2016-04-26



Apple has officially posted its Q2 2016 earnings results with $50.6 billion in revenue and $10.5 billion in profit from the January to March quarter. Apple’s guidance last quarter first pointed to a year-over-year decline in iPhone sales for the quarter following the holiday season citing global economic issues and inflated iPhone 6 demand due to supply constraints the year earlier. Apple’s updated 4-inch iPhone SE and 9.7-inch iPad Pro launched at the end of March.

Apple® today announced financial results for its fiscal 2016 second quarter ended March 26, 2016. The Company posted quarterly revenue of $50.6 billion and quarterly net income of $10.5 billion, or $1.90 per diluted share. These results compare to revenue of $58 billion and net income of $13.6 billion, or $2.33 per diluted share, in the year-ago quarter. Gross margin was 39.4 percent compared to 40.8 percent in the year-ago quarter. International sales accounted for 67 percent of the quarter’s revenue.

Here’s Apple’s breakdown of iPhone, iPad, and Mac sales from the quarter:

iPhone: 51.1 million units

iPad: 10.2 million units

Mac: 4 million units

For iPhone sales, that’s an 18% year-over-year drop and a 19% drop for iPads.

Apple CEO Tim Cook had this to say:

“Our team executed extremely well in the face of strong macroeconomic headwinds,” said Tim Cook, Apple’s CEO. “We are very happy with the continued strong growth in revenue from Services, thanks to the incredible strength of the Apple ecosystem and our growing base of over one billion active devices.”

And Luca Maestri, chief financial officer, said this:

“We generated strong operating cash flow of $11.6 billion and returned $10 billion to shareholders through our capital return program during the March quarter,” said Luca Maestri, Apple’s CFO. “Thanks to the strength of our business results, we are happy to be announcing today a further increase of the program to $250 billion.”

Apple’s Q2 results compare to the prior quarter’s $75.9 billion in revenue, 74.8 million iPhone sales, 16.1 million iPad sales, and 5.3 million Mac sales. In the same quarter a year ago, Apple reported $58 billion in revenue, 61.1 million iPhones sold, 12.6 million iPads sold, and 4.5 million Macs sold. Apple reported $18.4 billion in profit in the prior quarter and $13.6 billion in profit in the year ago quarter.

China, which has been a growth market, dropped 26% year-over-year in terms of revenue while Asia Pacific dropped 25% year-over-year. Total Apple revenue dropped 13% year-over-year. The US and EU dropped 10% and 5% year-over-year, respectively.

Apple’s guidance for the next quarter falls between $41 billion and $43 billion. Tim Cook also shared that iPhone SE is currently supply constrained, meaning sales could climb when Apple catches up with demand, and Apple Music now has more than 13 million subscribers. Apple also saw its highest number of Android switchers during H1.

Read on for Apple’s full Q2 earnings report, and stay tuned as we await Apple’s quarterly conference call at 2 p.m. PT/ 5 p.m. ET to discuss these results. Tim Cook and Luca Maestri are expected to deliver prepared commentary on the earnings results then field questions from analysts participating on the call.

A word is missing from Apple’s press release title today. pic.twitter.com/fv2Niabgd0

— Benjamin Mayo (@bzamayo) April 26, 2016

Apple Reports Second Quarter Results

CUPERTINO, Calif.–(BUSINESS WIRE)–Apple® today announced financial results for its fiscal 2016 second quarter ended March 26, 2016. The Company posted quarterly revenue of $50.6 billion and quarterly net income of $10.5 billion, or $1.90 per diluted share. These results compare to revenue of $58 billion and net income of $13.6 billion, or $2.33 per diluted share, in the year-ago quarter. Gross margin was 39.4 percent compared to 40.8 percent in the year-ago quarter. International sales accounted for 67 percent of the quarter’s revenue.

“Our team executed extremely well in the face of strong macroeconomic headwinds,” said Tim Cook, Apple’s CEO. “We are very happy with the continued strong growth in revenue from Services, thanks to the incredible strength of the Apple ecosystem and our growing base of over one billion active devices.”

The Company also announced that its Board of Directors has authorized an increase of $50 billion to the Company’s program to return capital to shareholders. Under the expanded program, Apple plans to spend a cumulative total of $250 billion of cash by the end of March 2018.

“We generated strong operating cash flow of $11.6 billion and returned $10 billion to shareholders through our capital return program during the March quarter,” said Luca Maestri, Apple’s CFO. “Thanks to the strength of our business results, we are happy to be announcing today a further increase of the program to $250 billion.”

As part of the updated program, the Board has increased its share repurchase authorization to $175 billion from the $140 billion level announced last year. The Company also expects to continue to net-share-settle vesting restricted stock units.

The Board has approved an increase of 10 percent to the Company’s quarterly dividend, and has declared a dividend of $.57 per share, payable on May 12, 2016 to shareholders of record as of the close of business on May 9, 2016.

From the inception of its capital return program in August 2012 through March 2016, Apple has returned over $163 billion to shareholders, including $117 billion in share repurchases.

