Apple Finally Reverses Years of Declining iPad Sales

Posted on August 2, 2017 by Paul Thurrott in iOS with 22 Comments

Apple Finally Reverses Years of Declining iPad Sales

It looks like Apple has finally found a way to reverse years of declining iPad sales: Lower the price.

As you may recall, iPad sales had been falling for over three straight years, or over 12 quarters. That’s almost half the lifetime of the device lineup. Or, as the Apple-friendly New York Times puts it, the iPad had been “struggling in recent quarters.”

No matter your grasp of reality, or your credibility in reporting the truth to readers, there’s no way around the fact that the iPad, viewed as the linchpin to the post-PC world, has indeed been struggling. And Apple has tried everything.

First, it rode the mini-tablet trend belatedly with the iPad mini, a version of the product that it is now ready to abandon. Then, it copied Surface Pro with its 12.9-inch iPad Pro, and when that went nowhere fast, it created a 9.7-inch version. And then a 10.5-inch version because they will get it right eventually.

But this past quarter, Apple finally found a recipe for success: It released a new version of its standard, 9.7-inch iPad. And this new iPad arrived with two major changes from previous iPads: It actually includes less sophisticated technology than its predecessors. And it cost significantly less.

Cue cash register sound.

For the quarter ending June 30, Apple reported, for the first time in over three years, that iPad unit sales had actually risen year-over-year. Apple sold 11.4 million iPads in the quarter, up 15 percent from the 10 million units it sold in the same quarter in 2016.

Revenue from iPad also rose: Apple reported $5 billion in iPad revenues this past quarter, up just 2 percent from the $4.9 billion it earned a year ago.

But Paul, you may argue, Apple has, in fact, released three new iPads this year. Not just the cheaper new base iPad, but also new 10.5- and 12.9-inch iPad Pro models too. Perhaps Apple’s Surface rip-offs contributed to this success as well?

Nah. Do the math and the conclusion is obvious: Apple sold many more iPads—1.4 million more, a jump of 15 percent—but its revenues only rose 2 percent. That means it made less on each iPad on average. Prices on iPad Pro actually went up with the new models. So the cheap new base iPad has weighed disproportionately on that business.

That’s a fact. But my belief is that this basic new iPad is the only iPad that is selling well, and that this business is still in trouble. After all, one of the prevailing theories out there is pro-Apple land (sadly, it’s not just the New York Times) is that Apple, and the market, are still trying to figure out what the replacement timeline looks like. And that customers will flock to new iPads in time.

But I think this is a one- or two-quarter phenomenon. And that sales will simply decline or limp along going forward. And the rationale here is simple: The iPad, put simply, is not necessary. Not in a world in which large screen phablets are preferred for consumption tasks, the iPad’s primary use case.

As for the “pro” market, the iPad Pro, even with iOS 11, continues to be a lackluster alternative to a PC, Mac, or Chromebook. And with good PCs and Chromebooks undercutting even the base iPad pricing, that trend will simply continue. The iPad Pro just isn’t competitive.

So congratulations, Apple, and welcome to the real world. As I wrote in March in Apple is Finally Competing on Price (Premium): “Competition has finally had its inevitable impact on even the mightiest of consumer electronics companies: Apple, suddenly, is competing on price. Just like a normal company.”


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Comments (22)

22 responses to “Apple Finally Reverses Years of Declining iPad Sales”

  1. Philotech Mueller

    No surprise. And I totally agree with Paul's interpretation of the results:

    Except for those precious few who indeed do use the iPad as a production device and (partial) replacement for a laptop (and who are usually getting from their big corporate), it still is a consumption device.

    I had an iPad 2 (sold), an original iPad mini (handed down to my kids, reaaallly long in the teeth now), but when I was looking for a replacement I got a Samsung tablet because all the iPads were way too expensive (Samsung isn't cheap per se, but for a time you could get great deals on the 10" S2 when everybody believed it was out for replacement, which didn't happen for a year or so).

    Now I got the 2017 iPad for my wife. For the first time in how many years a price that I could justify. As Paul says, Apple finally got it right. Probably their very last resort, because Apple always prefers adding features and increasing specs over reducing the price. I hope they will be going that route with their desktop and laptop computers too some time as my early 2009 iMac has been due for replacement for 3 years or so now...

