Apple Moves Into Post-iPhone Era As Contribution To Revenues Drops

Apple made a symbolic stride into the company’s ‘post iPhone’ era with the publication of a set of quarterly earnings that showed that sales of iconic smartphones accounted for less than 50% of its revenues. It’s the first time in seven years that has been the case and as recently as last year iPhone sales accounted for 70% of Apple’s gross sales.

Apple was determined to paint the development as positive evolution – the company having successfully diversified away from over-reliance on the iPhone. And that is not a way of looking at things that encountered too much resistance among market observers and analysts. Thomas Cooke, a professor of business at Georgetown University summed that up with a quote published by The Financial Times:

“They have diversified themselves in such a way that the iPhone is not so critical. It used to be, ‘tell me how many iPhone units were sold’, and that was it. Now it’s, ‘tell me about the iPhone — but tell me about all the rest’.”

And despite a 12% decline in iPhone revenues compared to the company’s third quarter last year, overall revenues were up 1% to $53.8 billion. That was ahead of analyst forecasts and demonstrated the growing strength of other revenues streams. Wearables showed particularly impressive growth, up 48%, with the AirPods earphones proving a big hit and Apple Watch sales also growing.

Sales in China have also proven more robust than expected, with the region dragging on performance over recent quarters. The U.S.-China trade war has taken something of the shine off the Apple brand in the eyes of Chinese consumers and domestic competitors such as the flagship Huawei smartphone models closing the quality gap has also had an impact on sales. But the worst impact now seems to have already been felt with sales in Greater China down just 4% compared to 22% over the previous quarter. This actually amounted to a modest increase in dollar-denominated revenues with the recent cut in VAT in China, part of the government’s most recent stimulus package, a helping hand.

Analysts are not unconcerned by slowing iPhone sales – particularly the trend towards users upgrading their model less frequently. But as long as the company keeps them within the Apple ‘ecosystem’, there is hope its growing income from the various services attached to that, music, TV, apps and new impending arrivals such as video game streaming service Apple Arcade, will compensate. Revenue from services maintained its recently positive trajectory with an 13% gain.

Revenues were up pretty much across the board outside of iPhone sales and even Mac computer and iPad sales, which might have been feared vulnerable, were up 11% and 8% respectively. Overall non-iPhone revenues had 17% growth. The report signed off on a strong point with Q4 revenues forward guidance set at $61-$64 billion, ahead of the analyst forecast for $61 billion.

Apple still has plenty of work to do if the transition from being ‘the iPhone company’ to ‘Apple’ again is to go smoothly. But there are at least signs that might be more achievable than it recently looked.