Apple is finally moving beyond the iPhone as the smartphone industry stalls out

KEY POINTS

  • The percentage of Apple’s total sales coming from iPhone was down this past quarter.
  • Apple does have two quickly growing product lines: Wearables and online services.
  • Apple is proving that it can increasingly sell additional gadgets and software to its installed base of 900 million active iPhones.

At the same time, the iPhone is becoming less important to Apple’s total sales as the smartphone industry stalls globally.

iPhone revenue accounted for 53.5% of Apple’s revenue for the company’s fiscal second quarter, which it reported on Tuesday. Last year, during the same quarter, iPhones sales were 61.4% of sales, and in the most recent quarter that ended in December, it accounted for 61.7% of Apple’s total sales.

The smaller share of iPhone revenue indicates that Apple is getting more skilled at selling other hardware and software products to its installed base of 900 million iPhone users.

Part of the iPhone’s diminished importance on Apple’s balance sheet can be attributed to sales shrinkage. iPhone revenue was also down 17.33% year-over-year.

But part of it can be attributed to growth in other categories.
Apple CEO Tim Cook also highlighted two big and growing businesses during a call with analysts: Apple’s Services revenue, which includes subscriptions like Apple Music and iCloud, and Apple’s Wearables business, which includes hardware products such as AirPods and the Apple Watch.

“It was our best quarter ever for services, with revenue reaching $11.5 billion,” Cook said. Services revenue was up 16% from $9.19 billion in sales the same period last year. Apple has been emphasizing its services business as iPhone sales stall, and held an event in March to launch four new services, including two new video services and a credit card.

Wedbush analyst Dan Ives estimated that Apple’s streaming services could sign up as many as 100 million customers over the next three years.

Apple also had success with what it calls its “wearables” business, which includes AirPods, Apple Watch and Beats headphones.

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