax rate, and plans for dividends, share repurchases and public debt issuance. These statements involve risks and uncertainties, and actual results may differ. Risks and uncertainties include without limitation the effect of competitive and economic factors, and the Company’s reaction to those factors, on consumer and business buying decisions with respect to the Company’s products; continued competitive pressures in the marketplace; the ability of the Company to deliver to the marketplace and stimulate customer demand for new programs, products, and technological innovations on a timely basis; the effect that product introductions and transitions, changes in product pricing or mix, and/or increases in component costs could have on the Company’s gross margin; the inventory risk associated with the Company’s need to order or commit to order product components in advance of customer orders; the continued availability on acceptable terms, or at all, of certain components and services essential to the Company’s business currently obtained by the Company from sole or limited sources; the effect that the Company’s dependency on manufacturing and logistics services provided by third parties may have on the quality, quantity or cost of products manufactured or services rendered; risks associated with the Company’s international operations; the Company’s reliance on third-party intellectual property and digital content; the potential impact of a finding that the Company has infringed on the intellectual property rights of others; the Company’s dependency on the performance of distributors, carriers and other resellers of the Company’s products; the effect that product and service quality problems could have on the Company’s sales and operating profits; the continued service and availability of key executives and employees; war, terrorism, public health issues, natural disasters, and other circumstances that could disrupt supply, delivery, or demand of products; and unfavorable results of legal proceedings. More information on potential factors that could affect the Company’s financial results is included from time to time in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s public reports filed with the SEC, including the Company’s Form 10-K for the fiscal year ended September 26, 2015, its Form 10-Q for the fiscal quarter ended December 26, 2015, and its Form 10-Q for the fiscal quarter ended March 26, 2016 to be filed with the SEC. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.
Apple revolutionized personal technology with the introduction of the Macintosh in 1984. Today, Apple leads the world in innovation with iPhone, iPad, Mac, Apple Watch and Apple TV. Apple’s four software platforms — iOS, OS X, watchOS and tvOS — provide seamless experiences across all Apple devices and empower people with breakthrough services including the App Store, Apple Music, Apple Pay and iCloud. Apple’s 100,000 employees are dedicated to making the best products on earth, and to leaving the world better than we found it.
NOTE TO EDITORS: For additional information visit Apple’s PR website (www.apple.com/pr), or call Apple’s Media Helpline at (408) 974-2042.
© 2016 Apple Inc. All rights reserved. Apple and the Apple logo are trademarks of Apple. Other company and product names may be trademarks of their respective owners.
| Apple Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) |
||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||
| March 26, 2016 |
March 28, 2015 |
March 26, 2016 |
March 28, 2015 |
|||||||||
| Net sales | $ | 50,557 | $ | 58,010 | $ | 126,429 | $ | 132,609 | ||||
| Cost of sales (1) | 30,636 | 34,354 | 76,085 | 79,212 | ||||||||
| Gross margin | 19,921 | 23,656 | 50,344 | 53,397 | ||||||||
| Operating expenses: | ||||||||||||
| Research and development (1) | 2,511 | 1,918 | 4,915 | 3,813 | ||||||||
| Selling, general and administrative (1) | 3,423 | 3,460 | 7,271 | 7,060 | ||||||||
| Total operating expenses | 5,934 | 5,378 | 12,186 | 10,873 | ||||||||
| Operating income | 13,987 | 18,278 | 38,158 | 42,524 | ||||||||
| Other income/(expense), net | 155 | 286 | 557 | 456 | ||||||||
