Quick. Can you name where most of Apple’s revenue and profits come from these days? iPhone, right? What else? Well, the obvious ones– Mac and iPad. Those in the know point to Services as Apple’s new secret sauce.
Wrong. Apple’s latest financial results were strong across the board; everything Apple makes seems to make a boat load of money these days, and even with iPhone sales down, the company rolled in profits again. What’s new?
Wear Them Out
The morning after any Apple financial report brings out the analysis ad nauseam and nothing changed, but you have to dig a bit to see the secrets in Apple’s sauce. Jony Evans has a list of numbers that matter but got the focus wrong:
iPhones don’t matter anymore
Uh, wrong. iPhones matter, still matter, and will matter, even if Services is the fastest growing business group and brings in more money than iPad and Mac combined. Without hardware, Services will not prosper. iPhone matters.
iPhones will be the center of Apple’s super-private and ultra-secure ecosystem, but the neurotic desire to purchase a new one annually is going to shrink in favor of a more Earth-friendly (and, indeed, climate responsible) approach of getting the most out of the device you’ve already got.
Apple knew that, of course, and planned accordingly by raising prices on new gear, then allowing discounts from already inflated prices so customers who do upgrade feel good about the deal.
We’ll spend more for better, but want it to last
That does not apply to every smartphone, tablet, or PC customer on planet earth, but definitely to Apple’s customer base, now pushing 1.5-billion earthlings.
We’re more prepared to buy less, but pay more, if we are getting products that will last longer… Think iPhone rentals, upgrade programs, carrier subsidies and more.
Think subscription software, subscription music, subscription movies and TV shows, and even subscription hardware.
What’s the secret new ingredient in Apple’s sauce that Evans and most other Apple analysts and members of the technorati elite politburo overlooked?
More hardware. Nope, not iPhone, iPad, or Mac. Wearables.
Chance Miller saw it.
Apple says that the second quarter of 2019 marks the best non-holiday quarter ever for Apple Watch. In total, Apple’s wearables, home, and accessories category set a new March quarter record with $5.1 billion in revenue. That’s up from $3.94 billion in the year-ago quarter.
That makes Apple’s wearables segment bigger than iPad and almost as big as the Mac. Look at all the legs on Apple’s chair.
- $31.05 billion iPhone
- $11.45 billion: Services
- $5.51 billion: Mac
- $5.13 billion: Wearables, Home and Accessories
- $4.87 billion: iPad
Remember, that’s quarterly revenue, and a weak quarter at that; the one right after the big holiday shopping quarter. Even better than the details is how all those revenue and profit centers fit together.
Apple is a hardware company. It sells hardware. Yes, software and services are in the mix; as always. But now accessories, or put in a more trendy way, Wearables, is a big freakin’ business for Apple. Do the math.
iPhone, Services, Mac, Wearables, iPad.
Now you may begin to understand why AAPL is up again and moving toward the company’s all time high. The company keeps adding new secret ingredients to the sauce.