Apple posted a mixed set of Q1 FY 2016 earnings amid economic softness in China, a tepid uptake for its latest iPhone 6S and FX headwinds. iPhone shipments grew by just 0.4% year-over-year, marking the weakest sales growth since the device’s launch, and Apple expects shipments to actually decline during the Q2. Apple’s other products didn’t fare too well either, with iPad shipments dropping 25% and shipments of the Mac, which has been a recent source of growth, dropping by about 3%. While the quarterly numbers could signal the end of an era of super-growth for Apple, investors should find some comfort in the fact that the company’s margin focus remain largely intact. Apple’s gross margins were up slightly to 40.1% (39.7% adjusted for revenue from patent infringement settlement), while net profits grew by 2%, despite significant currency headwinds – revenue growth would have been 6% higher if not for currency effects. In this note, we take a look at how Apple is managing its margins despite the industry and macro weakness.

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