| Income before provision for income taxes | 14,142 | 18,564 | 38,715 | 42,980 | ||||||||
| Provision for income taxes | 3,626 | 4,995 | 9,838 | 11,387 | ||||||||
| Net income | $ | 10,516 | $ | 13,569 | $ | 28,877 | $ | 31,593 | ||||
| Earnings per share: | ||||||||||||
| Basic | $ | 1.91 | $ | 2.34 | $ | 5.22 | $ | 5.43 | ||||
| Diluted | $ | 1.90 | $ | 2.33 | $ | 5.19 | $ | 5.39 | ||||
| Shares used in computing earnings per share: | ||||||||||||
| Basic | 5,514,381 | 5,793,799 | 5,536,656 | 5,818,441 | ||||||||
| Diluted | 5,540,886 | 5,834,858 | 5,567,506 | 5,858,330 | ||||||||
| Cash dividends declared per share | $ | 0.52 | $ | 0.47 | $ | 1.04 | $ | 0.94 | ||||
| (1) Includes share-based compensation expense as follows: | ||||||||||||
| Cost of sales | $ | 191 | $ | 142 | $ | 395 | $ | 282 | ||||
| Research and development | $ | 468 | $ | 384 | $ | 934 | $ | 758 | ||||
| Selling, general and administrative | $ | 389 | $ | 401 | $ | 797 | $ | 775 | ||||
| Apple Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) |
||||||
| March 26, 2016 |
September 26, 2015 |
|||||
| ASSETS: | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 21,514 | $ | 21,120 | ||
| Short-term marketable securities | 33,769 | 20,481 | ||||
| Accounts receivable, less allowances of $60 and $63, respectively | 12,229 | 16,849 | ||||
| Inventories | 2,281 | 2,349 | ||||
| Vendor non-trade receivables | 7,595 | 13,494 | ||||
| Other current assets | 10,204 | 15,085 | ||||
| Total current assets | 87,592 | 89,378 | ||||
| Long-term marketable securities | 177,645 | 164,065 | ||||
| Property, plant and equipment, net | 23,203 | 22,471 | ||||
| Goodwill | 5,249 | 5,116 | ||||
| Acquired intangible assets, net | 3,843 | 3,893 | ||||
| Other non-current assets | 7,745 | 5,556 | ||||
| Total assets | $ | 305,277 | $ | 290,479 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY: | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 25,098 | $ | 35,490 | ||
| Accrued expenses | 23,208 | 25,181 | ||||
| Deferred revenue | 9,461 | 8,940 | ||||
| Commercial paper | 7,998 | 8,499 | ||||
| Current portion of long-term debt | 2,500 | 2,500 | ||||
| Total current liabilities | 68,265 | 80,610 | ||||
| Deferred revenue, non-current | 3,322 | 3,624 | ||||
| Long-term debt | 69,374 | 53,463 | ||||
| Other non-current liabilities | 33,859 | 33,427 | ||||
| Total liabilities | 174,820 | 171,124 | ||||
| Commitments and contingencies | ||||||
| Shareholders’ equity: | ||||||
| Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 5,478,446 and 5,578,753 shares issued and outstanding, respectively | 29,484 | 27,416 | ||||
| Retained earnings | 102,021 | 92,284 | ||||
| Accumulated other comprehensive income/(loss) | (1,048) | (345) | ||||
| Total shareholders’ equity | 130,457 | 119,355 | ||||
| Total liabilities and shareholders’ equity | $ | 305,277 | $ | 290,479 | ||
| Apple Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) |
||||||
| Six Months Ended | ||||||
| March 26, 2016 |
March 28, 2015 |
|||||
| Cash and cash equivalents, beginning of the period | $ | 21,120 | $ | 13,844 | ||
| Operating activities: | ||||||
| Net income | 28,877 | 31,593 | ||||
| Adjustments to reconcile net income to cash generated by operating activities: | ||||||
| Depreciation and amortization | 5,431 | 5,054 | ||||
| Share-based compensation expense | 2,126 | 1,815 | ||||
| Deferred income tax expense | 3,092 | 1,879 | ||||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable, net | 4,620 | 6,555 | ||||
| Inventories | 68 | (285) | ||||
| Vendor non-trade receivables | 5,899 | 2,500 | ||||
| Other current and non-current assets | 300 | 2,448 | ||||
| Accounts payable | (9,475) | (5,428) | ||||
| Deferred revenue | 219 | 993 | ||||
| Other current and non-current liabilities | (2,093) | 5,679 | ||||
| Cash generated by operating activities | 39,064 | 52,803 | ||||
| Investing activities: | ||||||
| Purchases of marketable securities | (86,242) | (92,523) | ||||
| Proceeds from maturities of marketable securities | 9,148 | 5,871 | ||||
| Proceeds from sales of marketable securities | 50,051 | 48,924 | ||||
