Apple Beats Estimates as iPhone Revenue Drops Below Fifty Percent

Posted on July 30, 2019 by Brad Sams in Apple with 41 Comments

Apple reported its earnings today for the second quarter of the calendar year and beat Wall St. expectations. The company had $53.8 billion in revenue and is projecting $61-64 billion in revenue for the upcoming quarter.

The big item to note during this latest quarter is that iPhone revenue, the company’s largest single product by a significant margin, has fallen below 50% of the company’s overall revenue. Apple stated that iPhone revenue came in at $25.99 billion for the quarter and that its services revenue of $11.46 billion during the same period.

Apple credits growth in wearables and strong performance with the iPad with helping push their revenue higher for the quarter. The company says that for the remainder of 2019, they will have new products and services for all of their platforms.

But the real news here is that Apple has found a way to successfully counter its slowing iPhone sales. Yes, the company still sells in the tens-of-millions of iPhones each quarter but the growth has stagnated. That’s not a knock against Apple but it simply means the phone has reached a saturation point where triple-digit growth, or even single-digit growth, is not sustainable.

Instead, the company’s other product lines, most notably the services side of the company, is helping to fill the growth gap that the iPhone has left behind. With the iPhone now accounts for less than 50% of the overall revenue, the company is lowering its exposure to a weakening sales pipeline for the hardware.

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Comments (41)

41 responses to “Apple Beats Estimates as iPhone Revenue Drops Below Fifty Percent”

  1. Thom77

    I believe this is earnings for the third quarter, not the second.

    In my world, successfully countering slowing Iphone sales would mean doing something to increase Iphone sales or at the very least, decrease the decline. You don't counter decrease in Iphone sales by pointing out your services is making money too. Thats not countering ... thats just spinning that even though product A is decreasing in sales, product B is making up for it (hypothetically).

    Also, I don't understand why a tech journalist would state a fact that even Apple does not deny, then proceed it defensively with "but I'm not knocking Apple." Will you inform us when you ARE, in fact, knocking Apple? The truth is that tech journalism, as a whole, is highly compromised, and although I am not accusing Brad of being compromised, comments like that does cast a shadow on his integrity at least for me who are suspicious of journalism in general, especially tech journalism concerning Apple, who has a history of blackballing people critical of them.

    And the last sentence, which is awkward by the way, seems to somehow try to spin that decrease in Iphone sales isnt all that bad, because at least Apple is lowering its exposure to weakening hardware pipelines. Again, this reeks of spin and I guarantee you that Apple would rather have increase Iphone sales and difficult hardware pipeline problems, then decreasing sales that they can easily supply hardware for.

  2. krisarthur

    I think this is huge... honestly I wasn't convinced they could come anywhere near this - I just don't see their iCloud offering iTunes, etc. that compelling. I do think this is surprising.

  3. melinau

    Predicted this years ago - Steve Jobs was smart enough to see that 'phones would go the way of PCs and sales would peak sometime. That time has come.

    Jobs was instrumental in the 'walled garden' approach to paid services which are now making the profits.

  4. wocowboy

    All cellphones from all manufacturers are, I think, reaching commodity status. They are all excellent devices capable of doing whatever the user wants and needs to do with little differentiation between them except in more exotic ways if that is the right word for it. The hundreds of tech YouTubers who breathlessly release daily videos about the latest cellphone rumors, "I ditched (name of phone) for (name of phone)", etc, are running out of material to hawk or complain about (and I could not be happier). The world is waiting for the next big tech thing, I have no idea what that is, but this is a mature market now.

  5. dcdevito

    Apple is joining Microsoft is becoming Wiley tech veterans who are learning to shift away from their cash cows (Windows and iPhone). It’s a bit surprising how quickly Apple is doing it though.

  6. chaad_losan

    We knew this would eventually happen. While I no longer use any of apple's hardware. The constant drum beat of constant growth is unsustainable for any company no matter how big. As long as they are making money it really should not matter if they fall 2%. Apple has so much cash that it could loose money for years and be in no trouble at all. The stock market's model of growth and more growth cannot work. This is why dell went private. They were sick of the market punishing them for even the slightest hint negative news that is not double digit growth. There is no long term planning anymore in the public sector. No one wants to hear about your long term plans. They just want to hear how you will make them millions over night.

  7. dontbeevil

    strange that this article is not wirtten by hassan

  8. truerock2

    I have a Windows PC I built in 2012: USB3, PCIe3, SATA3, etc.

