Apple CEO partly blames Q2 results on next iPhone rumours, but what are they?

After Apple Inc.’s latest quarterly results missed analysts’ expectations by at least $200 million USD, CEO Tim Cook at least partially blamed the increased number of rumours regarding the company’s next iPhone, making this week as good a time as any to look at what the latest reports say.

According to Bloomberg, which noted that the Cupertino, Calif.-based tech giant forecast between $43.5 billion and $45.5 billion (all figures USD) in revenue for the present quarter, below the $45.7 billion analysts had estimated, there are compelling reasons to believe the next iPhone will include a significant augmented reality (AR) component.

“Hundreds of engineers are now devoted to the cause, including some on the iPhone camera team who are working on AR-related features for the iPhone,” Bloomberg reporter Mark Gurman wrote in a March 20 feature, noting that in addition to augmenting its AR team with experts in 3D video production, wearable hardware, and camera and optical lens engineering, the company has been making tactical acquisitions such as AR software developer Metaio in 2015 and AR-related camera software developer FlyBy Media in 2016.

In a separate report Business Insider – which, citing analysts from Deutsche Bank, has reported that we’re unlikely to see the iPhone 8 this year – has said we can expect to see an edge-free display similar to the Samsung Galaxy S8 released last month.

Other projected iPhone 8 features that will sound familiar to fans of Samsung Electronics Ltd.’s latest could include the replacement of the physical home button with an onscreen version and wireless charging features.

The official word

During a May 2 conference call discussing the company’s second-quarter financial results with investors, Apple CEO Tim Cook did not lead with exact sales numbers, though he mentioned a “larger iPhone channel inventory reduction this year versus last year,” and called iPhone sales “in line with our expectations.”

“We’re thrilled to see the continued strong demand for iPhone 7 Plus with its beautiful large display and dual-camera system,” he said. “Our active installed base of iPhones grew by double digits year over year. And based on the latest data from IDC, we gained market share in nearly every country we track.”

He also noted that Apple’s Services revenue topped $7 billion for the second quarter in a row, remaining well on its way to potentially becoming the size of a Fortune 100 company before the end of the year.

“We’re very happy to see the deep level of customer engagement with the Apple ecosystem across all of our services,” Cook said.

Later, when asked about a 451 Research survey that found a nine-year low in iPhone purchase intent and a declining retention rate in the U.S. that is inching toward 80 per cent, Cook acknowledged a “pause” in demand.

“In general… we’re seeing what we believe to be a pause in purchases on iPhone, which we believe are due to the earlier and much more frequent reports about future iPhones,” he said.

Apple CFO Luca Maestri was more forthcoming with exact numbers during the call, revealing that the company sold 50.8 million iPhones during the quarter and reduced the device’s channel inventory by 1.2 million units, compared to a reduction of about 450,000 last year.

Last year Apple sold close to 51.2 million iPhones during the same period, and close to 78.3 million last quarter.

“Our iPhone performance was slightly better than last year on a sell-through basis,” Maestri said, noting also that the company saw “very solid” iPhone growth in four of its five operating segments, including Western Europe, the Middle East, and Asia-Pacific segment, where sales rose by double digits.

Maestri also emphasized the devices’ satisfaction ratings among customers, particularly business users.

Our thanks to investment research platform Seeking Alpha for the transcriptions from Apple’s May 2 earnings call.

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Jim Love, Chief Content Officer, IT World Canada

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Eric Emin Wood
Eric Emin Wood
Former editor of ITBusiness.ca turned consultant with public relations firm Porter Novelli. When not writing for the tech industry enjoys photography, movies, travelling, the Oxford comma, and will talk your ear off about animation if you give him an opening.

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