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Apple, Inc. Earnings: Revenue Is Down, but Growth Is Ahead

By Daniel Sparks - Updated Oct 25, 2016 at 11:37PM

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Declining iPhone sales weighed on results, but new devices for the holiday season have management predicting a return to growth.

Apple store. Image source: Apple.

As expected, Apple (AAPL 0.00%) reported declining revenue for its September-ended fourth fiscal quarter of 2016 as the company's iPhone 6s and 6s Plus continued to face-off against monstrous iPhone 6 and 6 Plus-driven growth in 2015. But the quarter's results also included a few bright spots, including management's optimistic guidance for the tech giant's important holiday quarter.

Here's a look at the report.

Financial results


Q4 2016

Q4 2015

Change (YOY)

Q4 2016 Consensus Analyst Estimate


$46.9 billion

$51.5 billion


$46.9 billion






Financial results retrieved from Apple quarterly press releases and SEC filings. Analyst estimate is based on data from Thomson Reuters. Table source: author.

Overall, Apple's results were about in line with expectations. Revenue and EPS of $46.9 billion and $1.67, respectively, were about in line with analyst expectations for the two key metrics. Further, revenue was within Apple's guidance range for fourth-quarter revenue of $45.5 billion to $47.5 billion. 

Apple's gross profit margin was 38%. While the important metric was at the high end of Apple's guidance range for the quarter of 37.5% to 38%, it's notably down from a heady gross profit margin of 39.9% in the year-ago quarter.

The results continued to highlight Apple's ability to generate boatloads of cash, which the company has continued to tap into for dividend payments and share repurchases.

"We are pleased to have generated $16.1 billion in operating cash flow, a new record for the September quarter," said Apple CFO Luca Maestri in Apple's fourth-quarter press release. "We also returned $9.3 billion to investors through dividends and share repurchases during the quarter and have now completed over $186 billion of our capital return program."

Key takeaways

iPhone 7 and 7 Plus see a promising start: While sales of the newest iPhones were likely limited during the quarter since they were released within only a few weeks of the quarter left and since shipments were supply constrained, demand for the device is apparently high enough to impress management. Apple CEO Tim Cook said the company was "thrilled with the customer response" to the new iPhones.

iPhone 7. Image source: Apple.

Services revenue growth accelerated: One of the more optimistic takeaways from Apple's fourth-quarter earnings release was the exceptional growth in its services segment. Services revenue was up 24% year over year and set another all-time record. This "incredible momentum," as Cook referred to it, highlights faster growth than the 19% year-over-year revenue increase for the segment in the prior quarter.

iPhone revenue was down: Apple's iPhone revenue, which accounted for about 60% of fourth-quarter revenue, was down 13% year over year. On the bright side, however, the year-over-year decline was an improvement compared to the second- and third-quarter iPhone declines of 18% and 23%, respectively.

Apple forecast first-quarter revenue growth: For its fiscal first quarter of 2017, or Apple's important holiday quarter, management said it expected revenue to be between $76 billion and $78 billion. This range is slightly above Apple's revenue of $75.9 billion in its first fiscal quarter of 2016.

At the time of this writing, Apple stock is trading about 2.8% lower during after-market hours on Tuesday. However, shares are up about 17.5% during the past three months.

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