Declining iPhone sales see Apple revenues drop 15%

Apple has seen a 15% decline in its revenues for Q3, led by decreasing iPhone sales, revenue and average selling price.

2016 has proven to be something of a challenge for Apple, with its market share of global smartphone shipments on the decline in Q1 following a couple of years’ worth of impressive growth, particularly in China. Gartner reported Apple’s market share in Q1 fell three percentage points YoY from 17.9 to 14.8 as shipments dropped from 60.1 million to 51.6 million worldwide. This came as Chinese smartphone vendors Huawei, Oppo and Xiaomi all gained ground on the top two market leaders Apple and Samsung.

In its quarterly earnings call for Q3, Apple reported an overall decline in revenues of $7 billion to $42.4 billion, down 15% year on year. Perhaps no coincidence is the decline in iPhone unit shipments, which dropped 15% year on year and revenue declined by 23%, to 40 million units and $24 billion respectively. In Q3 2015 iPhone generated $31.3 billion in revenues; so the cause of Apple’s struggles this quarter seem to lay at the feet of iPhone’s dip in performance.

Despite the decline in its iPhone sales, Apple CEO Tim Cook remained optimistic and positive over the appeal of iPhone to switchers and the broader smartphone market.

“Overall, we added millions of first-time smartphone buyers in the June quarter, and switchers accounted for the highest percentage of quarterly iPhone sales we’ve ever measured,” he said. “In absolute terms, our year-to-date iPhone saes to switches are the greatest we’ve seen in any nine-month period, and our active installed base of iPhones is up strong double-digits year over year.”

Cook pointed towards the launch of the iPhone SE as a growing medium through which Apple can capture the mass market. Priced at $399, the SE brings the same system on chip processing power as the iPhone 6s, but at a cheaper price point and in a model that aesthetically looks exactly like the iPhone 5.

“Our initial sales data tells us that the iPhone SE is popular in both developed and emerging markets, and the percentage of iPhone SE sales going to customers who are new to iPhone is greater than we’ve seen in the first weeks of availability for other iPhones launched in the last several years,” he said.

Cook said the average selling price of iPhone dropped as a result of both the SE and a reduced channel inventory of more than 4 million higher-end iPhones; although with the next iPhone flagship product, the iPhone 7, due out in H2, that ASP is due to pick up again. After a tricky year to date, Cook and Apple will be under pressure to see a return to growth in the second half of the year.