Apple has just released its earnings report for the fourth quarter of fiscal 2016, which runs from the beginning of July to the end of September. As has been the case for the last two quarters, iPhone sales were down year-over-year, and that decline combined with sliding sales for Macs, iPads, and "other products" has driven the company's revenue and profit down even as its Services division continues to climb at a steady clip.
Apple made $9 billion in profit and $46.9 billion in revenue, compared to $11.1 billion in profit and $51.5 billion in revenue in Q4 of 2015. Its gross margin was 39.4 percent. These results beat Apple's guidance for the quarter, which predicted revenue between $45.5 billion and $45.7 billion and a profit margin between 37.5 and 38 percent.
The company predicts that it will make between $76 and $78 billion in the first quarter of fiscal 2017, with profit margins between 38 and 38.5 percent. The company made $74.6 billion in revenue in Q1 of 2016, so this would be a return to growth after three quarters of year-over-year decline.
The Americas are still Apple's largest territory, but deflating sales in China made it Apple's third-largest territory by revenue after Europe. Huge growth in China was part of what drove Apple's 2015 numbers up as high as they were, and the fact that Apple hasn't been able to maintain that level of sales has been hurting it all year. Revenue declined around 7 percent in the Americas and around 30 percent in China, but Apple managed to grow 2.5 percent in Europe and nearly 10 percent in Japan. The rest of the Asia Pacific region contracted by a negligible 1 percent.
Unit sales of the iPhone declined around 5.3 percent, from 48.05 million units last year to 45.51 million this year. Revenue declined by around 12.5 percent from $32.21 billion to $28.16 billion. We'll need to wait until next quarter to see how the iPhone 7 is faring compared to the iPhone 6S—this quarter's sales reflect just a couple weeks of iPhone 7 sales—but the fact that revenue has dropped more than unit sales have suggests that the smaller, cheaper iPhone SE is slightly cannibalizing the larger, more expensive models.
Things actually look a little better for the iPad, which has been falling year-over-year since Q2 of 2014. Unit sales fell by just 6 percent, from 9.88 million units to 9.27 million units, and the $4.26 billion in revenue was almost exactly even with the $4.28 billion the iPad made in Q4 of 2015. Apple forecasted a couple of quarters ago that it expected the iPad to bottom out this year, and that's getting pretty close to being true. The more expensive iPad Pro models also appear to be increasing the tablets' average sale price, which is good news.
The only good news for the Mac is that new models are right around the corner. Most of the Mac lineup is as stale as it has ever been, and that's reflected in both unit sales (down 14.4 percent from 5.71 million units to 4.89 million units) and revenue (down 16.6 percent from $6.88 billion to $5.74 billion). Hopefully new MacBook Pros can boost those numbers.
And while Apple doesn't differentiate between Beats headphones, Airport routers, the Apple TV, and the Apple Watch when reporting "other products" revenue, things don't look great there, either. Revenue was down by over 22 percent from $3.05 billion to $2.37 billion, and independent analyst reports suggest that it's because Apple Watch sales have fallen off in a big way. The new Series 1 and Series 2 models, released last month, may help increase these sales next quarter.
Finally, the one unqualified bright spot in Apple's earnings reports this year continues to be its Services division, which increased 24.4 percent from $5.09 billion to $6.33 billion. As Apple sells more devices, its iCloud, Apple Music, and App Store ecosystem picks up more potential users, and it looks like many of those people are happy to hand Apple their money.
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