Apple?s second quarter earnings plagued by iPhone sales? 16pc decline

Apple?s disappointing second quarter saw unit sales of iPhones decrease by 16 percent and total revenue fall by 13 percent, suggesting that the company should streamline its focus on its more lucrative services sector, which includes a still-expanding Apple Pay.

During its second quarter earnings call, Apple?s CEO Tim Cook blamed faltering revenue on current macroeconomic situations and comparisons to previous iPhones? meteoric initial sales. While the company claims it still maintains a strong handle on the smartphone market ? especially in India ? its first major revenue stumble indicates that it should continue investing heavily in its other successful services, which include streaming platform Apple Music and mobile payment solution Apple Pay.

?The iPhone SE launched at the very end of the first quarter and was Apple's biggest mobile news of the quarter,? said Adam Foroughi, co-founder and CEO of AppLovin. ?Our data showed that nearly 40 percent of iPhone owners were holding on to small-screen devices.

?With the new SE, Apple has a chance to give a large contingent of smaller phone loyalists a reason to upgrade.?

IPhones? spotlight falters
Apple?s quarterly revenue clocked in at $50.6 billion, down from the $58 billion it garnered last year at this time. United States revenue for the second quarter came in at $19.1 billion, down from $29.3 billion in 2016?s first quarter.

IPhones saw a sharp sales decline, with only 52.1 million units sold this quarter. This is a stark contrast to the 61 million units sold at this time in 2015, representing a 16 percent year-over-year decrease.

Apple?s iPhone sales stem from three categories: customers who upgrade their existing Apple smartphones, consumers who switch over from Android devices and individuals who purchase their first-ever smartphone.

In yesterday?s earnings call, Tim Cook revealed that the second quarter saw many new-to-Mac customers enter the Apple market.

?We continued to see very high levels of customers switching from Android and other operating systems,? Mr. Cook said during the call.

He also claimed that iPhones make up 42 percent of the smartphone penetration of the global handset market, with iPhone sales in India up 65 percent year-over-year. However, sales in greater China ? a previous revenue hotspot for Apple ? decreased 26 percent year-over-year.

One of the company?s bright spots this past quarter was its services category, which experienced a 20 percent uptick in revenue, per Mr. Cook.

The Apple App Store?s revenue was up 30 percent, while Apple Music continues to grow with 13 million paying subscribers.

?Our music revenue has now hit an inflection point after many quarters of decline,? Mr. Cook said.

Mobile payment platform Apple Pay also continues to go from strength to strength, boasting five times more transaction volume than it did one year ago.

Additionally, the platform receives one million new users each week, likely helped by widespread merchant and retailer adoption of the service.

Apple Pay is currently available at over 10 million contactless locations in participating countries, signaling its seemingly unstoppable growth patterns.

Mr. Cook promised that more Apple Pay expansions are forthcoming, following recent successful rollouts in China and Singapore.

The company is also forging ahead with investments in areas such as supply chain and research and development, as evidenced by the 15 acquisitions it made in the last quarter.

Revitalizing the Apple Watch
Although Apple did not discuss specific results relating to the Apple Watch, Mr. Cook affirmed that unit sales met expectations. The wearable device?s expected seasonality was comparable to that of the iPod.

The company began shipping the Apple Watch one year ago, and revealed that unit sales during the first year exceeded that of the iPhone in its first year. Apple also refreshed the Watch?s spring lineup by rolling out new watchbands and a new price point for the product.

?The Apple Watch has seen a relatively slow adoption curve, which is to be expected for a device that's so different from anything else we use,? AppLovin?s Mr. Foroughi said. ?[It] is still in its nascent stage, but we think there's potential for a resurgence in customer excitement.

?First of all, the Watch itself will get better, but even more importantly, the ecosystem around the Watch (connected devices, beacons, accessories) will mature so the overall experience will be exponentially improved,? he said.

?It?s still early days for wearables, and mass adoption will take time.?