This is one big example of the market conditions that are holding Apple down

On Tuesday Apple reported its first quarterly sales drop since 2003 as part of a pretty disappointing earnings report.

But if you hear CEO Tim Cook talk about it, Apple’s poor report was due to economic conditions, as well as the fact that the smartphone market appears to be saturated, which means that fewer people are buying new iPhones.

“In terms of do I think the smartphone market is mature, I think that the market, as you know, is currently not growing,” Cook said during a call with analysts to discuss Apple’s earnings report.

A research note from analysts at Stifel put those conditions in stark relief with one stat: At Verizon and AT&T, the two largest United States carriers, upgrade rates are at their lowest level since 2012.

Part of that might be the fact that Verizon and AT&T have moved away in the United States from a subsidy model which significantly discounts phones in return for a two-year contract. But some of the effect is definetely due the fact that it appears as if people are hanging onto their smartphones for longer.

From the note:

While we have only been able to calculate this on a VZ and AT&T basis, and thus we appreciate that this only represents a small portion of the global smartphone installed base (and thus our estimate of Apple’s +620M iPhone installed base exiting 2015), we are interested in this analysis as we gauge whether we are seeing a lengthening upgrade cycle and / or how this might set-up into the late-2016 iPhone 7 cycle.

Here are the charts:

Cook, however, seems confident that these conditions are not permanent, telling analysts, “this too shall pass.”

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