| Payments made in connection with business acquisitions, net | (140) | (115) | ||||
| Payments for acquisition of property, plant and equipment | (5,948) | (5,586) | ||||
| Payments for acquisition of intangible assets | (657) | (155) | ||||
| Other | (322) | 88 | ||||
| Cash used in investing activities | (34,110) | (43,496) | ||||
| Financing activities: | ||||||
| Proceeds from issuance of common stock | 247 | 309 | ||||
| Excess tax benefits from equity awards | 264 | 357 | ||||
| Payments for taxes related to net share settlement of equity awards | (751) | (608) | ||||
| Payments for dividends and dividend equivalents | (5,871) | (5,544) | ||||
| Repurchase of common stock | (13,530) | (12,000) | ||||
| Proceeds from issuance of term debt, net | 15,584 | 11,332 | ||||
| Change in commercial paper, net | (503) | (2,508) | ||||
| Cash used in financing activities | (4,560) | (8,662) | ||||
| Increase in cash and cash equivalents | 394 | 645 | ||||
| Cash and cash equivalents, end of the period | $ | 21,514 | $ | 14,489 | ||
| Supplemental cash flow disclosure: | ||||||
| Cash paid for income taxes, net | $ | 6,630 | $ | 7,058 | ||
| Cash paid for interest | $ | 565 | $ | 220 | ||
| Apple Inc. | |||||||||||||||||||||
| Q2 2016 Unaudited Summary Data | |||||||||||||||||||||
| (Units in thousands, Revenue in millions) | |||||||||||||||||||||
| Q2 2016 | Q1 2016 | Q2 2015 | Sequential Change | Year/Year Change | |||||||||||||||||
| Operating Segments | Revenue | Revenue | Revenue | Revenue | Revenue | ||||||||||||||||
| Americas | $19,096 | $29,325 | $21,316 | – 35% | – 10% | ||||||||||||||||
| Europe | 11,535 | 17,932 | 12,204 | – 36% | – 5% | ||||||||||||||||
| Greater China | 12,486 | 18,373 | 16,823 | – 32% | – 26% | ||||||||||||||||
| Japan | 4,281 | 4,794 | 3,457 | – 11% | 24% | ||||||||||||||||
| Rest of Asia Pacific | 3,159 | 5,448 | 4,210 | – 42% | – 25% | ||||||||||||||||
| Total Apple | $50,557 | $75,872 | $58,010 | – 33% | – 13% | ||||||||||||||||
| Q2 2016 | Q1 2016 | Q2 2015 | Sequential Change | Year/Year Change | |||||||||||||||||
| Product Summary | Units | Revenue | Units | Revenue | Units | Revenue | Units | Revenue | Units | Revenue | |||||||||||
| iPhone (1) | 51,193 | $32,857 | 74,779 | $51,635 | 61,170 | $40,282 | – 32% | – 36% | – 16% | – 18% | |||||||||||
| iPad (1) | 10,251 | 4,413 | 16,122 | 7,084 | 12,623 | 5,428 | – 36% | – 38% | – 19% | – 19% | |||||||||||
| Mac (1) | 4,034 | 5,107 | 5,312 | 6,746 | 4,563 | 5,615 | – 24% | – 24% | – 12% | – 9% | |||||||||||
| Services (2) | 5,991 | 6,056 | 4,996 | – 1% | 20% | ||||||||||||||||
| Other Products (1)(3) | 2,189 | 4,351 | 1,689 | – 50% | 30% | ||||||||||||||||
| Total Apple | $50,557 | $75,872 | $58,010 | – 33% | – 13% | ||||||||||||||||
| (1) | Includes deferrals and amortization of related software upgrade rights and non-software services. | |
| (2) | Includes revenue from Internet Services, AppleCare, Apple Pay, licensing and other services. | |
| (3) | Includes sales of Apple TV, Apple Watch, Beats products, iPod and Apple-branded and third-party accessories. |
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FYI, Wells Fargo thinks that Apple’s going to sell 80 Million iPhone 7’s during the ’16 Xmas season, which is contradictory to KGI’s statement. So, who knows? We have to wait and see who’s right? Wells Fargo or KGI.
This wasn’t so bad.
So KGI, about iPhone sales “drastically” slowing down.
18% year over year drop in your largest revenue stream is categorically drastic
True. But remember that q2-15 had sales due to iPhone 6 supply constraints.
Not saying it isn’t something to be concerned with, but the sky isn’t falling yet.
Based on the 9to5 “usually accurate” rumors that the iPhone 7 is going to be a boring iPhone 6SS and the real upgrade will be 2017…..the sky may very well be falling.
Damn that after hours stock price, yikes
Time to load up.
From the looks of it, not quite yet its not….how low will it go
Anyway, this won’t prevent AAPL stock from going down.
This is the first true sign of the Tim Cook era…..smh. This boring iphone 7 sure wont help.
