Apple (NASDAQ:AAPL) reported quarterly earnings last week, and while its top line and earnings beat out analyst expectations, its iPhone sales and revenue were down from last year.

In this clip from the Industry Focus: Tech podcast, tech analyst Dylan Lewis and Fool contributor Daniel Sparks explain why Apple is a unique case when it comes to comparisons, and how looking at the company's numbers a little differently paints a much different picture of its current growth.

A full transcript follows the video. 


This podcast was recorded on July 29, 2016.

Dylan Lewis: Why don't we start out talking about Apple? I'm a shareholder, you're a shareholder, a lot of Fools are shareholders, a lot of people that own mutual funds wind up being shareholders whether they realize it or not because it's such a large component of the S&P 500. Apple's top line came in at $42.4 billion, which beat estimates by about $300 million. Earnings came in at $142 a share, which also beat estimates of $138. I know I was pretty happy to see that because after the last quarterly report, I think there was some pessimism following the company in the market.

Looking at what's going on with their iPhone line, the company sold 40.4 million iPhones. Sell-through was down 8%, but that was expected. We knew that was going to be happening with where they're at in the iPhone line and the life cycle there and the product rollouts. ASP, average selling price, for the iPhones, was $595, which is down from what we've seen in the mid-$600s with some of the other lines. Overall, the category made up about 56% of revenue.

We see sell-throughs down, revenue is down. Is this something we should be worried about, Daniel? I think no. What do you think?

Daniel Sparks: This has definitely been a trend for Apple in fiscal 2016, watching the company turn to these year-over-year declines in revenue. I think it's something we need to put into perspective of last year. Like you said, iPhone is 56% of revenue, so it's the key driver here. When iPhone sales hurt, so does total revenue. And that's been the case. Lately, iPhone sales are down. During this quarter, iPhone sales were down about 15%, which also happens to be in line with the company's year-over-year decline in revenue.

But you have to put that in the context of last year. Last year was a monster upgrade cycle for Apple. The iPhone 6 was huge. The holiday quarter, which is always Apple's biggest quarter, iPhone unit sales were up about 46%. That was up from a previous record. And we're talking one of the biggest companies in the world. When you have a segment like this posting this sort of growth, it's not going to be easy to live up to that. So when you zoom out and look at iPhone, you look at Apple's business on a two-year basis, you're actually still seeing revenue headed upward, and even net income headed upward. Apple's third-quarter net income of $7.8 billion was up $100 million from $7.7 billion two years ago. It's still, generally, a healthy business, but we have to put it in comparison to this monstrous year last year.

Lewis: And you talked about how, if you look at things relative to two years ago, the numbers actually look pretty rosy. I think that's kind of how you have to look at a business that we expect to issue a major overhaul to their namesake, huge product, flagship line, every two years. The 6S was not a huge incremental change in form factor, and they were going up against years where they had rolled out the 6 Plus line, which was a totally different form factor. Of course, [Apple CEO] Tim Cook has zero interest in getting into the details on what we can expect for future product launches. But based on the cadence we've seen in the past, they're almost a company you want to see a two- or three-year comp look at, rather than just a straight year-over-year. I know it's tempting for investors, but I think it's something to be mindful of.

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