The most profitable quarter in history: analyzing Apple's record breaking Q1 2016


Investors are not happy with Apple: the sentiment is that the company cannot keep up its breakneck tempo when it comes to making outrageous profits and Apple Watch has not been the runaway hit many hoped it would be (at least not at this point in time). In addition, the rumored upcoming small, 4-inch iPhone 5se (that is 'special edition' for you) does not seem to spur crazy enthusiasm.

However, this sentiment is based on all things future and speculative.

What we have right now is the official data for Apple's Holiday quarter (technically, fiscal Q1 2016 in Apple's books) and one thing is certain: this is the most profitable quarter of any company ever. (Fannie Mae made an insane $58.7 billion in net income in Q1 2013, but more than $50 billion of that profit came from deterred tax assets, so it's hard to count this in.)

The second best in history? It's Apple again with its almost equally impressive fiscal Q1 2015, that was exactly a year ago.

So there are definitely some key takeaways that are worth a detailed look and that's what we aim to show you here: what are the staples of the Apple economy, how have its key products performed and what new promises are on the horizon. Take a look.

Apple sold the most iPhones ever in fiscal Q1 2016

Still it was almost flat and behind analysts expectations

Apple managed to improve slightly upon its previous record for iPhone sales set in fiscal Q1 2015, going up to 74,779 million units sold, up from 74,468 million. This is a very modest, 0.4% improvement in terms of unit sales (practically, we can count this as a flat quarter) and Apple has warned that - for the first time in history - iPhone sales might decline on an annual basis in fiscal Q2 2016.

This is a crucial moment: Apple's sales in the Americas have declined on an annual basis, which shows that the biggest market the company has is getting very saturated. At the same time, Apple sees growth potential in the developing world and has said that it will focus on expanding its business in Asia and India in particular. An interesting move, but one that seems inevitable.


Look at the bigger picture: iPhone sales grow 32% for the whole year

While nearly flat on the quarter, yearly growth is still impressive

While analysts were quick to paint doom and gloom on iPhone sales based on the nearly flat last quarter, it's worth looking at iPhone sales from a wider perspective to understand the deeper dynamics. 

It's interesting that despite this nearly flat quarter, in calendar year 2015, iPhone sales stood at 231.5 million units, up from 175 million in the previous year. That’s a growth in unit sales of the very healthy 32% and shows that the iPhone has not yet stalled its growth on a yearly basis.


iPad crashed to its worst yet

Apple sold 16.1 million units in fiscal Q1 2016

Apple's iPad, on the other hand, is now on a very clear and very steady decline curve. Despite the fact that Apple launched a brand new, 12.9-inch Apple iPad Pro - something that businesses and artists should embrace - sales of the iTablets have shown no sign of revival.

With 16.1 million units sold, the decline is sharp - in the same quarter of last year, iPad sales amounted to 21.4 million, while at their peak in the Holiday quarter of 2014, iPad sales were at 26 million.

On an annual basis, the drop in iPad sales is also very clearly pronounced: sales in calendar 2015 amounted to 49.56 million units (for the quarters that roughly coincide with calendar 2015), down from 63.36 million in the previous year. That’s a decline of nearly 21%.

Now, despite its clear decline, iPad on its own is still a business larger than most companies and it brings more than $7 billion in revenue. And yes, it's still a business larger than the Mac, so we do expect Apple to continue trying to bring excitement to the iPad lineup in 2016.


Yet net profit soared to an impressive $18.4 billion

The most profitable quarter of any company ever (excluding Fannie Mae's deferred-tax profit in Q1 2013)

It's all about the money, the song goes, and when it comes to money, it's all about Apple. No other company comes close: Apple registered $18.4 billion in net profit on revenue of $75.87 billion. Comments are really not really needed here: just look at the chart and see the impressive growth in Apple's fortune.


