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<p align="center"></p><p><p>Today Apple announced their quarter 1 earnings, and once again Apple had record revenue of $75.9 billion, and a record quarterly profit of $18.4 billion. Revenue is up 2% compared to Q1 2015, and 66% of the quarter&rsquo;s revenue came from International sales. Gross margin for the quarter was 40.1%, or $30.4 billion, up from 39.9% and $29.7 billion last year. Operating income was down slightly to $24.171 billion, but net income was $18.361 billion, which is up 1.8% year-over-year.</p>

<table align="center" border="0" cellpadding="0" cellspacing="1" width="635">
<tbody>
<tr class="tgrey">
<td align="center" colspan="6">Apple Q1 2016 Financial Results (GAAP)</td>
</tr>
<tr class="tlblue">
<td width="120">&nbsp;</td>
<td align="center" valign="middle" width="85">Q1'2016</td>
<td align="center" valign="middle" width="85"><span style="color: rgb(255, 255, 255); font-family: Rokkitt, serif; font-size: 17px; text-align: center; background-color: rgb(34, 149, 171);">Q4'2015</span></td>
<td align="center" valign="middle" width="85">Q1'2015</td>
</tr>
<tr>
<td class="tlgrey">Revenue (in Billions USD)</td>
<td align="center" valign="middle">$75.872</td>
<td align="center" valign="middle"><span style="color: rgb(68, 68, 68); text-align: -webkit-center; background-color: rgb(238, 238, 238);">$51.501</span></td>
<td align="center" valign="middle">$74.599</td>
</tr>
<tr>
<td class="tlgrey">Gross Margin (in Billions USD)</td>
<td align="center" valign="middle">$30.423</td>
<td align="center" valign="middle"><span style="color: rgb(68, 68, 68); text-align: -webkit-center; background-color: rgb(238, 238, 238);">$20.548</span></td>
<td align="center" valign="middle">$29.741</td>
</tr>
<tr>
<td class="tlgrey">Operating Income (in Billions USD)</td>
<td align="center" valign="middle">$24.171</td>
<td align="center" valign="middle"><span style="color: rgb(68, 68, 68); text-align: -webkit-center; background-color: rgb(238, 238, 238);">$14.623</span></td>
<td align="center" valign="middle">$24.246</td>
</tr>
<tr>
<td class="tlgrey">Net Income (in Billions USD)</td>
<td align="center" valign="middle">$18.361</td>
<td align="center" valign="middle"><span style="color: rgb(68, 68, 68); text-align: -webkit-center; background-color: rgb(238, 238, 238);">$11.124</span></td>
<td align="center" valign="middle">$18.024</td>
</tr>
<tr>
<td class="tlgrey">Margins</td>
<td align="center" valign="middle">40.1%</td>
<td align="center" valign="middle"><span style="color: rgb(68, 68, 68); text-align: -webkit-center; background-color: rgb(238, 238, 238);">39.9%</span></td>
<td align="center" valign="middle">39.9%</td>
</tr>
<tr>
<td class="tlgrey">Earnings per Share (in USD)</td>
<td align="center" valign="middle">$3.30</td>
<td align="center" valign="middle"><span style="color: rgb(68, 68, 68); text-align: -webkit-center; background-color: rgb(238, 238, 238);">$1.96</span></td>
<td align="center" valign="middle">$3.08</td>
</tr>
</tbody>
</table>

<p>Although the company had record iPhone sales, it was only just a record. It is still a massive part of their business, and for the quarter Apple sold 74.779 million iPhones, with an average selling price of $691. Compared to the year ago quarter, this is a gain of 311,000 iPhones. That&rsquo;s a pretty small gain, and percentage wise Apple calls it a year-over-year change of 0%. Although the growth is not there, that is still a huge amount of devices sold. iPhones accounted for $51.6 billion in Apple&rsquo;s revenue this quarter.</p>

<p>iPad has been a tricky market for Apple. After initial sales figures with huge growth, the platform stopped growing and started having a drop in sales quite a few quarters ago. The release of the iPad Pro was hoped to kick-start this, but, at least for the launch quarter, that has not been the case. iPad sales continued their fall, and in fact had an even larger drop of 25% year-over-year to 16.1 million devices. Revenue from iPads dropped 21% to $7.084 billion.</p>

<p>Mac sales were also down, with a year-over-year drop of 4% to 5.3 million devices sold. Revenue went down slightly less than that, with just a 3% drop, to $6.7 billion. Considering the slowdown in the PC market, the drop is less than what we&rsquo;ve seen from the PC market as a whole, but still a drop nonetheless. Regardless, Apple is likely pretty happy with Mac sales, which have weathered the storm better than many other brands. Dividing revenue by sales leads to an average of $1269.95 per Mac sale, which is territory most other OEMs would love to be in.</p>

