Apple Earnings: The iPad Pro Didn’t Slow Down Declining Tablet Sales

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Courtesy of Apple

The iPad Pro may not be Apple’s tablet savior after all: iPad sales continued to decline by double digits year-over-year during the company’s most recent quarter, despite the introduction of the higher-priced iPad Pro last fall.

iPad revenue continued to slump, shrinking by 21 percent year-over-year, compared to negative growth of 22 percent a year ago. That’s despite the introduction of the iPad Pro last fall, which was supposed revive the company’s tablet sales. Altogether, Apple sold 16.1 million iPads during the holiday quarter, compared to 21.4 million a year ago, which represents a 25 percent decline in units sold. Three months ago, Apple reported less than 10 million iPad sales for the first time since 2012.

The news emerged as Apple reported its earnings for the company’s fiscal Q1 of 2016, which ended on 12/31 of 2015. Apple generated $75.9 billion of revenue in its fiscal Q1 of 2016, compared to $74.6 billion during the same quarter a year ago. Its income for the quarter was $18.4 billion, compared to $18 billion a year ago. This equates earnings of $3.28 per share, compared to $3.06 a year ago.

This represents the biggest quarterly profit in the company’s history — but there are some caveats for investors in addition to the slumping iPad sales. Apple also disappointed investors with one of its strongest products: Apple sold just about 75 million iPhones during the quarter, which is essentially flat when compared to close to 75 million sales a year ago. The company expects its first-ever quarterly decline for the product for the ongoing second quarter, confirmed Apple CEO Tim Cook. 

Apple may eventually be able to make up for those numbers with two new products which are seeing some significant growth, albeit from a low starting point: Sales of its Apple Watch and its newly-introduced Apple TV grew significantly, with CEO Tim Cook telling investors during the company’s earnings call that the quarter led to the best sales ever for Apple TV, and that Apple Watch sales were “especially strong” in December.

Apple doesn’t currently break out Apple Watch or Apple TV sales, but instead lumps the two products in a joint category together with Beats speakers and headphones as well as iPods. And that category saw some significant growth: Apple generated $4.3 billion in revenue with these devices, compared to just $2.7 billion a year ago.

Cook also confirmed that Apple now has more than 10 million paying Apple TV subscribers — a number that was first reported earlier this month. And he hinted at the possibility for the company to explore other new products and services. Asked about virtual reality, Cook said: “I don’t think it’s a niche. It’s really cool and has some interesting applications.”

Apple’s numbers were especially closely watched this time around for numerous reasons: Investors were hungry for a good story after sinking oil prices depressed markets over the past few weeks. Apple’s Q1 also is traditionally the company’s busiest and most lucrative quarter, with consumers spending billions on shiny gadgets during the holiday season.

One of the  uncertainties closely watched by investors was Apple’s performance in China in light of the ongoing volatility of that market. And Apple’s China performance is in fact a bit of a mixed bag. The company’s sales in China generated $18.4 billion in revenue, compared to $16.4 billion a year ago.

But it’s worth noting that this represents a significant slow-down in growth: In 2014, Apple’s China business grew a whopping 83 percent. In 2015, it only grew its China revenue by 14 percent.

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  1. John McPear says:

    Apple insists on having inflated margins for each iPad or iPhone that sells and now the market is full of Android tablets and the offer is now huge. I prefer Apple to hunger-for-your-personal-data Google but in these days you can have a very good screen, with a we can say decent operating system with a great MicroSD slot for your documents or videos with less than half the price of an iPad. Apple please, common, we love your designs, we love your iOS and OS X, and we love the user experience, but I also like to have the experience of having my bank account less damaged. Amazon, Google, Samsung… to many competitors taking pieces of cake invented or reinvented by Apple. I thinks the your closed and propietary ecosystems is part of your sucess. But people is not change iPad every year, and prefer to upgrade theirs iMac in two years… New iMacs with soldered RAM? Really? It’s time to back to the beginnings of Apple and make products for everyone not only for Burberry’s executives.

    • coldspring21 says:

      Or Apple taking pieces of cake invented by Samsung and other pioneers in smart phones. Remember, smart phones incorporating all modern features were there way before Apple came out with iphone.

      • John McPear says:

        Google was pionering taking our personal data with web-browsers and now also with our phones. All our life, ideas, preferences, etc. are controlled by Google… and others: Facebook… etc. And Samsung, others Android devices manufacturers are only hardware inventors (as much). Samsung will try to reduce Android dependancy in some products, but the reality is hard. iOS or Android. Google are only interested in our data, and we are giving it all for free. We are the product, not the phones.

  2. Jenny S says:

    Should this have read that there are 10 million Apple Music subscribers instead of Apple TV?

  3. Johnny says:

    I would buy an iPad if they could make them with a hard drive bigger than 16GB for a reasonable price. If I had a lot of hard drive space, I would buy movies from the iTunes store thus adding to revenue for Apple. But, since iTunes movies are 3GB+ and I’m limited to choose 2 movies to load onto the iPad for my trip… it’s essentially useless for me.

    Put a 500GB hard drive in there and I might change my mind. Until then, I’m sticking with Amazon tablets that expand to 128GB with a Micro SD card (yes, MICRO SD – the ones the size of your pinky nail.) which is plenty since the movies I buy from Amazon are only around 500MB.)

    I have the same opinion of the iPhone. 16GB makes the iPhone useless, so I don’t buy one and don’t buy anything from the iTunes store.

  4. Sherry S. says:

    Tablets are nice, but I’m not interested in them because they aren’t going to help me specifically. As a website designer, I need something transportable that will also allow me to do my work – like a laptop. A laptop may be bigger and bulkier than a tablet, but until a tablet can do what I need, I’m not going to buy one.

    I need to use a mouse for specific design work, I need to be able to plug in a USB flashdrive (or other USB-related products), or load and call up my file work in various design programs, connect to FTP, and use a real keyboard, not some tiny thing meant for texting and quick-looking up stuff on the internet. There’s so many things that I need to be able to do, but I can’t do with a tablet or iPad. I need the functionality of a laptop.

    So they’re cute but kind of pointless to me.

  5. Mike says:

    Interesting tone for this article – for one, iPads aren’t a yearly upgrade type product. The iPad Pro is an addition to the iPad product line, but was never going to be a “must buy” item unless you needed the extra features. In regard to the phone, it was an “S” launch which is never as popular as the regular number upgrades. Maybe you sold all of your Apple stock and needed to kick it a little? My takeaways are biggest profit ever, along with more revenue in new product lines. Many users have a two year contract with their iPhone 6, so the iPhone 7 will be a better representation of phone sales now that all contracts will expire at that time.
    Title of article could have been “Biggest quarterly profit in history”.

  6. Jim says:

    Been to an Apple store lately – lines of people who had an appointment an hour ago and still haven’t been helped. It is not the happy place filled with shiny toys any longer.

    • Bill says:

      That’s rather cynical and is not the experience in any of the Apple stores I’ve visited.

      Personally, I believe tablet sales have been impacted more by devices like the iPhone 6 Plus and 6S Plus which serve the duty of both phone and tablet and laptops like the MacBook which are basically a tablet with a keyboard that runs OS X like any other Mac.

      Really, unless you need a bigger screen there are few things a tablet can do that iPhones cannot.

      The iPad Pro is just that – a tablet for people who need the additional features it provides. I know few who would give up a laptop or not go with one of the smaller, cheaper iPads in favor of it.

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