| Apple follows up biggest quarter ever with slew of declines Jessica Smith | April 28, 2016 Want to receive more charts, research, reports, and data from BI Intelligence? Learn More Now » Apple's Q1 2016 (Q2 fiscal-year 2016) earnings call on Tuesday showed the company's first year-over-year (YoY) decline in revenue in 13 years, and the company's first-ever YoY decline in iPhone sales and revenue derived from iPhone sales. Apple's total revenue saw -13% growth in Q1, down to $50.6 billion from $58 billion in Q1 2015. Apple CEO Tim Cook cautioned about the slowdown last quarter, and during the call on Tuesday referred to the deceleration as a "pause in our growth" that's likely to persist throughout the year, as the year-ago sales numbers from Apple's iPhone 6 line were large enough to make YoY growth without a break-out device highly unlikely. Although Apple missed analyst revenue expectations for the quarter, the results were in line with Apple's own guidance. 
iPhone Although iPhone sales beat analyst expectations in Q1, the iPhone also saw its first-ever quarter of YoY sales decline. Apple sold 51.2 million iPhones in Q1 2016, down 16% YoY from 61.2 million in Q2 2015. Subsequently, revenue derived from iPhone sales also saw its first-ever YoY decline; iPhone revenue was down 18% in the quarter, pulling in $32.8 billion, down from $40.3 billion in the same quarter last year. Apple's newest iPhone, the iPhone SE, was not included in Q1 sales figures because it launched on the final day of the quarter. Cook seemed optimistic about the three major categories of iPhone buyers: first-time buyers, switchers from other platforms, and upgraders of current iOS models. However, it's likely that a slowing in first-time buyers and upgraders were the main reasons iPhone sales slowed so precipitously in the quarter. - The subsegment of first-time buyers of iPhones is in an odd position as developed markets continue to mature and emerging markets have yet to build out enough infrastructure to kick off growth in earnest. While Cook stated that iPhone sales in India were up 56% from last year, it's likely that sales volume is fairly small. Emerging markets do post an enormous opportunity for Apple as they hit their stride, however. A recent research note from Morgan Stanley shows that almost 50% of consumers in India are unfamiliar with the Apple brand. This means that as smartphones enter the mainstream in the country, Apple could drastically increase its sales in the region with properly placed marketing and distribution efforts.
- iPhone upgrades in the quarter slowed because there was no device with a truly distinctive offering, as opposed to in Q1 2015, when Apple's iPhone 6 line offered iOS users large screens for the first time. Although some consumers who prefer smaller screens may have been holding off for Apple's iPhone SE, it's likely that these consumers will wait to upgrade their devices until their contracts run out or their current devices no longer serve their needs, meaning Apple is unlikely to see large concurrent upgrades from their newest model.
- Apple continued to convert smartphone users from Android to iOS in Q1. Cook stated that the period between Q4 2015 and Q1 2016 saw the highest level of Android switchers Apple has seen in any six-month period in its history.
iPad Apple sold 10.3 million iPads in Q1, a decline of 19% YoY from 12.6 million in Q1 2015. Revenue from the iPad fell as well, seeing a decline of 19% YoY from $5.4 billion last Q1 to $4.4 billion this quarter. This is the 9th consecutive quarter in which iPad unit sales and revenue saw YoY declines. Despite the long-term deceleration, Cook is optimistic about the iPad line, and particularly so about the new iPad Pro, Apple's largest iPad to date. Mac Sales of the Mac and revenue tied to it continued to shrink following last quarter's decline. Sales of Mac units were down 12% YoY, from 4.6 million units in Q1 2015 to 4.03 million in the most recent quarter. Mac revenue declined 9%, from $5.6 billion in Q1 2015 to $5.1 billion in the most recent quarter. This is only the fourth time in the history of the Mac that it's seen consecutive quarters of negative growth, the first three coming back-to-back from Q1 2013 to Q3 2013. Cook stated that Mac is increasing its share in the contracting global PC market, partially due to a high volume of first-time buyers; over 50% of Mac buyers in Q1 were purchasing their first Mac.  Apple Watch Apple has yet to break out Apple Watch unit shipments, merely stating that Apple Watch unit sales "met expectations" for Q1. Cook did share that the first year of Apple Watch unit sales did better than the first year of iPhone sales back in 2007/2008, meaning that the Apple Watch has sold at least 5.42 million units since launch. However, some research houses like Canalys put that number much higher; Canalys estimates 12 million Apple Watches sold in 2015 alone. Apple expects to see Apple Watch sales spikes tied to the holiday season, mirroring the seasonality seen with the iPod. Average Selling Price The average selling price of the iPhone saw a YoY decline of 2.5%, iPad ASP remained relatively unchanged with 0.1% YoY growth, and Mac ASP grew 3%. iPhone ASP was down to $641 in the quarter from its all-time high of $690.5 in the previous quarter. iPhone ASP will likely shrink further in the quarters to come as the introduction of the lower-priced iPhone SE enters the sales mix. 
Services
Apple lumps together its software offerings into its Services category, which accounted for $6 billion in revenue during the quarter, up 20% YoY from $5 billion. As of Q1, the Services category is officially the only Apple revenue segment that has never seen a quarter of YoY negative growth. - The App Store: Revenue from the App Store increased 35% YoY, beating last quarter's all-time record.
- Apple Music: Apple Music now has 13 million paying subscribers, up from 10 million in the prior quarter, and 6.5 million in Q3 2015.
- Apple Pay: Apple launched Apple Pay in China during Q1 and rolled out to Singapore in mid April. Cook is confident about Apple Pay's growth, with the service bringing in 1 million new users a week and seeing a transaction volume five times what it saw last year.
Revenue Apple's $50.5 billion in revenue during the quarter was largely driven by the iPhone as its biggest category and the Americas as its biggest region. The deceleration of Apple sales and the maturation of Apple's biggest markets, the Americas and China, helped contribute to the 13% decline in revenue YoY. This comes just after Apple's all-time biggest revenue quarter in Q4 2015, which saw $75.8 billion. - The iPhone is still Apple's biggest revenue driver. iPhone sales brought in $32.9 billion in revenue during the quarter, accounting for 65% of total revenue. The iPhone has accounted for around two-thirds of total revenue each quarter since Q4 2014.
- The Services segment is poised to account for larger and larger shares of Apple's revenue, particularly as their 1 billion 90-day active user base grows and money spent on mobile continues to rise. Services accounted for $6 billion in revenue during Q1, up 20% YoY, and taking the #2 spot in terms of revenue for the first time. Services accounted for 12% of Apple's total revenue in the quarter.
- iPad and Mac revenue both saw YoY declines, but held fairly steady in terms of total revenue share. The iPad generated $4.4 billion and the Mac totaled $5.1 billion in the quarter, representing YoY declines of 19% and 9%, respectively. The iPad accounted for 9% of total revenue, and Mac accounted for 10%.
Another look at revenue, by product: 
Services is officially the only segment that has not experienced a YoY revenue decline.
By region, the Americas, Greater China, and Europe made up the largest share of revenue. The three regions combined accounted for 85% of Apple's total revenue in the quarter. However, all three regions also saw YoY revenue decline. The only region that saw revenue growth was Japan, which generated $4.28 billion in revenue for Apple, up 24% from $3.46 billion last year. Greater China saw the most significant deceleration in revenue YoY with a 26% decline. The Americas and Europe both declined at a less severe degree than the 13% YoY decline that Apple's total revenue saw in Q1; The Americas saw a decline of 10% to $19.1 billion, and revenue from Europe declined by 5% to $11.5 billion. 
Another look at revenue, by region:
Revenue share, by region:
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