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Apple - iPhone revenue down again but Services lifts the mood

Equity research team | 26 October 2016 | A A A
Apple - iPhone revenue down again but Services lifts the mood

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iPhone revenue down again but Services lifts the mood

Apple's fourth quarter results confirmed a first full year drop in revenue for more than a decade. Analysts' expectations had already factored declines in, however the shares were still down by 3.3% in pre-market trading this morning.

Full year revenue of $215.6bn fell by 7.7% year-on-year, with net income of $45.7bn down 14.4%. The group's fourth quarter revenue o6f $46.9bn is 9% down, with net income declining by 19% to $9.0bn. Gross margin fell by 1.9 percentage points to 38%.

iPhone revenue fell by 13% to $28.2bn. While Mac sales are also falling, the continued decline in iPhone sales is the main reason for the drop in revenues. More positive news again comes from the Services division, which delivered revenue of $6.3bn, up 24% on last year. This growth has helped the division become Apple's second largest source of income, although it still trails the iPhone by some distance.

Apple has now completed over $186 billion of its capital return program. The Q4 dividend is $0.57 per share, up 9.6% from last year.

CEO Tim Cook said he was thrilled with the early customer response to the iPhone 7 and 7 Plus, so has guided for a return to revenue growth in Q1 of 2017. The first quarter, which includes the busy Christmas period, is an important quarter for the company. Revenue of $76-78bn is expected, slightly higher than Q1 2016's revenue of $75.9bn. Gross margin is expected to be between 38 percent and 38.5 percent, slightly up on this quarter but down on the 40.1% achieved in Q1 2016.

Unless otherwise stated, all estimated figures, including prospective dividend yields, are taken from a consensus of analyst forecasts compiled by Thomson Reuters. These estimates should not be taken as a reliable indicator of future performance.

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