Apple just released its latest financial earnings report, and for the first time in a long time, the numbers weren’t good.
The company’s second quarter revenues ($50.6bil) came up $1.5 billion short of analysts’ expectations, and are down nearly $8 billion compared to last year ($58bil). Apple also fell short of its earnings target of $2 per share, reporting earnings of just $1.90/share.
The bleak earnings statement had an immediate effect on Apple stock. Shares fell by a staggering 8% in reaction to the report, wiping $40 billion off the company’s valuation in just a few hours.
Apple stock fell off a cliff after the company revealed a less-than-stellar earnings report on Tuesday
So why is Apple, a company that just set a record for the largest quarterly profit ever reported, struggling all of a sudden?
The main reason is that the iPhone market is cooling off. Apple sold just 51.2 million iPhones during the second quarter of 2016 — 10 million less than it sold during the same period a year ago. In fact, Tuesday’s earnings report marked the first time ever that Apple has seen a decline in iPhone sales. (It’s also the first time in 13 years that Apple has posted a year-over-year decline in revenue).
Sales of iPads and Mac computers are also down considerably as compared to last year.
Declining sales in China, where Apple has seen considerable growth over the past few years, also contributed to the gloomy earnings report. Apple raked in nearly $17 billion in revenue from China during the second quarter of last year. This year, however, the company brought in just $12.5 billion — a decline of more than 25 percent.
Of course, Apple is still the most valuable company in the United States, with a market cap of over $600 billion. That being said, the tech giant will have some serious questions to answer over the next few years if sales of its flagship product, the iPhone, continue to decline.
Read more from TechCrunch and Fortune.