Although iPhone 7 Plus owners today might be celebrating its camera’s new portrait capabilities, the ubiquitous smartphone in the fourth quarter of 2016 slipped a bit compared with last year’s numbers.
In the fourth quarter, ending Sept. 24, Apple sold 45.5 million iPhone units, with total revenue at $46.9 billion; that’s compared to last year’s 48 million units sold and revenues of $51.5 billion in the same quarter. The company did not release Apple Watch numbers.
Quarterly net income was $9 billion, or $1.67 per diluted share, compared to net income of $11.1 billion, or $1.96 per diluted share, in the year-ago quarter.
These numbers are slightly above analysts’ estimates. Apple stock dropped about 3 percent in after-hours trading.
“Our strong September quarter results cap a very successful fiscal 2016 for Apple,” said Tim Cook, Apple’s chief executive officer. “We’re thrilled with the customer response to iPhone 7, iPhone 7 Plus and Apple Watch Series 2, as well as the incredible momentum of our Services business, where revenue grew 24 percent to set another all-time record.”
Apple’s Services businesses include purchases from App Store and iTunes, streaming-music subscriptions, payment for additional storage and mobile payments. Forrester vice president and principal analyst Frank Gillett said that the continuing growth in services shows strength in the “mobile mind shift,” the move of consumers to deeply embrace the smartphone as a tool and a remote control for life. “It shows depth and stickiness for Apple’s iPhone users, which is a big positive [in the] long-term,” Gillett said.
Apple released new iPhone and Apple Watch models in early September; this might have impacted the lower sales numbers in the quarter as customers anticipated the new models.
In a call with investors, Cook said that iPhone customers continued to grow and that demand outstripped supply. The company has recently expanded its offerings with lower-priced models in efforts to expand to untapped markets.
He alluded to the competition from Google’s Android. “As you know, iPhone customers are the most satisfied and loyal customers in the world and fiscal 2016 saw more customers switch from Android to iPhone than ever before,” Cook said. “This is due to the superior customer experience we deliver with our product and it’s something no other company can match.”
He said that Apple Pay transactions were up 500 percent in the quarter and that September saw more transactions alone than in 2015; this is thanks in part to Apple Pay now being built into Safari, which brings Apple Pay to the mobile web, rather than just on apps.
“With Apple Pay support now built into Safari, hundreds of thousands of web sites are bringing Apple Pay to their customers,” he said. “Our major partners tell us that Apple Pay shows the highest conversion rate of any digital wallet.”
Cook added that people and businesses are tapping into the Apple Watch Series 2’s new features. According to a recent report from the International Data Corporation, Apple Watch is the most popular smartwatch globally and claimed 41 percent of the smartwatch market in the most recent quarter. This number has decreased from 70 percent since the same time last year. Researchers say that might rebound with new designs and new features.
Apple has also recently revamped its retail locations, with Apple senior vice president of retail Angela Ahrendts overseeing a reimagining of the Apple store as a town square concept; by year-end, 95 Apple doors will have the new design. Apple is also expected to release its wireless headphones, called Air Pods, by the end of this month.