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Twitter & Apple Fail to Meet Expectations

Apple Logo

Yesterday (26 April) analysts forecast the first ever quarterly decline in iPhone sales on a year-over-year basis. Overall expectations for Apple (NASDAQ:AAPL) earnings were bleak. Analysts' predictions were realised - and stock fell by 8%.

This quarter marks Apple's first quarterly sales drop in 13 years.

The company posted quarterly revenue of US$50.6bn (£34.7bn,) 13% down year-over-year; and quarterly net income of US$10.5bn (£7.2bn) 23% down year-over-year; or US$1.90 (£1.30) per diluted share, 19% down year-over-year.

Gross margin was 39.4% compared to 40.8% in the year-ago quarter. International sales accounted for 67% of the quarter’s revenue.

“Our team executed extremely well in the face of strong macroeconomic headwinds,” said Tim Cook, Apple’s CEO. “We are very happy with the continued strong growth in revenue from Services, thanks to the incredible strength of the Apple ecosystem and our growing base of over one billion active devices.”

iPad sales fell by 19%, iPhone sales are down 16%  – indicating a saturated market and increasing competition.

iPhone sales: 51.19 million, for $32.86bn (£22.54bn) in revenue
iPad: 10.25M, for $4.41bn (£2.84bn)
Mac: 4.03M, for $5.1bn (£3.5bn)

Apple Watch and Apple Pay continue to grow.

Damon Combrinck, global digital advertising operations director, iProspect said: “As predicted, iPhone sales have fallen significantly with other product lines such as the iPad not seeing frequent upgrades, and the Apple Watch having failed to endear consumers to the wearables market as some experts had expected. A focus on bettering the App Store and Apple’s services business is one way to off-set this, but it’s likely that we’ll see Apple looking to new product lines. Tim Cook will likely be hoping that the SE, its new “budget” handset, will bring on new customers this year, though that remains to be seen. Advertisers will likely be hoping that the focus is on VR and AI however, as Apple moving into these markets could bring it to the mainstream and create new opportunities for brands.”

Weak Pickings for Twitter

Yesterday also saw Twitter (NYSE: TWTR) announce Q1 earnings that disappointed investors, coming in below expectations as the social media company hankers for growth in users and advertising.

For years Twitter has struggled to generate profit from its user base. Yesterday the company reported 310 million monthly users in Q1, and revenue of US$594.5m (£407.85), below analyst expectations.

Twitter's revenue forecast for this quarter is between US$590m (£405m) and US$610m (£419m), also short of what investors had been hoping for.

Today's advertising landscape is making things hard for Twitter. With competition from Facebook, Snapchat, Instagram and Pinterest, attracting and maintaining users is hard.

In Q4 2015 Twitter had actually lost users - which for a major social network is practically unheard of. This quarter they've gained 5 million active users a month - a small drop in the social media ocean, and not enough to compete equally with Facebook and Snapchat.

To boost its stagnant user growth, Twitter has over the past months introduced a new user interface and emphasised its live video offerings. However, Facebook is launching a similar product, Facebook Live. The questions is: Will Twitter's product be good enough to rival Facebook's and attract more users and advertisers?