The End of Apple’s 13-Year Revenue Growth Streak: A Closer Look at Q2 2016

The tech world watched with bated breath during its latest earnings report on Apple, with particular attention paid to the rumored crest of iPhone sales predicted in 2015. This meant that those in the industry watched for signs of a downturn in this report more than in previous ones.

According to the released quarterly figures, the faith was not misplaced. In line with the expectations, Apple’s previously unbroken 13-year streak of consecutive quarterly revenue growth ended. Though not an entirely gloomy affair, Apple had a noticeable dip in its revenue, experiencing a 13% decrease driven mainly by falling iPhone sales.

The second-quarter revenue of $50.6 billion, a significant dive from last year’s standout figure of $58 billion for the same period, reflects the impact of decreased iPhone sales. Net income too shrunk to a less than usual $10.5 billion, cause for concern as there’s the forecast that the third quarter sales could experience an even further dip to $41 billion – $43 billion. If these projections hold true, they would be a significant reversal against the $49 billion achieved the previous year.

It’s crucial to note that Apple sold 51.2 million iPhones during this period, a 16% drop from the previous years’ same period. The company’s shares also plunged by about 7% at the close of report day.

As if the current tribulations were not enough, rival smartphone manufacturers employing Google’s Android operating system are gradually chipping away at Apple’s dominance, even in its stronghold United States. Here, Apple still manages to sell almost half of the smartphones, but it also faces stiff competition; faceless competition increasingly gaining ground by providing products similar to Apple’s at a fraction of the cost. This is presumably why Apple decided to lower the price of their latest product, the iPhone SE.

Growth in China, one of Apple’s most important markets, was slower than anticipated, further compounding the negative impact of the disappointing financial results. However, Apple’s CEO downplayed concerns, referring to the slump as “a pause, not a permanent shift,” in what seems to be an attempt to assure investors and cushion the company’s stock.

On a brighter note, Apple may have found a lifeline in its services, ranging from iTunes to the App Store. While devices like the iPhone and iPad posted disappointing sales, earnings from services showed promising growth. “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,” said CEO Tim Cook.

Apple’s Music streaming services have earned 13 million paying customers since February, an increase from 11 million. It also posted a 20% year on year growth, which places Apple’s streaming service, a newbie in the market launched in June of last year, ahead of its biggest competitor, Spotify’s 30 million customers. Revenue from Apple’s services now stands at $5.99 billion, making it their second-largest revenue source, just next to iPhone, but surpassing Mac and iPad.

However, Apple’s fight with the FBI over unlocking the iPhone 5c belonging to an alleged terrorist could have implications on the overall security of Apple’s products, which have been known for their impenetrability up till now. The future impact of this debacle on the sales of Apple products remains to be seen.

As Apple navigates these challenging waters with over a billion active devices still in use, industry analysts will be watching the company’s future quarters closely. Rest assured, we’ll bring the breakdown of Q3 results when they become available.