Apple blamed "strong macroeconomic headwinds" on its surprisingly sluggish quarterly results, in which the smartphone vendor posted revenues and profits below analyst expectations, driven largely by a significant dip in its iPhone shipments. Apple shipped a total of 51.2 million iPhones during its most recent quarter, down from the 61.2 million it shipped during the same quarter last year.
Apple's results mark the first time the company's revenues have fallen year-over-year since 2003. Apple's stock fell almost 7 percent in after-hours trading immediately following the release of the company's fiscal 2016 second quarter.
"Despite the pause in our growth, our results reflect excellent execution by our team in the face of ongoing macroeconomic headwinds in much of the world, and difficult year-over-year comparison," Apple CEO Tim Cook said during the company's quarterly conference call with analysts.
During its most recent quarter, Apple posted net income of $10.52 billion, below the $13.57 billion it posted a year ago and short of what Wall Street had expected. The company's revenue fell 13 percent during that period to $50.55 billion in Apple's most recent quarter.
Further, Apple's projections for the coming quarter were also below some analyst estimates.
"Apple's first YoY revenue drop since 2003 and further declines in fiscal 3Q16 guidance. The cash cow couldn't keep growing indefinitely," tweeted CCS Insight analyst Geoff Blaber. "iPhone at least came within Apple's guidance and hit expectations. Let's not lose sight that these earnings are not a complete surprise."
During Apple's quarterly call with investors, CEO Cook argued that "the future of Apple is very bright." He said Apple's services business -- which encompasses everything from app sales to cloud storage -- grew 20 percent to $6 billion. Cook pointed out that Apple now counts fully 13 million Apple Music customers, up from 11 million in February.
Further, Cook noted Apple continues to work to grow its ecosystem in order to increase its sales of services; part of that effort focuses on the company's new iPhone SE, a cheaper iPhone model the company introduced earlier this year. Cook explained that the company's most recent sales quarter does not include sales of the iPhone SE, but that the device will likely entice new users into Apple's services ecosystem. Cook added that Apple expects growth in sales of devices in emerging markets like India.
Some analysts seemed to agree with Cook's positive outlook: "If we assume the iPhone 7 has a lower units per carrier in the December qtr than the iPhone 6 (cycle to cycle comparison), we still arrive at more than 80MM units in the December qtr even assuming no new carrier additions," wrote the analysts at Wells Fargo in a research note on Apple's results.
Others however took a more cautious approach: "It's still too early to tell whether the next iPhone can return Apple to revenue growth," noted BTIG analyst Walter Piecyk. "Even wireless operators, which reported the drop in Q1 upgrade rates that we forecast, have expressed caution on trying to extrapolate the longer replacement cycles of their customers today into a new product introduction at the end of the year. Nevertheless, we remain concerned about a possible structural change in the replacement cycle of high-end smartphone buyers."
Interestingly, Cook hinted that Apple would be open to more mergers and acquisitions, bigger deals than what the company has inked in the past.
"We're always looking in the market about things that could complement things that we do today, become features in something we do, or allow us to accelerate entry into a category that we're excited about," Cook said. "We would definitely buy something larger than we've done before. … We continue to look and stay active in the M&A market."
And what of the Apple Watch? The company still won't release sales figures for the device, but Cook said that "unit sales met our expectations in the quarter" and that "we believe it has an exciting future ahead."
Apple is the world's second-largest smartphone vendor, behind Samsung. According to eMarketer, Apple will command around 43.5 percent of the U.S. smartphone market in 2016, up slightly from 43.3 percent in 2015. Android, by comparison, will see its share of U.S. smartphone users rise slightly to 52 percent, from 51.7 percent last year.
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Article updated April 27 with analyst commentary.