Apple Forecasts Earning Decline for the Second Quarter

Apple scored record revenue for the first quarter, but the big news coming out of the earning call is the forecast for the next quarter has sales of the iPhone falling year over year for the first time since its inception. This earning decline is also the first time Apple has had a year over year drop in revenue in any quarter in 13 years. That in itself is an amazing achievement.

Why then has this decline come about? Tim Cook has a couple of theories:

“We see that Q2 is the toughest compare. We believe it’s the toughest compare because the year-ago quarter also had catch up in it from Q1; if you recall, we were heavily supply-constrained throughout the whole of Q1, and so some of that demand moved into Q2.”

This is very likely. The launch of the iPhone 6 was supply constrained and it is very possible that the Q2 numbers were inflated from sales of phones that would normally have moved in the first quarter provided there was inventory.

“Plus, we’re in an environment now that is dramatically different from a macroeconomic point of view than last Q2: from a currency point of view, from the level at which we’ve had to adjust pricing in several of these markets, and sort of the overall malaise in virtually every country in the world”

The economic situation in most of the world is quite dire and it is no surprise that it would reflect on the earning of a company like Apple. It also means that it is quite likely that this will be a depressing factor on iPhone sales for several more quarters.