Apple reported record revenue during its earnings call Tuesday, but Tim Cook almost sounded like he was channeling Game of Thrones characters. He didn’t actually say “winter is coming,” but he might as well have.
Revenue is high for now, but iPhone sales are slowing down, the iPad continues to underperform and — most troublesome of all — the global economy will continue to play havoc with Apple’s bottom line.
Still, Cook and Co. remain optimistic about Apple’s ability to continue its world-beating performance. Here are five of the biggest takeaways we got from Apple’s Q1 2016 earnings call today with Cook and Apple CFO Luca Maestri.
‘Peak iPhone’ problem isn’t getting better soon
Nagging concerns about slowing iPhone sales aren’t getting better anytime soon. Apple barely missed Wall Street’s expectations for quarterly iPhone sales, moving 74.8 million units rather than 75.46 million, and Cook said next quarter’s not going to be mind-blowing either.
In fact, Apple expects next quarter will bring the first year-over-year decline in iPhone sales ever. That means continuing fear for Apple investors as the main engine of Cupertino’s profit-making machine comes under increasing pressure. However, the Apple CEO predicted that things will pick up later in 2016, presumably with the launch of the iPhone 7, which is rumored to bring major upgrades.
Apple TV and Apple Watch are killing it. And so is the App Store.
Cook and Maestri still refuse to give actual numbers of Apple Watch sales, but they said consumers spent “billions” on the wearable during an extremely successful holiday shopping season.
The recently revamped Apple TV is doing very well, too, and Cook pointed out that the tvOS App Store now has 36,000 apps on it (which boosts the bottom line of Apple’s growing services business). App Store revenue itself is so large that Apple has started pulling it out of its results as a separate number.
One Apple device for every 7 humans on the planet
Taking a page from McDonald’s, Apple raved about the number of consumers the company now serves. Apple’s active installed base now equals 1 billion. That’s a lot of iPhones, Macs, iPads, Apple Watches, iPod touches and Apple TVs, and those 1 billion devices drive growth in the App Store, which Cook called “one of the largest service businesses in the world.”
It’s an amazing milestone. And you’ve got a really good chance of seeing an iPhone if you travel outside of the United States. That giant number also reflects how many Apple devices remain in use after new ones are released (though I’m sure Apple would rather everyone had a shiny new one).
Apple is an increasingly global company
Two-thirds of Apple revenue comes from outside the United States. The crazy macroeconomic issues this past quarter really affected Apple’s bottom line, said Maestri. Despite the turmoil in currency markets, greater China financials remained good, with the best results ever in the region (14 percent growth). Cook assured investors that even with financial volatility in places like Russia and Brazil, “this too will pass.”
Also, Cook remains bullish on China, and he’s super-excited about India’s massive, young population and increasing LTE presence, both of which should drive increased iPhone sales.
Apple met its own expectations — but just barely
This is the dark side of making predictions. Apple wants to signal to investors that it is optimistic about the future, but also knows that its predictions can spawn negative consequences if they are so high that they become unachievable. This subtlety about “meeting expectations” will mess with Apple share prices today.
Still, Apple maintains what Cook called “the mother of all balance sheets,” with nearly $216 billion in cash on hand. “Our financial position has never been stronger,” he said, and the company will continue to invest during tough economic times..