Apple’s latest financial results always show more than revenue and profits and a record stock price. Good news was everywhere, right? Record numbers all over the place.
CEO Tim Cook:
We’re thrilled to report Apple’s best June quarter ever, and our fourth consecutive quarter of double-digit revenue growth. Our Q3 results were driven by continued strong sales of iPhone, Services and Wearables, and we are very excited about the products and services in our pipeline.
Wearables is a thing now. Think Beats and Watch and AirPods, Oh My! Services is a a bigger story but masks a bigger problem. How so?
Apple is a hardware company. Revenue and profits come from hardware. Customers buy hardware. Wait. Apple’s Services group– Apple Care, App Store apps, Apple Music, Apple Pay, et al– is the fastest growing business segment.
So, what’s the problem?
Hardware unit sales are not growing. Check Apple’s Q3 Data Summary PDF and you’ll see the issue more clearly. Unit sales of iPhone, Mac, and iPad have stalled. Every quarter for the past few years is the same. Unit sales are going nowhere fast.
Unit sales for iPhone and iPad, with a total customer base that exceeds 1-billion, were up 1-percent. Mac sales units were down 13-percent. Apple wrings more money from the iPhone customer base, thanks to App Store app sales that dwarf Google’s play store, despite Android’s customer base that doubles Apple’s iOS customer base.
Apple’s hardware sales are not growing.
Actually, the base is growing in total numbers because many of Apple’s sales are to new customers, but the base is not upgrading their hardware purchases as frequently as in the past. It’s that growing total customer base which helps to push the Services segment to ever greater revenue and profits, but Apple remains a hardware company and none of the major lines of hardware products are growing in number each year.
Apple has turned inward and sells new Services products to the current installed base, which is growing, albeit far less than in years past. Guesstimates put the Mac customer base at 100-million; the iPad customer base at nearly 300-million, and iPhone at nearly 1-billion. The total is a staggering number, but even the most recent financials do not highlight the problem.
Apple hasn’t had a market disruption product since Steve Jobs died in 2011. Since then, Apple has focused on selling to the installed user base– more accessories (wearables) and more Services products (Apple Music, App Store apps, et al).
That predicament is dangerous for the future.