“Other” has become a major contributor to Apple revenue

It includes Apple Watch, Beats gear, Apple TV and more

The "other" category just begs to be broken down in pieces: right now, Apple bundles the Apple Watch, Beats gear, Apple TV and mroe in it. Well, this breakdown did NOT happen this quarter, as the number is still provided as one single piece (nope, no separate Apple Watch sales numbers either).

Tim Cook, however, did say that the Apple Watch had its best quarter with December being especially strong. This is not exactly a surprise, but it is reassuring that the Watch is growing, a piece of information that was needed given the fact that there are zero numbers to tell us how it's doing otherwise. 

"Revenue from other products grew strongly, up 62 percent over last year, thanks to the growing contribution from Apple Watch, as well as the successful launch of the new Apple TV, both of which established new all-time quarterly records. We expanded Apple Watch distribution significantly over the course of the quarter, and we experienced especially strong results during the holiday buying season," Tim Cook said in Apple's earnings call.

It's also notable that services has also become a major contribute to Apple revenue growing to a record $6.05 billion, including App Store revenues, Apple Pay proceeds and more.


Apple is mostly an iPhone company

iPhone revenue made up 68% of its total revenue in fiscal Q1 2016

As a conclusion, we ought to say that Apple is transforming. The iPhone has now practically stopped its growth for the first time in history and iPad sales are crashing.

What comes next? As is with Apple, we never know, but the growth of services and other products (especially the Apple Watch) has allowed the company to deliver another record quarter despite challenging global economic conditions and product saturation in its key markets.

For all it is, though, Apple remains an iPhone company. The phone is responsible for 68% of its revenue and Apple certainly realizes this. Expect big things for it in the future.

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46 Comments

1. TBomb

Posts: 1551; Member since: Dec 28, 2012

I'm confused... how is Q1 of 2016 over already? it's still January...

3. Commentator

Posts: 3723; Member since: Aug 16, 2011

Different companies' fiscal years tend to vary, they don't necessarily follow calendar years.

6. TBomb

Posts: 1551; Member since: Dec 28, 2012

Thanks.

10. sgodsell

Posts: 7419; Member since: Mar 16, 2013

The other thing to remember is Apple's smartphone market share in both the US and Chine fell. Apple has 39% of the US market share for the holidays (their Q1). Android has 59% of the US market share in the same quarter. People have finally opened their eyes and can quickly see that Apple does not offer the best bang for your buck. Come on only Apple release's a flagship device with a low resolution HD display. Yet charges flagship prices. Not to mention those starting prices are for only a 16gb model. Everyone else charging the same prices have released better displays, cameras, offer better storage and ram at more reasonable prices.

12. sissy246

Posts: 7124; Member since: Mar 04, 2015

Because the isheep are brain washed and will pay top dollar for that little fruit on the back.

19. htcisthebest

Posts: 437; Member since: Nov 15, 2011

I completely agree with you. Not to mention apple's unethical manufacturing outsourcing activities to Foxconn, which forces its assembly line workers to work at less 12 hours a day and pay them less than $4 an hour.

38. Xelief

Posts: 62; Member since: Aug 17, 2015

I don't buy Apple products, but I know that they're not the only phone company guilty of this. They just get the most attention for being at the top.

24. Ahovking

Posts: 711; Member since: Feb 03, 2015

"People have finally opened their eyes" what are you on about.. Apple still sold more iPhones than last year.. The issue the market is now satiated with iPhone.. Android hit this point 2 years ago when you had HTC, Samsung etc began to report sale declines, stagnation or embarrassingly low sale increases.. Apple has finally join android. And it's pretty embarrassing that such a low spec phone like the iPhone can out benchmark every phone in multitasking and comes second only to the NOTE... Power wise the IPhone 6s Plus is the second most powerful phone you can get today behind the Note.

25. French_Toast

Posts: 98; Member since: Sep 02, 2015

The last breath of air before drowning!

29. AlikMalix unregistered

Wow, very poetic. I disagree, but very nicely said.

31. riteshrkm

Posts: 157; Member since: Apr 15, 2015

Agree with u.....in single core functionality even a 3 yr old iphone 5s is as par with any top end android smartphone today

34. TechieXP1969

Posts: 14967; Member since: Sep 25, 2013

No, it isn't. But if you "think" it is, that is all that matters.

