Apple Q3 2016 earnings beat estimate but iPhone sales continue to slide

Apple earned revenue of $42.4 billion and a net income of $7.8 billion for the earnings report ended the third quarter of the fiscal year. These figures are equivalent to $1.42 per diluted share.

However, Apple Q3 2016 earnings is $49.6 billion, and the total net income is $10.7 billion for the same quarter of the previous fiscal year. The net income earned by Apple in 2015 is equivalent to $1.85 per diluted share.

Earlier, industry analysts had predicted that the company would post revenue of $42.1 billion, which is more or less equivalent to $1.38 per share. Although Apple was able to beat these predictions, it was only by a narrow margin.

Responding to media queries, Apple CEO Tim Cook disclosed that the management is pleased to present third quarter results that reflect strong customer demand. Moreover, the business performance was well above our expectations than we anticipated at the beginning of the quarter.

Cook, meanwhile, added that the launch of iPhone SE was highly successful despite its sluggish sales in few Asian countries like India. The company is excited to hear feedbacks from both customers and developers on the various products unveiled at the WWDC 2016 conference in June.

Cook further stated that the launch of iOS 10 had simplified the lifestyle of people to a large extent. He also hinted at adding more features in the final release of iOS 10, which will occur during the launch of iPhone 7 in September.

Decline in iPhone sale

Despite good revenues, the sale of flagship iPhone continued to decline. Apple is also facing a decrease in the sale for Mac and iPad.

According to analysts, several smaller companies like Xiaomi have introduced several smartphones with great features at an affordable price. This has resulted in customers to shift to Android platform instead of investing in costly iPhones.

As per estimates, nearly 40.4 million units of the iPhone have been sold for the quarter. If you look at the previous quarter sale, 47.5 million units were sold. Hence, the current figure indicates that there is a 15 percent decline.

In the meantime, Apple managed to sell only 4.3 million units of MacBook compared to 4.8 million in 2015. This indicates a sharp decline of 10.5 percent in sales. As far as iPads are concerned, nearly 10 million units of iPad Pro were sold as against 10.9 million units in 2015.

All is not well for Apple since the gross margin in the third quarter is only 38 percent when compared to 39.7 percent for the same period in the previous fiscal year.

Nowadays, Apple is concentrating on services like Apple Store, Apple Music, iCloud and Apple Pay instead of just hardware.

Commenting on the development, Apple CFO Luca Maestri revealed that the services business reported a revenue increase of 19 percent with up to $6 billion record sales from the App Store.

The future of the company will largely depend on upon the pricing structure of the upcoming iPhone 7 in September. If Apple manages to fix the price at par with other Android competitors, then we can expect a sharp increase in profits.

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