Apple’s earnings calls tend to give analysts bits and pieces of its products’ progress but never really the whole meal.
That’s what happened yesterday (April 26) during Apple’s second quarter earnings call. Apple CEO Tim Cook threw out new Apple Pay user stats — but in a way that gave little context or details.
For example, he noted that Apple Pay is growing at 1 million users a week and that it is seeing five times the transaction volume of a year ago. But he didn’t say how many users Apple Pay has or what transaction volume was a year ago. In terms of acceptance, he said that Apple Pay is accepted at 2.5 million locations in the U.S. alone.
During the call, CFO Luca Maestri noted that the company hasn’t seen a meaningful revenue impact from Apple Pay but did say that he expects Apple Pay could eventually make a financial impact. Of course, no clarity around “eventually.”
iPhone Sales — And Slowdowns
But the big news, as all of the headlines have blasted, is that Apple’s iPhone sales took a hit this quarter. Cook explained that the dip had a lot to do with the overwhelming number of customers who upgraded to the iPhone 6/6s when those models first came out, so way more then means way fewer now. In Q2 2015, the quarter after the Apple iPhone 6 launch, Apple sold 61.2 million iPhones. A year later, iPhone sales were down 10 million phones, to 51.2 million.
That 16 percent downward slump drove revenues downward as well. Apple brought in 18 percent less revenue as a result of the slowdown — $32.9 billion this quarter versus $40.3 billion one year ago.
The somewhat bright spot is that analysts had already predicted Apple to sell only 50 million iPhone units this quarter, so in that regard, Apple beat estimates. That wasn’t enough to keep Apple stock from falling 8 percent in post-trading hours.
The other big headline, of course, is that this quarter is the first time that Apple took a quarterly sales dip in 13 years. Apple’s YOY revenue dipped to $50.6 billion, which was down 13 percent from last year’s Q2 of $58 billion. The downside of a massively successful quarter with record-breaking iPhone sales like 2015’s Q2 is that it creates a tough benchmark to follow.
Apple certainly saw that play out this time around.
“Without giving exact numbers, if we would have had the same rate for the 6s as we did the 6, it would be time for a huge party. It would be a huge difference,” Cook said, acknowledging that the sales difference between the iPhone 6 and 6s was “lower, a lot lower.” Of course, he didn’t break out how much lower specifically for that model.
He also noted that switchovers from non-Apple users to Apple users was the largest the company had seen in six months, but he was mum on those figures, too.
“Despite the pause in our growth, our results reflect excellent execution by our team in the face of strong macroeconomic headwinds in most of the world,” Cook said.
In terms of highlights for Apple, emerging markets — specifically, India — were mentioned as high points for the company. Apple saw a 56 percent sales growth in India and is seeing much more traction in that region.
In China, however, the numbers weren’t quite as strong as those Apple previously posted, but Cook was optimistic that things will pick up. Sales across Greater China (defined by Apple as China, Taiwan and Hong Kong) were down 26 percent to $12.49 billion — down from $16.82 billion a year ago. Outside of Japan, revenues in that region were down across the board.
“I think China is not as weak as it has been talked about. We may not have the winds at our back that we had hoped, but it’s a lot more stable than what I think is the common view of it. We remain really optimistic on China,” Cook said on the call with analysts.
Certainly, China’s economic slowdown came at the wrong time for Apple. But Cook also hinted that Apple may be paying attention to India now that China is a bit in flux.
“The market potential has not been as great there. India is where China was seven to 10 years ago,” Cook said on the call. “I think there’s a great opportunity there.”