Apple (NASDAQ: AAPL) once again pointed to growing revenue from services as it posted a second straight quarter of falling iPhone sales. But shares rose in after-hours trading Tuesday as the company beat expectations in some key areas.
The company sold 40.4 million units of its iconic handset, down 15 percent year over year and 21 percent from the previous quarter. Revenue fell 11 percent year over year in the Americas and 7 percent year over year in Europe, and it plummeted a whopping 33 percent in greater China.
Apple posted $42.4 billion in quarterly revenue, marking a 14.6 year-over-year decline, and net income came in at $7.8 billion, down from $10.68 percent during the prior year. Analysts had expected iPhone sales in the range of 40 million units, and the Wall Street Journal reported that analysts polled by Thomson Reuters estimated Apple would post $42.1 billion in revenue.
Revenue from iPhone sales slid 23 percent year-over-year to just more than $24 billion.
"Our Services business grew 19 percent year-over-year and App Store revenue was the highest ever, as our installed base continued to grow and transacting customers hit an all-time record," Apple CFO Luca Maestri said in a prepared statement. "We returned over $13 billion to investors through share repurchases and dividends, and we have now completed almost $177 billion of our $250 billion capital return program."
Earnings also appeared to be buoyed by the 9.7-inch iPad Pro the company introduced in March. Apple sold nearly 10 million iPads during the quarter, marking a 9 percent year-over-year drop, but iPad revenues increased 7 percent to $4.9 billion.
Apple saw its quarterly revenues fall year over year for the first time during the previous quarter, when it shipped 51.2 million iPhones, down from 61.2 the prior year.
Like its competitors, Apple is struggling in a worldwide market where growth has slowed due to smartphone saturation and lengthening handset replacement cycles. IDC last month predicted worldwide smartphone shipments will grow at a sluggish 3.1 percent clip this year in a revision of a previous forecast that had pegged the market to grow at 5.7 percent in 2016.
Not every vendor is suffering, however. Huawei said this week it hopes to meet its goal of shipping 140 million smartphones this year, which would mark a 30 percent increase over last year's figures.
Apple is widely expected to introduce a new flagship iPhone in September, and while the phone isn't expected to offer any dramatic new features or redesign, it may include upgrades such as a faster, more powerful processor and significantly increased storage. Whether the iPhone 7 will be enough for Apple to grow its handset business again remains to be seen.
- see this Apple press release
Apple shows declines in revenues, profits and iPhones sales - and predicts more of the same this year
IDC: iPhone shipments to slide 2% this year as worldwide smartphone market slows to a crawl
Huawei hopes to ship 140M smartphones this year despite market challenges
The next iPhone said to offer only modest modifications