<table align="center" border="0" cellpadding="0" cellspacing="1" width="635">
<tbody>
<tr class="tgrey">
<td align="center" colspan="6">Apple Q1 2016 Device Sales (thousands)</td>
</tr>
<tr class="tlblue">
<td width="120">&nbsp;</td>
<td align="center" valign="middle" width="85">Q1'2016</td>
<td align="center" valign="middle" width="85"><span style="color: rgb(255, 255, 255); font-family: Rokkitt, serif; font-size: 17px; text-align: center; background-color: rgb(34, 149, 171);">Q4'2015</span></td>
<td align="center" valign="middle" width="85">Q1'2015</td>
<td align="center" valign="middle" width="85">Seq Change</td>
<td align="center" valign="middle" width="85">Year/Year Change</td>
</tr>
<tr>
<td class="tlgrey">iPhone</td>
<td align="center" valign="middle">74,779</td>
<td align="center" valign="middle"><span style="color: rgb(68, 68, 68); text-align: -webkit-center; background-color: rgb(238, 238, 238);">48,046</span></td>
<td align="center" valign="middle">74,468</td>
<td align="center" valign="middle">+56%</td>
<td align="center" valign="middle">0%</td>
</tr>
<tr>
<td class="tlgrey">iPad</td>
<td align="center" valign="middle">16,122</td>
<td align="center" valign="middle"><span style="color: rgb(68, 68, 68); text-align: -webkit-center; background-color: rgb(238, 238, 238);">9,883</span></td>
<td align="center" valign="middle">21,419</td>
<td align="center" valign="middle">+63%</td>
<td align="center" valign="middle">-25%</td>
</tr>
<tr>
<td class="tlgrey">Mac</td>
<td align="center" valign="middle">5,312</td>
<td align="center" valign="middle"><span style="color: rgb(68, 68, 68); text-align: -webkit-center; background-color: rgb(238, 238, 238);">5,709</span></td>
<td align="center" valign="middle">5,519</td>
<td align="center" valign="middle">-7%</td>
<td align="center" valign="middle">-4%</td>
</tr>
</tbody>
</table>

<p>Services, which includes the App Store, AppleCare, Apple Pay, licensing, and other services, had a much better quarter. This segment had revenue of $6.056 billion for the quarter, which is a 26% increase year-over-year.</p>

<p>Finally, Other Products, which includes Apple TV, Apple Watch, Beats, iPod, and accessories, had another great gain of 62% in revenue to $4.351 billion. Apple doesn&rsquo;t break out individual numbers for this segment, but considering the Apple Watch did not exist in the 2015 numbers, you can be sure a lot of the gain is from this new product introduction.</p>

<table align="center" border="0" cellpadding="0" cellspacing="1" width="635">
<tbody>
<tr class="tgrey">
<td align="center" colspan="6">Apple Q1 2016 Revenue by Product (billions)</td>
</tr>
<tr class="tlblue">
<td width="120">&nbsp;</td>
<td align="center" valign="middle" width="85">Q1'2016</td>
<td align="center" valign="middle" width="85">Q4'2015</td>
<td align="center" valign="middle" width="85">Q1'2015</td>
<td align="center" valign="middle" width="85">Revenue for current quarter</td>
</tr>
<tr>
<td class="tlgrey">iPhone</td>
<td align="center" valign="middle">$51.635</td>
<td align="center" valign="middle"><span style="color: rgb(68, 68, 68); text-align: -webkit-center; background-color: rgb(238, 238, 238);">$32.209</span></td>
<td align="center" valign="middle">$51.182</td>
<td align="center" valign="middle">68.05%</td>
</tr>
<tr>
<td class="tlgrey">iPad</td>
<td align="center" valign="middle">$7.084</td>
<td align="center" valign="middle"><span style="color: rgb(68, 68, 68); text-align: -webkit-center; background-color: rgb(238, 238, 238);">$4.726</span></td>
<td align="center" valign="middle">$8.985</td>
<td align="center" valign="middle">9.34%</td>
</tr>
<tr>
<td class="tlgrey">Mac</td>
<td align="center" valign="middle">$6.746</td>
<td align="center" valign="middle"><span style="color: rgb(68, 68, 68); text-align: -webkit-center; background-color: rgb(238, 238, 238);">$6.882</span></td>
<td align="center" valign="middle">$6.944</td>
<td align="center" valign="middle">8.89%</td>
</tr>
<tr>
<td class="tlgrey">iTunes/Software/Services</td>
<td align="center" valign="middle">$6.056</td>
<td align="center" valign="middle"><span style="color: rgb(68, 68, 68); text-align: -webkit-center; background-color: rgb(238, 238, 238);">$5.086</span></td>
<td align="center" valign="middle">$4.799</td>
<td align="center" valign="middle">7.98%</td>
</tr>
<tr>
<td class="tlgrey">Other Products</td>
<td align="center" valign="middle">$4.351</td>
<td align="center" valign="middle"><span style="color: rgb(68, 68, 68); text-align: -webkit-center; background-color: rgb(238, 238, 238);">$3.048</span></td>
<td align="center" valign="middle">$2.689</td>
<td align="center" valign="middle">5.73%</td>
</tr>
</tbody>
</table>

<p>Apple will pay a dividend of $0.52 per share, payable to shareholders of record as of February 8. The payment will be made on February 11. Apple paid back $9 billion to shareholders this quarter, through share buybacks and dividend payments. They have now paid out $153 billion of their $200 billion capital return program.</p>

<p>Looking forward to next quarter, the forecast is decidedly down, with Apple expecting revenue of $50-53 billion, and margins of 39-39.5%. In Q2 2015, Apple had revenue of $58 billion, so this is a big drop. As always, forecasts are just that, and we&rsquo;ll have to wait for their actual numbers to see how they do.</p>

<p>Apple had a record quarter, but flat iPhone sales, and a drop in iPad and Mac sales are definite sour notes on this otherwise great quarter. Apple did say that currency rates have had a big impact this quarter, and &ldquo;$100 of Apple&rsquo;s non-U.S. dollar revenue in Q4&rsquo;14 translates into only $85 U.S. dollars today&rdquo;, which is going to be a big factor in earnings. Looking at a Constant Currency calculation, revenue would have been up 8% instead of 2%. Still, for a company with a net income higher than the revenue of many other players in the tech space, I think they will be OK.</p>

<p>Source: Apple Investor Relations</p>
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