Although Apple isn't exactly hurting, this is the worst fiscal quarter for the company since 2003. Product sales are down across the board, including for the iPhone, marking its first year-over-year decline since the smartphone was introduced back in 2007.
Apple managed to sell 51.2 million iPhones in the second quarter, down from 61.1 million year over year. Historically this has been the worst quarter for iPhone sales, but Apple wasn't likely to match last year's sales numbers regardless of what happened, as sales were inflated due to supply constraints of the iPhone 6 that pushed purchases past the holiday quarter. But the decline is still the first ever for an iPhone year over year, and no amount of justifications will change that.
But the future is looking bright for iPhone sales: the iPhone SE was recently released to rave reviews, and later this year the 10th version of the iPhone will be unveiled and will likely come with a redesign given Apple's tick-tock release schedule.
The future is looking bright for iPhone sales
iPad sales also continued to decline, with the company moving 10.3 million units in the quarter, down from 12.6 million iPads this time last year. Apple recently released a smaller version of its iPad Pro, which should help boost sales in the third quarter, but the iPad business hasn't looked healthy in some time — falling for eight straight quarters. The company still has a long way to go in order to restore investor confidence in the product line, which has gone from the heir apparent to the iPhone business, to just another (still profitable) product line.
Mac sales were also slightly down, as Apple only managed to sell 4 million units, slightly down from 4.6 million Macs from the same quarter in 2015. This is the second consecutive quarter Mac sales have fallen year over year. Sales of "Other Products" — the category containing Beats products, the Apple TV, and most importantly the Apple Watch — were the only section of Apple products that grew from last year, bringing in $2.2 billion in revenue, up from $1.7 billion last year.
If Apple Watch sales were great, the company would be touting them
This is the third quarter of earnings in which the Apple Watch has been reported under Other Products and Apple still hasn't offered up any concrete numbers on sales of the device, which likely isn't a good thing. If they were great, the company would be touting them as a way to calm concern around the down quarter, which leads many investors to believe that while the sales of the smartwatch may surpass the current crop of competition, they aren't up to Apple's internal expectations.
Apple's third quarter will be more interesting than usual this year, as investors look closely at the success of the iPhone SE and iPad Pro to see if Apple can turn it around. The company will likely continue to have monster holiday quarters for some time as it falls right in line with its iPhone release schedule. But it has to show it can maintain sales throughout the year to keep its shareholders happy.