CEO Defends Apple's Future Against Skeptics -- Despite First Revenue Drop in 13 Years

Apple CEO Tim Cook tried to allay investor concerns that the iPhone’s best days are over during a disappointing second-quarter earnings call Tuesday.

Cook repeatedly hammered home his optimism about the future of the iPhone market, despite reporting Apple’s first revenue drop since 2003.

’The market is currently not growing; however, my view is that’s an overhang of macroeconomic environments in many places of the world,’ Cook told analysts on the earnings call. ’We’re very optimistic that this too shall pass and that the market, and Apple, will grow again.’

[Related: Apple Earnings Preview: 5 Issues Partners Want CEO Tim Cook To Address]

The Cupertino, Calif.-based company reported fiscal second-quarter earnings of $1.90 per share on $50.56 billion in revenue -- a 13 percent drop year over year from the same quarter in 2015.

That’s also below Wall Street expectation of $2 a share on $51.97 billion in revenue, according to Thomson Reuters.

In the second quarter, iPhone shipments dropped 16 percent from the same period last year -- but Cook defended the iPhone lineup, arguing that upgrade cycles are positive compared with the iPhone 5s, switchover rates for new Apple customers from other platforms are high, and the smartphones still see mobile sales opportunities in lucrative emerging markets.

’We look at the three places that iPhone sales are coming from -- from an upgrade point of view, we compare favorably and slightly better than the upgrade cycle on the iPhone 5s. … As we look at switchers, we have traction there,’ he said. ’And for emerging markets, we’re placing incredible emphasis in areas where it’s clear there will be growth.’

It may be difficult for Apple to repeat history and top the $18.4 billion record quarterly profit it posted in the fiscal first quarter (ended Dec. 26), but for channel partners, Apple products such as Macs and iPhones are still selling, and that's what matters.

’It has been pretty much business as usual. … The products are selling,’ said Stephen Monteros, vice president of business development and strategic initiatives at Sigmanet, an Ontario, Calif.-based Apple partner. ’Most of the buzz right now is in the data center arena and hybrid cloud.’

Michael Oh, chief technology officer and founder of TSP, a Boston-based Apple partner, said Apple’s reaction in the coming year to how it approaches its smartphone market is critical.

’How will Apple react? Do they work on premium pricing or do they make more moves to get more people in the Android world looking to spend less than a top-end iPhone?’ Oh asked. ’The [smaller] iPhone 5se arguably is one way to do that. I don’t really think there’s much overall that Apple can do to change [iPhone product sales growth declines]. … They’re just reaching a saturation point.’

Continuing to attract new customers may also be difficult in a saturated, mature smartphone market overall. According to research firm IDC, regional mature markets like the U.S., China and Western Europe hit single-digit growth in 2015, marking a mature market slowdown that could have serious consequences for Apple.

Despite the smartphone market saturation, Apple has continued releasing iPhones -- in March, it unveiled the 4-inch iPhone 5se for developing markets, while in September it released the upgraded iPhone 6s and Phone 6s Plus.

Apple product sales also dropped across the company’s portfolio: iPad sales fell 19 percent and Mac sales dropped 12 percent from the same quarter last year.

Apple shares were down 8 percent in early after-hours trading, dropping to $96.67.