The Company plans to continue to access the domestic and international debt markets to assist in funding the program. The management team and the Board will continue to review each element of the capital return program regularly and plan to provide an update on the program on an annual basis.

Apple is providing the following guidance for its fiscal 2016 third quarter: • revenue between $41 billion and $43 billion • gross margin between 37.5 percent and 38 percent • operating expenses between $6 billion and $6.1 billion • other income/(expense) of $300 million • tax rate of 25.5 percent

Apple will provide live streaming of its Q2 2016 financial results conference call beginning at 2:00 p.m. PDT on April 26, 2016 at www.apple.com/investor/earnings-call/. This webcast will also be available for replay for approximately two weeks thereafter.

This press release contains forward-looking statements including without limitation those about the Company’s estimated revenue, gross margin, operating expenses, other income/(expense), tax rate, and plans for dividends, share repurchases and public debt issuance. These statements involve risks and uncertainties, and actual results may differ. Risks and uncertainties include without limitation the effect of competitive and economic factors, and the Company’s reaction to those factors, on consumer and business buying decisions with respect to the Company’s products; continued competitive pressures in the marketplace; the ability of the Company to deliver to the marketplace and stimulate customer demand for new programs, products, and technological innovations on a timely basis; the effect that product introductions and transitions, changes in product pricing or mix, and/or increases in component costs could have on the Company’s gross margin; the inventory risk associated with the Company’s need to order or commit to order product components in advance of customer orders; the continued availability on acceptable terms, or at all, of certain components and services essential to the Company’s business currently obtained by the Company from sole or limited sources; the effect that the Company’s dependency on manufacturing and logistics services provided by third parties may have on the quality, quantity or cost of products manufactured or services rendered; risks associated with the Company’s international operations; the Company’s reliance on third-party intellectual property and digital content; the potential impact of a finding that the Company has infringed on the intellectual property rights of others; the Company’s dependency on the performance of distributors, carriers and other resellers of the Company’s products; the effect that product and service quality problems could have on the Company’s sales and operating profits; the continued service and availability of key executives and employees; war, terrorism, public health issues, natural disasters, and other circumstances that could disrupt supply, delivery, or demand of products; and unfavorable results of legal proceedings. More information on potential factors that could affect the Company’s financial results is included from time to time in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s public reports filed with the SEC, including the Company’s Form 10-K for the fiscal year ended September 26, 2015, its Form 10-Q for the fiscal quarter ended December 26, 2015, and its Form 10-Q for the fiscal quarter ended March 26, 2016 to be filed with the SEC. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

Apple revolutionized personal technology with the introduction of the Macintosh in 1984. Today, Apple leads the world in innovation with iPhone, iPad, Mac, Apple Watch and Apple TV. Apple’s four software platforms — iOS, OS X, watchOS and tvOS — provide seamless experiences across all Apple devices and empower people with breakthrough services including the App Store, Apple Music, Apple Pay and iCloud. Apple’s 100,000 employees are dedicated to making the best products on earth, and to leaving the world better than we found it.

NOTE TO EDITORS: For additional information visit Apple’s PR website (www.apple.com/pr), or call Apple’s Media Helpline at (408) 974-2042.

© 2016 Apple Inc. All rights reserved. Apple and the Apple logo are trademarks of Apple. Other company and product names may be trademarks of their respective owners.

Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except number of shares which are reflected in thousands and per share amounts)

Three Months Ended

Six Months Ended

March 26, 2016

March 28, 2015

March 26, 2016

March 28, 2015

Net sales

$

50,557

$

58,010

$

126,429

$

132,609

Cost of sales (1)

30,636

34,354

76,085

79,212

Gross margin

19,921

23,656

50,344

53,397

Operating expenses:

Research and development (1)

2,511

1,918

4,915

3,813

Selling, general and administrative (1)

3,423

3,460

7,271

7,060

Total operating expenses

5,934

5,378

12,186

10,873

Operating income

13,987

18,278

38,158

42,524

Other income/(expense), net

155

286

557

456

Income before provision for income taxes

14,142

18,564

38,715

42,980

Provision for income taxes

3,626

4,995

9,838

11,387

Net income

$

10,516

$

13,569

$

28,877

$

31,593

Earnings per share:

Basic

$

1.91

$

2.34

$

5.22

$

5.43

Diluted

$

1.90

$

2.33

$

5.19

$

5.39

Shares used in computing earnings per share:

Basic

5,514,381

5,793,799

5,536,656

5,818,441

Diluted

5,540,886

5,834,858

5,567,506

5,858,330

Cash dividends declared per share

$

0.52

$

0.47

$

1.04

$

0.94

(1) Includes share-based compensation expense as follows:

Cost of sales

$

191

$

142

$

395

$

282

Research and development

$

468

$

384

$

934

$

758

Selling, general and administrative

$

389

$

401

$

797

$

775

Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except number of shares which are reflected in thousands and par value)

March 26, 2016

September 26, 2015

ASSETS:

Current assets:

Cash and cash equivalents

$

21,514

$

21,120

Short-term marketable securities

33,769

20,481

Accounts receivable, less allowances of $60 and $63, respectively

12,229

16,849

Inventories

2,281

2,349

Vendor non-trade receivables

7,595

13,494

Other current assets

10,204

15,085

Total current assets

87,592

89,378

Long-term marketable securities

177,645

164,065

Property, plant and equipment, net

23,203

22,471

Goodwill

5,249

5,116

Acquired intangible assets, net

3,843

3,893

Other non-current assets

7,745

5,556

Total assets

$

305,277

$

290,479

LIABILITIES AND SHAREHOLDERS’ EQUITY:

Current liabilities:

Accounts payable

$

25,098

$

35,490

Accrued expenses

23,208

25,181

Deferred revenue

9,461

8,940

Commercial paper

7,998

8,499

Current portion of long-term debt

2,500

2,500

Total current liabilities

68,265

80,610

Deferred revenue, non-current

3,322

3,624

Long-term debt

69,374

53,463

Other non-current liabilities

33,859

33,427

Total liabilities

174,820

171,124

Commitments and contingencies

Shareholders’ equity:

Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 5,478,446 and 5,578,753 shares issued and outstanding, respectively

29,484

27,416

Retained earnings

102,021

92,284

Accumulated other comprehensive income/(loss)

(1,048)

(345)

Total shareholders’ equity

130,457

119,355

Total liabilities and shareholders’ equity

$

305,277

$

290,479

Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

Six Months Ended

March 26, 2016

March 28, 2015

Cash and cash equivalents, beginning of the period

$

21,120

$

13,844

Operating activities:

Net income

28,877

31,593

Adjustments to reconcile net income to cash generated by operating activities:

Depreciation and amortization

5,431

5,054

Share-based compensation expense

2,126

1,815

Deferred income tax expense

3,092

1,879

Changes in operating assets and liabilities:

Accounts receivable, net

4,620

6,555

Inventories

68

(285)

Vendor non-trade receivables

5,899

2,500

Other current and non-current assets

300

2,448

Accounts payable

(9,475)

(5,428)

Deferred revenue

219

993

Other current and non-current liabilities

(2,093)

5,679

Cash generated by operating activities

39,064

52,803

Investing activities:

Purchases of marketable securities

(86,242)

(92,523)

Proceeds from maturities of marketable securities

9,148

5,871

Proceeds from sales of marketable securities

50,051

48,924

Payments made in connection with business acquisitions, net

(140)

(115)

Payments for acquisition of property, plant and equipment

(5,948)

(5,586)

Payments for acquisition of intangible assets

(657)

(155)

Other

(322)

88

Cash used in investing activities

(34,110)

(43,496)

Financing activities:

Proceeds from issuance of common stock

247

309

Excess tax benefits from equity awards

264

357

Payments for taxes related to net share settlement of equity awards

(751)

(608)

Payments for dividends and dividend equivalents

(5,871)

(5,544)

Repurchase of common stock

(13,530)

(12,000)

Proceeds from issuance of term debt, net

15,584

11,332

Change in commercial paper, net

(503)

(2,508)

Cash used in financing activities

(4,560)

(8,662)

Increase in cash and cash equivalents

394

645

Cash and cash equivalents, end of the period

$

21,514

$

14,489

Supplemental cash flow disclosure:

Cash paid for income taxes, net

$

6,630

$

7,058

Cash paid for interest

$

565

$

220

Apple Inc.

Q2 2016 Unaudited Summary Data

(Units in thousands, Revenue in millions)

Q2 2016

Q1 2016

Q2 2015

Sequential Change

Year/Year Change

Operating Segments

Revenue

Revenue

Revenue

Revenue

Revenue

Americas

$19,096

$29,325

$21,316

– 35%

– 10%

Europe

11,535

17,932

12,204

– 36%

– 5%

Greater China

12,486

18,373

16,823

– 32%

– 26%

Japan

4,281

4,794

3,457

– 11%

24%

Rest of Asia Pacific

3,159

5,448

4,210

– 42%

– 25%

Total Apple

$50,557

$75,872

$58,010

– 33%

– 13%

Q2 2016

Q1 2016

Q2 2015

Sequential Change

Year/Year Change

Product Summary

Units

Revenue

Units

Revenue

Units

Revenue

Units

Revenue

Units

Revenue

iPhone (1)

51,193

$32,857

74,779

$51,635

61,170

$40,282

– 32%

– 36%

– 16%

– 18%

iPad (1)

10,251

4,413

16,122

7,084

12,623

5,428

– 36%

– 38%

– 19%

– 19%

Mac (1)

4,034

5,107

5,312

6,746

4,563

5,615

– 24%

– 24%

– 12%

– 9%

Services (2)

5,991

6,056

4,996

– 1%

20%

Other Products (1)(3)

2,189

4,351

1,689

– 50%

30%

Total Apple

$50,557

$75,872

$58,010

– 33%

– 13%

(1)

Includes deferrals and amortization of related software upgrade rights and non-software services.

(2)

Includes revenue from Internet Services, AppleCare, Apple Pay, licensing and other services.

(3)

Includes sales of Apple TV, Apple Watch, Beats products, iPod and Apple-branded and third-party accessories.

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