While many observers would describe 2016 as a good year for Apple, it turns out that it was not good enough. In fact, the company missed many of its internal targets and several key executives were forced to take a pay cut. Fortunately for them, the miss has done little to curtail the company’s share price which was trading near five-year highs on Friday afternoon at $118.

Based on regulatory filings, Apple posted sales of just under $216 billion for 2016, with a net operating profit of $60 billion. While this might not seem too shabby, the filings noted that this was below internal targets for the company – these targets have not been released to the public.

Some analysts believe reasons for the miss include lower than expected sales of the Apple Watch and consumer apathy towards the iPhone. The phone was a big deal when it was first released in January 2007, but since then consumers have come to take it for granted.

Another issue is the increased competition in the smartphone space.  While the iPhone revolutionized the category, leading the eventual exit of Blackberry and Nokia, the space has become increasingly commoditized.  This has impacted Apple’s market share and today Samsung holds the upper hand in the global smartphone market.

The importance of the iPhone to Apple’s success cannot be underestimated.  The product catapulted the company to become the most valuable company by market capitalization. It is also an extremely profitable product line and this has helped Apple to post quarterly profit numbers which smashed records for public companies anywhere.

The iPhone’s magic has begun to wane in recent years and in 2016 sales fell by nearly 8 percent. This represented a nearly 28 percent reversal from 2016 sales growth and was the first-time Apple sales had dropped in 15 years.

In statements regarding the cut in executive pay, the company noted that 2015 was a ‘record-breaking year’ and that performance for 2016 was ‘below the target performance goals set by the Compensation Committee’.

While this meant that top executives would receive a pay cut, their overall compensation remained hefty. The filings noted that Apple CEO, Tim Cook, was due to receive nearly $8.7 million including salary and bonuses. Not bad for a year’s work and Mr. Cook benefited from more than $130 million in stock options vesting last year – stock options are a big part of compensation at Apple.

In the end, 2016 remained a good year for Apple and the company remains tremendously profitable. In addition, the company has nearly $53 billion in free cash flow on hand.  Given this envious position, it is highly likely that Apple will begin committing some of this case to develop new products or services to expand its reach.  Some possibilities include a major push into China or the enterprise market in the U.S.  Some analysts have also speculated that Apple might pursue investments in services or entertainment as this would be a logical extension of its current portfolio.

December was a banner month for Apple’s App Store both in the U.S. and in China. When talking to Verge on Wednesday, Phil Schiller, Senior Vice President of Worldwide Marketing at Apple, noted the App Store has more than $3 billion in review in December alone. This total included subscription fees, in-app purchases, and paid downloads. 2016 was a big year for the App Store. Revenue for the year was up nearly 40 percent over 2015. But December’s tally of $3 billion total represented a big chunk of the $20 billion collected last year.

It turns out the U.S. was not the only growth market for the App Store in December. According to reports, the App Store for the mainland China market was up roughly 90 percent from December 2015. The growth highlights an important opportunity for Apple which has long sought to gain inroads in the fast-developing market with more than 1 billion potential users.

Apple’s path to success in China has been an arduous one and even with the App Store growth the company still has a way to go. One of the challenges has been battery issues which first popped up on Chinese social media last year. Another challenge is how Apple can supplant the dominance of local handset makers – many of whom are now beginning to compete with the company on a global stage.

In the end, the growth of App Store revenue has a tremendous impact on the company’s top, and bottom, lines. Analysts believe the App Store helped to add anywhere between $4 to $8.6 billion in revenue in 2016 alone – the variance is due to licensing fees, etc. This does not consider the carried interest which Apple generates from the massive overnight balances it carries on the fees it collects from users.

Granted, the clear majority of apps are free but in-app purchases have become increasingly commonplace. Another revenue generation opportunity are fees collected for subscriptions, such as the streaming of music and sports content among other things.

Looking back at 2016, it was not surprising that Pokémon Go was the most downloaded app of the year. The app took off like a rocket in June, breaking records for downloads.  While it has set an interesting precedent for Augmented Reality (AR) app in gaming and in other categories, active daily users have waned in recent months.

In some ways, this is to be expected as the groundswell which propelled the app last summer was likely to burn out after a while. However, the game remains one of the most downloaded apps and is should remain popular for the foreseeable future.

Speaking on the future of the App Store, Mr. Schiller noted that the company is also focusing on targeted advertising and search suggestions. Not only will this help app developers to gain exposure, but it is a way to continue revenue growth.

Shares of Apple were up 0.44 percent in morning trade on Thursday at $116.54.