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Apple earnings: Company beats with $42 billion, iPhone SE above expectations

Device sales were down across the board, but analysts had expected worse.

Greg Sterling on July 26, 2016 at 8:22 pm

Earlier this afternoon, Apple reported its fiscal 2016 third quarter results. The company had quarterly revenue of $42.4 billion, which was down 15 percent year-over-year but beat financial analyst consensus estimates. Revenue a year ago was $49.6 billion.

Gross margin was down year over year partly because of the apparent popularity of the lower-cost iPhone SE. There were two highlights: Services revenue grew 19 percent to roughly $6 billion, and iPad sales beat expectations (9.95 million units vs. 9.1 million).

Here are the device numbers:

iPhone: 40.4 million units — $24 billion
iPad: 9.95 million units — $4.9 billion
Mac: 4.2 million units — $5.2 billion
Services (App Store, etc.) — $6 billion
Other Products (including Apple TV, Apple Watch) — $2.2 billion

More than 60 percent of Apple’s sales were from international markets. Of particular concern, Greater China sales were off 33 percent vs. a year ago. In addition, last week, IDC asserted that Apple Watch sales saw a significant 55-percent plunge from last year.

Apple provided FY Q4 guidance (between $45.5 billion and $47.5 billion) that was somewhat better than analyst expectations as well. The company reported it had $231.5 billion in cash on hand.

During the earnings call, Apple CEO Tim Cook said that the quarter had seen “millions” of new iPhone buyers. Some of that was attributable to the iPhone SE, demand for which apparently exceeded supply. He also reiterated that Apple is seeing a high “switcher [from Android] rate.”

Cook explained that the China results look bad but the business is healthier than it seems there, given the economic downturn. He added that India is a fast-growing market for the company.

The Apple CEO also said that there were numerous products still in development. One of those projects is presumably Titan, described by The Wall Street Journal as its “secret autonomous, electric-vehicle initiative.”

About The Author

Greg Sterling

Greg Sterling is a Contributing Editor at Search Engine Land. He writes a personal blog, Screenwerk, about connecting the dots between digital media and real-world consumer behavior. He is also VP of Strategy and Insights for the Local Search Association. Follow him on Twitter or find him at Google+.