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

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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