Apple Inc. Stock Tumbles After Earnings, Sales Miss

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Apple Inc. (AAPL) released the earnings results from the second quarter of its fiscal 2016 after closing bell tonight, posting adjusted earnings of $1.90 per share on $50.6 billion in revenue. Analysts had been expecting adjusted earnings of $2 per share and $51.97 billion in revenue, representing the weakest March quarter in many years. In last year’s March quarter, the iPhone maker posted adjusted earnings of $2.33 per share and $58 billion in revenue.

Apple posts first quarterly revenue decline in over a decade

Apple Inc. (NASDAQ:AAPL) management had warned that this would be a weak quarter, so expectations were set quite low as the company was expected to post the first iPhone sales decline ever. They guided for sales of between $50 billion and $53 billion, which implied earnings of about $1.94 per share at the midpoint.

Apple Inc. (NASDAQ:AAPL)’s gross margin declined slightly from 40.8% last year to 39.4% in this year’s March quarter. Greater China sales plunged 26%, while Americas sales declined 10% and Europe sales slipped 5%. Japan saw the only sales increase at 24%, with the rest of the Asia Pacific region recording a 25% decline in sales.

The company sold 51.2 million iPhones, against the consensus estimates ranging between 50 million and 52 million. It sold 10.25 million iPads and 4 million Macs. Services revenue came in at $6 billion, while Other Products revenue amounted to $4.4 billion.

Apple provides June quarter guidance

Apple management expects June quarter revenue to come in between $41 billion and $43 billion and gross margin to be between 37.5% and 38%. The company also added $50 billion to its capital return authorization. With the expansion, the iPhone maker will pay out a total of $250 billion in cash to shareholders by the end of March 2018. The board increased  the share repurchase authorization from $140 billion to $175 billion as part of the expanded program.

Wall Street is currently projecting revenue of $47.32 billion and earnings of $1.76 per share for the third quarter of the company’s fiscal 2016. In terms of iPhone units, the Street expects 44 million units. BMO Capital Markets analysts said before the report that in-line guidance could be seen as a positive as investors look forward to the iPhone 7 cycle.

Cantor Fitzgerald analysts said before tonight’s earnings report that they estimate Apple’s June quarter sales at $44.55 billion. They expected a cautious outlook from Apple Inc. (NASDAQ:AAPL) management as the end of the problematic iPhone 6s cycle nears its close and the current macro environment is still uncertain. They also expected Apple Inc. (NASDAQ:AAPL) to increase its capital returns from the $200 billion it had pledged through March 2017. As of the end of the December quarter, the iPhone maker had already used up $153 billion of its repurchase authorization.

Apple Inc. (NASDAQ:AAPL) stock plunged 5.38% to $98.74 per share in after-hours trades following tonight’s earnings report.

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