Apple’s sales and profit fell for the first time since 2001

Apple needs a Swift turnaround.
Apple needs a Swift turnaround.
Image: AP Photo/Tony Avelar
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Apple’s meteoric rise in the last 15 years has been punctuated by devices that changed the landscape of personal computing: the iPod, iPhone, and iPad.

But the company has hit its first real bump in that remarkable run, and 2016 marked the first year since 2001 that Apple posted an annual decline in revenue and profit (Apple’s fiscal year ended Sept. 24). The company reported $46.9 billion in revenue for the fourth quarter, down about 9% from a year earlier. It was the third consecutive quarter of declining revenue for the company. Sales for the year were $215.6 billion, compared to $233.7 billion in fiscal 2015.

Apple stock is down about 2% in after-hours trading.

People are buying more iPhones

Sales of Apple’s keystone product, the iPhone, rebounded in line with Apple’s forecast. Just a few weeks of iPhone 7 sales are included in this round of earnings, and Q4 is typically slow for Apple. The company sold 45.5 million iPhones in Q4, slightly higher than the 45 million units predicted by analysts.

All those iPhones resulted in Apple beating year-over-year figures in 33 of their 40 markets, CEO Tim Cook told investors in a call after the earnings were reported. Apple points to new iPhone growth in Canada and Europe, although overall sales declined in the crucial China market 30% year-over-year.

The holiday rush typically provides a big push at the start of its fiscal year, and a full quarter of iPhone 7 sales should also help. Apple said it expects revenue of $76 billion to $78 billion in the quarter. That would put it back in positive growth territory; it recorded $75.9 billion in sales in the first quarter of 2015.

Next year looks to be the real one to watch for Apple, due to the highly-anticipated iPhone 8—a rumored complete overhaul of the phone. Anticipation is so high that iPhone 8 leaks were seen before the iPhone 7 was announced.

More trouble in China

While Apple is expanding its presence in Japan and Europe, the company’s woes in China continued.

China has proven to be a tough hurdle for Apple, as a recent glut of high-end domestic smartphones from manufacturers like Xiaomi and Huawei have hit the market.

Apple has also had iBooks and sections of iTunes shut down in China, due to national regulation.

The company is still pushing hard to reach China and its 1.3 billion residents, evidenced by a $1 billion investment in Chinese ride-hailing startup Didi Chuxing, a new research and development center located in the country, and multiple recent visits by Cook.

Services keep shining

Services continued to be a bright spot, though it still makes up just a small piece of the company’s overall revenue. Revenue from the category, which includes iCloud, Apple Music services, and Apple Care, increased 24% during the quarter to $6.3 billion.

On the call, Cook said the services numbers were bolstered by a 22% jump in music revenue. He also talked up Apple Pay, saying transactions grew 500% year-over-year, and that more transactions were made in September 2016 than the entire year of 2015.

Revenue from every product that Apple makes (the iPhone, Mac and their “Other Products” category, which covers the Apple Watch and Apple TV) fell during the quarter—except the iPad, which did not see any change. Despite the revenue staying flat, Apple shipped 6% fewer iPads than Q4 2015.