Apple Has First Earnings Decline in More Than a Decade

Slowing iPhone sales took a bite out of Apple's impressive growth streak.

ByABC News
April 26, 2016, 5:13 PM

— -- Slowing iPhone sales took a bite out of Apple's impressive growth streak, with the company announcing today its first-ever decline in revenue in the past 13 years.

For its second quarter, the company posted revenue of $50.6 billion and quarterly net income of $10.5 billion. By comparison, the company this time last year posted revenue of $58 billion and net income of $13.6 billion.

Apple sold 51.2 million iPhones this year, "lower than the exceptional year ago quarter," Apple CEO Tim Cook said today in an earnings call. Despite the sluggish quarter, Cook said services, which includes the App Store, Apple Music and Apple Pay, were one of the bright spots of this quarter, with revenue at $6 billion, up 20 percent from last year.

Patrick Moorhead, an analyst at Moor Insights & Strategy, told ABC News in an email that while the results are disappointing, "we aren't talking about a company in trouble."

"Every hardware sector declined, and China declined 26 percent," Moorhead said. "I'm a bit troubled about this given this has been such a growth area, but it's too soon to call it a systemic and repeatable issue."

The success of the iPhone, which was first released in 2007, has been one of the key drivers of the tremendous growth Apple has consistently posted each quarter. However, Cook warned investors earlier this year that the company expected a challenging three months.

With iPhone sales up less than 1 percent year-over-year last quarter, Cook pointed to weakening currencies worldwide as one of the obstacles the company would face.

Gene Munster, managing director and senior research analyst at Piper Jaffray, told ABC News before the results were posted that Wall Street had already been bracing for today's report.

"This has been anticipated for three months now," he said. "The reason is nothing is wrong with the iPhone.”

The blockbuster iPhone 6 releases in 2014 and 2015, which included the huge Chinese market, helped fuel Apple's record iPhone sales, according to previous earnings reports.

While the likely decline may be a headline, Munster said it's not a reason to worry for Apple. He predicts iPhone sales will once again increase by the end of this year, following the likely release of a new product in September.

Cook warned a reduction in channel inventory -- that's supply available to retailers -- would also impact Apple's revenue for the next quarter, but projected an optimistic outlook on the call.

"The future of Apple is very bright," he said. "Our product pipeline has amazing innovation in store."