Apple reported revenues for its fiscal first quarter (to December 2015) up just 2 percent year-over-year to US $75.9 billion. The sales were at the low end of its forecast of US $75.5–77.5 billion and include US $548 million from the company’s patent settlement with Samsung. Apple blamed the slower growth on the strong U.S. dollar, saying revenues would have risen 8 percent at constant exchange rates. At constant rates, revenues were up 18 percent in Europe and 17 percent in greater China, while falling 1 percent in the Americas and 4 percent in Japan. The company’s net profit rose to US $18.4 billion or US $3.28 per share, from US $18.0 billion or US $3.06 per share a year earlier, and Apple maintained its quarterly dividend at 52 cents a share.

While Apple said it set a new record for iPhone sales in the quarter (the iPhone 6s was launched in September) unit sales of the smartphone were unchanged year-over-year at 74.78 million and iPhone revenues were up just 1 percent compared to the same quarter a year earlier. iPad sales fell 25 percent year-over-year to 16.12 million, and sales of Mac computers were down 3 percent over the same period to 5.31 million units. Apple highlighted the growing contribution from its services business, which grew revenues by 15.5 percent year-on-year to US $5.5 billion in the quarter. Apple said it recently passed the milestone of an installed base of 1 billion devices accessing its services, including iPhones, iPads, Macs, Apple TV, iPod touch and Apple Watch. For fiscal Q2, Apple forecast a sharp slowdown in sales to US $50–53 billion and a gross margin of 39.0–39.5 percent compared to 40.1 percent in Q1.

Tarifica’s Take

Questions of the exchange rate aside, these results make it clear that Apple’s growth, particularly of its flagship iPhone, is slowing. Not only that, but there is no upturn in sight—the U.S. technology giant predicts a continuation of the trend, with an actual decline in revenue impending. This situation should come as no genuine surprise; growth, and especially steep growth, cannot go on forever, and Apple’s slowdown can be considered as a sign of maturity. And it is not just Apple that has matured; the global smartphone market has. With iPhones in the hands of a huge range of users in developed and developing countries, saturation has set in. What is more, as manufacturers of budget devices (especially in China) include more and more advanced features and capabilities in their low- to medium-priced smartphones, they are closing the gap with Apple’s high-priced phone. And finally, Apple has not, to date, expanded into the very fast-growing new sector of connected cars and other IoT applications.