Earlier this week, Apple released its FY Q4 earnings during its regular earnings call and reported a 9% decline in iPhone sales. While under normal circumstance this would be cause for concern, it’s becoming clear that iPhone sales will no longer be the deciding factor in the overall health of the company.
By the Numbers
Despite the “disappointing” iPhone numbers (iPhone sales netted $33 billion in revenue), Apple still saw a 17% uptick in revenue totaling $64 billion, closing out the year with $118 billion or $17 billion in growth. If you’re wondering how Apple managed to pull this bit of accounting magic the answer is simple – iPhone sales being down will matter less and less in 2020 and beyond.
One of the main reasons that Apple is less reliant on iPhone sales has been its success with Wearables. In Q4, Apple posted $6.4 billion in revenue coming from their wearables and home accessories product category – a category that includes not just the Apple Watch but Apple AirPods as well. The real news here is that Apple has found a hit product category that will keep people coming back for more and it isn’t the iPhone for a change.
Services, Services, Services
The biggest piece of insight this past quarter’s earnings call provides is the pivot to services from what’s been a product-oriented company. Apple’s September event highlighted the iPhone but made very clear that the iPhone was simply a delivery method for their actual product – Subscription Services. With Apple Arcade and Apple TV+ joining Apple Music, Apple is positioning itself as a serious distribution network for content. So much so, that in Q4, services amassed to nearly 20% of their total quarterly revenue.
The iPhone No Longer Matters And That’s Okay
For the layperson, the yearly iPhone release will still get us amped and checking social media for all the hot takes. For investors, the iPhone will matter less and less as Apple signals that its long term interests are in repeat revenue in subscription services and a not so subtle hint that it may be entering the health and wellness sector. In fact, there are only two companies today that can make a serious push into the space with both the amount of capital needed as well as positive public perception on their handling of customer privacy. As the tech space begins to move away from devices, Apple’s future is looking bright – with or without a new handset.