Would you be so kind to share with us the full specs of the hardware, iOS 10 and the review of the iPhone 7? If you are criticizing the phone so hard it only must mean that you practically own the device…
I really don’t see the iPhone 7 making people upgrade in huge numbers unless we see a completely new design. Sure I’m going to get one but I’m a phone nut; I also own a Galaxy S7 which I use more than my iPhone.
If the iPhone 7 looks similar to the current model Apple will have a terrible year. And so many people use the headphone jack. Just don’t believe people are going to respond well to that.
Here is a fun story, some time ago I was working on a RadioShack store and one costumer came into the store searching for a laptop bag for his new MacBook Air. This sir was on his 60s-70s, and he was telling me that his ‘Macintosh’ (his words) was so cool because it didn’t have a CD Drive; “I just download the programs from the App Store and don’t need a CD, is awesome!” He said.
My point is, killing a legacy tech is a coin flip. Have you seen someone honestly caring about Flash or FireWire?
I just switch from a Bose SoundTrue to a nice Bluetooth Pioneer headphones and I’ve been super happy with those, not missing the 3,5mm jack at all.
Here is a cool story. Bluetooth sound quality is terrible.
Have you even tried a bluetooth headphones? No you haven’t.
I have been using a Bluetooth headset that it’s on pair with my Bose SoundTrue on the quality deparment, how do I know this? Beacuse I actually tried the damn thing before making a jugdment.
I get it, some people are super mad because they spent $400 on Audio Technica headphones or some other brand with the prestige and they don’t want to buy an adapter… Very mature
Basically:
51.2 million iPhones sold (down 16%)
10.2 million iPads sold (down 19%)
4 million Macs sold (down 12%)
Overall PC market: down 10%. So they even beat the PC market decline in all categories they do business in. yikes!
Apple is slowly turning into the microsoft that Balmer ran into the ground, I hope i’m not the only who see’s this.
You are the only one who thinks that this is so.
Speak for yourself. Apple’s best days are behind it.
I wish my “failures” included making over $10 billion in a single quarter…
I bought the 6 on day one. And returned it the same day. The 5s has been great and ill wait until they release a product that is not as underwhelming.
I’ve wanted a larger device but the 6 and plus are misses. I’ve mentioned before that if it wasn’t for the lack is ios, I would have went with the amazing Note 5.
Its the product thats the problem. Its always the product. The 6 served a pent up demand but a lot of folks were disappointed. The nicest thing anyone has said was they could put a cover over it to hide it.
Having said that I look forward to next year’s 8 finally being a modern iPhone I can see myself buying. The 6 is an old 4″ iPhone lazily blown up in an unimpressive way.
Nice visualization of the numbers.
https://sixcolors.com/post/2016/04/apple-q2-2016-results-going-down/
Well, if you get lazy and decide to release a new version of the same product but you add a suffix to it and charge 100 more, this is what happens.
If you release a poorly thought product and unfinished product to the market hoping for it to be the next big thing. Well, this is what happens.
If you take your top selling device and change 2 things and say you changed everything. Well people eventually find out.
And if you take your original product. Every version of it, and decide you don’t want to update it for over a year, well you end up with this.
Hope this is a wakeup call for Apple and they stop being so fucking lazy and stale.
I miss Steve Jobs!!! I’m sick of hearing about Apple’s profits all the time…but I shouldn’t be surprised since it’s obvious that profits and money are all that Tim Cook cares about!! He is ruining Apple in my opinion!! He lacks Steve’s vision and imagination..Cook is just a numbers man!! Apple doesn’t innovate like it used to..instead it plays it safe with small incremental changes in its products. They have no real game changers anymore and it is getting harder and harder for me to justify paying a premium price for their products!! I want to see some real innovation and totally fresh ideas in design like Steve would be doing…not playing it safe and only caring about money like Tim Cook seems to do!! Stuff the earnings report please Apple!!
Steve talked about numbers way more then Tim. The SE and iPad Pro event 70% of it was about environmental and social initiatives. Steve would highlighted iPad sales, iPhones sales and many other numbers. Steve was way more of numbers man. You might want to go back and watch the first 15 minutes of any of Steve’s keynotes.
Not this Steve Jobs crap again…
If Jobs were still around there is a BIG chance that the iPhone would still be locked in the 4″ screen.
Under Jobs direction Apple also made some serious BIG flaws, Ping, MobileMe, the hockey puck mouse, the skeuromorphic design… The man wasn’t perfect and neither is Tim.
The main reason that people are not buying Apple stuff is because the US dollar exchange rate is freaking high