43. coldspring22

Posts: 349; Member since: Feb 28, 2015

Actually, if you factor in that iphone 6 wasn't available in China until October 2014, you can see that iphone sales rate in Q1 2015 is higher than iphone sales in Q1 2016. Further more, inventory build up (channel stuffing) was virtually zero in Q1 2015, where as there are more than 2 million iphone sitting in warehouse somewhere in Q1 2016. Like Tim Cook said, outcome for Q2 2016 is already baked in. First ever YOY iphone sales decline, and not even by small margin. It will be pretty hefty YOY decline in Q2 2016

5. Victor.H

Posts: 1076; Member since: May 27, 2011

This is fiscal Q1 2016 for Apple, not calendar year. It's a bit confusing, but a fiscal year is different than a calendar year, for some companies it can start in the middle of a calendar year :) For Apple, fiscal Q1 2016 is the October - December 2015 quarter. Hope that makes it clear!

32. TechieXP1969

Posts: 14967; Member since: Sep 25, 2013

Because Apple's Fiscal year starts with the last 3 months of the year. You know, so they can brag about how they sold more product during the holidays.

2. ryq24

Posts: 875; Member since: Oct 17, 2011

Impressive considering it has only a few models to choose from unlike others.

4. darkkjedii

Posts: 31263; Member since: Feb 05, 2011

Done right, the iPhone 7 will give a much needed jolt. Done wrong...uh ohhhhhhh.

7. Tziggy14

Posts: 624; Member since: Sep 02, 2014

I'm starting to feel Apple is going through its version of Microsoft's Ballmer era. Where it's less about innovation and more about profit margins.

8. darkkjedii

Posts: 31263; Member since: Feb 05, 2011

That's every for profit business that's ever existed, and ever will.

20. htcisthebest

Posts: 437; Member since: Nov 15, 2011

Even MS cares a little bit about innovation. Apple? Not at all.

27. mayur007

Posts: 593; Member since: Apr 10, 2012

You imagine inspite of low sales and weak demand they earned more than ever.... So how much phone would be costing...

30. AlikMalix unregistered

What low sales and what weak demand? Are you still talking about iPhones?

44. coldspring22

Posts: 349; Member since: Feb 28, 2015

True, there are more than 2 miilion iphones sitting in on shelves or warehouse indicating weak demand. That's why Apple told it's suppliers to cut back in production. Too much inventory

41. jalebi2000

Posts: 181; Member since: Mar 01, 2015

I think apple will invest alot in Rd eventually when they start to tank.

9. shiftt

Posts: 333; Member since: May 03, 2015

How many "featured" articles on Apple's income are you guys going to make? Jesus.

14. Victor.H

Posts: 1076; Member since: May 27, 2011

Well, sorry to break your comfort :) In fact, it's the first time we're doing such kind of analysis and I thought it's a fun and interesting way to have a more visual, chart based overview of the quarter. We're lucky Apple provides all those numbers, but we'll definitely try doing something similar for Samsung and others if we get the data.

11. jroc74

Posts: 6023; Member since: Dec 30, 2010

Again, if they are constantly breaking records with sales and profits maybe its time for shareholders, analysts to stop with the extreme expectations. Every new version of the iPhone has outsold the previous version. Let that sink in for a min.

13. darkkjedii

Posts: 31263; Member since: Feb 05, 2011

Apple could benefit from a yearly redesign cycle, couldn't hurt. The 2 year one is giving users a compelling reason to wait.

15. Martineverest

Posts: 521; Member since: Oct 27, 2015

So ironic and awkward that iPad that is predicted to overtake PC is dying before PC. With vr, PC Is gearing for a come back

17. Ordinary

Posts: 2454; Member since: Apr 23, 2015

PC aint dying. The data for that are stock build PC sales. You need to consider that a lot of people customize their PC so its hard to find data on that.

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