    I'll probably build a new Windows PC when USB4, PCIE4, etc are well supported - 2021?

    Anyway, I bought an iPhone 7 from Apple a few months ago. I won't be buying a new iPhone anytime soon. I assume the smart phone market is well saturated.

    I will say this: if Apple delivered a new iPhone that was the same form factor as the iPhone 4, I would definitely buy it tomorrow. iPhones are much, much too big.

    • Jeffsters

      In reply to truerock2:

      Yeah you aren’t alone thinking that. I use my phone for everything now and don’t think I can go smaller but there are a lot of people that feel the same way you do! I wonder if these new CPU’s etc., require more power such that larger batteries are needed?

  9. dkrat

    Please just sell iMessage apps/services on non-iPhones!

  10. Kevin Bae

    Are they really lowering their exposure if their products and services are tied to declining hardware on which those products and services depend?

    • BigM72

      In reply to Kevin Bae:

      Declining hardware sales is not the same as install base and it's the latter that matters for services.

    • Jeffsters

      In reply to Kevin Bae:

      If you read the article again they point to other devices gaining traction and given Apple’s services are a natural attach to all they serve as a great bridge between today and what ever comes next. Like the surge after iMac, then iPod, then iPhone, what is that next thing and what do you do to lengthen the tail until it’s ready. Well run business, especially since for almost a decade between WinSite and here, all I read from the anti-Apple cabal is Apple is doomed and finished. It’s best days behind it. This even when Microsoft, another well run company, has largely given up on the consumer and moved to cloud services as the future.

      • digiguy

        In reply to Jeffsters:

        the concept of "next big thing" is tricky. Hardware wise, the only real big thing (that completely changed the business) was iphone and smartphones in general.

        And there is not going to be any next big thing for many years to come, at least for consumers.

        The real big thing of the past decades was the Internet. Microsoft took advantage of it with Windows and PC for around 15 years, then came smartphones. On the corporate side, cloud is also built on the Internet. There is a lot of talk among "experts" on what's next after smartphones and some were predicting 5 years ago that smartphones would be "the past" in 5 years. They are here to stay, maybe changing a bit, not always for the better, but here to stay.

      • jrickel96

        In reply to Jeffsters:

        I also suspect they will gain further traction with the iPad. iPadOS is a pretty substantial move for the tablets and makes them more useful. They also may begin to move the design from the iPad Pro down the line to go with USB-C, so I could see the iPad continuing to tick up for a while with people expanding services and also buying more licensed peripherals.

        Apple is diversifying their revenue and that puts them on more stable ground. They understand they are not going to get a lot of conquests, but they have a strong enough core that they don't need them with strong services growth, etc.

        • Stooks

          In reply to jrickel96:

          Until the iPad has real pointer support (mouse/trackpad) I do not see it really doing anything other than work the replacement cycle for 80% of current iPad owners.

          I have seen a lot of iPad sales early on in the corporate environment and the vast majority of them get little on no use, with many that just collect dust. My daughter is about to start college. Her university is part of some Apple learning program and every student gets a iPad with pencil (yes I am sure I pay for it). She got hers a few 3 weeks ago at her orientation weekend. She has yet to even power it up, but her new Lenovo T490 with touch screen that we bought her and received a week ago gets used daily.

          I also have little doubt that if iPhone sales really tank, Apple would open up all of its services to other platforms.

          • Jeffsters

            In reply to Stooks:

            Yeah...I’d like to see better mouse support but Apple will day you have that’s called a MacBook Air.

            • Stooks

              In reply to Jeffsters:

              If I am going to go with a laptop these days it wont be a Macbook. I have a 2017 15inch Macbook pro that I do not like using because of the keyboard. If they get rid of that keyboard in the future I might consider a new Macbook.

              The lure of the iPad with mouse/keyboard support is that I could use it traveling as a light weight, long battery life laptop replacement while on vacation or whatever. Use native apps much better with mouse/keyboard and use it to VPN/RDP into work desktop if I needed too. Without mouse support is it just not an option for that use case, and it remains a consumption device for me.

              • Jeffsters

                In reply to Stooks:

                I’m in the same boat on the keyboard. I get them free too for work yet I’ve kept my 2015 too. Word is this is changing. This keyboard will end up on the list with the hockey puck mouse that seemed like good idea but...

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