Apple Isn’t Rotting After All
We’re confident in our long-term view of Apple ahead of the crucial iPhone 7 launch.
Apple’s revenue in the June quarter was $42.4 billion, down 15% year over year but ahead of Street expectations. iPhone sales of 40.4 million units were also down 15% year over year. Although iPhone average selling prices, or ASPs, fell 10% year over year, Apple was encouraged by sales of its lower priced iPhone SE, as it believes it captured more switchers from Android than ever before (most likely such customers could not afford prior iPhone versions). Apple’s total gross margins fell 140 basis points sequentially, but the SE doesn’t appear to be a hefty drag on margins, as margins came in at the high end of prior guidance and favorable commodity pricing partially offset these headwinds.
iPad revenue was a bright spot, up 7% year-over-year, while ASPs rose 18% thanks to a richer mix toward the higher-priced, and recently released, iPad Pro. Services revenue continues to do well, up 19% year-over-year thanks to Apple’s larger installed base, but the firm noted that each customer, on average, spent more within the Apps Store this quarter than ever before, which bodes well for iOS engagement.
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