Apple has entered a new slow-growth era of iPhone sales.
The company sold 74.8 million iPhones for the last three months of 2015 — up less than 1% from the same quarter a year ago, marking the slowest increase for the device since it was introduced in 2007 and slightly under the 75.5 million forecast by analysts.
Apple CEO Tim Cook warned of a tough beginning to 2016, including a year-over-year decline in iPhone unit shipments for the current quarter. The financial report and subsequent comments from executives during a conference call sent Apple shares (AAPL) down 2% in after-hours trading.
Apple’s fiscal first-quarter results for the three-month period ended Dec. 26 were brisk, as they usually are during the holiday shopping season. Its iPhone franchise contributed mightily to $75.9 billion in revenue, which rose 2% from a year ago, but fell short of $76.5 billion forecast by analysts polled by S&P Capital IQ.
Earnings for the just-completed quarter were $3.28 per share, compared with $3.06 a year ago, and topping forecasts of $3.23 a share.
Cook said that the January-to-March quarter will be rough, indicating slackening iPhone growth. He estimated sales of $50 billion to $53 billion for the current quarter, short of the $55 billion forecast by analysts.
“Economic challenges are all over the world,” Cook said in a conference call after the results were announced, emphasizing “extreme conditions” in several countries including Russia and Brazil. In China, sales rose 14% year over year, though he started to see slowness in the country — Apple’s second-biggest market — in December.
Jittery investors, pounded by a wobbly market and squishy global IT spending forecasts, are worried how iPhone 6S and 6S Plus sales will hold up in the first half of 2016. A Nikkei report said production of the models was down 30% in the January-to-March quarter.
Worldwide IT spending will improve a scant 0.6% to $3.54 trillion this year, from $3.52 trillion in 2015, according to market researcher Gartner.
Apple’s other major products took a thumping during the quarter: iPad sales fell 25% to 16.1 million units shipped, and Macintosh sales slid 4% to 5.3 million.
Yet the lure of Apple products and its sterling brand name remains irresistible to many.
Among the bright spots: an increase in Android users who switched to iPhone, said Cook.
In the fourth quarter, Apple was the only PC manufacturer among the top five to post year-over-year improvement in sales, Gartner says. Apple’s share of U.S. smartphone sales improved to 43.3% in 2015, according to eMarketer. (Android remains tops, at 51.7%.) And there are 1 billion active Apple devices worldwide, counting iPhones, iPads and Macs.
And many analysts anticipate blockbuster sales of iPhone 7, likely to land in September.
Apple’s premium pricing has also afforded it a vast pile of cash reserves — $216 billion and climbing — which gives it flexibility few companies enjoy.
Apple is leveraging that loyalty, with premium pricing, “to be dominate in profit share rather than market share,” says David Rogers, who teaches digital strategy at Columbia Business School.
But with intensifying competition and economies in flux, it remains unclear how long Apple will enjoy such an advantage, say marketing experts.