  2. Darmok N Jalad

    iPad is far from a failure, and it has historically outsold Surface around 5:1. So a lower price version sold the best. It's hard to suggest that this is simply a given, as this only works if the product is actually desirable. Look no further than Surface RT, Surface 2, or Surface 3--all of which have either failed to survive at best or at worst cost MS millions, and most of those failed to sell at whatever price MS slapped on them. iPads are well built and their usage model allows them to last for a long time. The fact that people bought a bunch of them in a non-holiday quarter tells me that they are still useful to a lot of people. And I guess those "Apple sheep" aren't so foolhardy with their money after all and know a good deal when they see one.

    I'm still eying the 10.5 myself. Just biding my time, as I'm sure we'll see some decent holiday sales on them. I'll likely never buy another MS-branded device though. Been burned too many times. Every iPad I've had has stood the test of time, even the one with a cracked digitizer.

  3. disco_larry

    My iPad 3 finally died, and I replaced it with a $50 Amazon Fire HD 8. So it's not quite as nice, but for that price I really don't care. It does everything I did on my iPad, and I don't have a big fear of breaking it (which I did twice with the iPad) or losing it while traveling.

  4. Bdsrev

    A Chromebook with a detachable keyboard would embarrass the iPad Pro. When those come out later this year, those iPad Pros won't be looking very appealing

  5. skane2600

    I think the comparison between the iPad and Surface devices is pretty meaningless unless were are talking exclusively about Windows 10S. The Surface line (with the exception of 10S) , are full PCs with a thin tablet "coating" while iPads are all-out tablets. If you include Surface in the comparison, you should include all laptops and desktops running Windows as well. Historically it's the WinRT devices that were the logical competitors to the iPad.

  6. nbplopes

    "Apple’s Surface rip-offs ..."

    Bring on the violines ....

  7. Roger Ramjet

    The iPad is a great device for very light computing. Don't forget, this was the original device that Apple wanted in response to the Microsoft Windows CE(?) Tablets. It was a later realization that it would work on phones as well, and the phones that grew in size to phablets basically are homage to the iPad, which is fine. The reason it is not such a big seller or that it is not high growth is simply it's limited use case. Obviously it doesn't get beat up like a phone.

    That said, $4.9B or $5.0B (quarterly) are not numbers to sniff at, if they are done at good margins (the one thing you can point out is if revenues grew so marginally, for many more units, maybe profitability is actually falling? Apples comeback is probably they'll make it back in services, but that's a bird in the bush).

    Until Microsoft come up with credible ARM devices, this is just free lunch for Apple and Android, can't fill that light/"personal" computing (yes, this fits the meaning of "PC" better than the orginal PC) space with x86. I have both iPads, and Surface devices, so, this is a fact.

    Btw to beat a dead horse, the iPad/iPhone are overwhelming proof that the vision of making the product to fit the purpose rather than trying to extend the existing platform (e.g. iOS not compatible with MacOS vs Windows) was the correct one during that last inflection point. Obviously. Bill Gates & Steve Ballmer made a terrible mistake when they did otherwise. This is still the legacy around the neck of Microsoft today. Although it was based on learning the opposite lesson long ago when IBM lost it's hegemony.

    • Darmok N Jalad

      In reply to Roger Ramjet:

      Yes, Apple does see pretty good revenue from services, but then again, so does Microsoft, which is demonstrated by their support of competing platforms. The base iPad might be sold with little margin, but history has also show that iOS users are the most likely to actually spend money on apps, and many services offered by third-party vendors can also do so through the AppStore, where Apple gets a cut. The base iPad might be following the game console model.

      I think you're spot on with your analysis. MS has tried multiple times to wrangle Windows onto something better than the iPad. While they've managed to get the internals to a decent place, they've never gotten significant adoption of the touch environment from users. Touchscreen laptops have been around a long time, and essentially no support has grown in MS's version of the AppStore. That's not to say there's no value in such things for Windows, but the consumers aren't buying it.

  8. lvthunder

    It boggles my mind how selling 10 million units in 3 months puts that business in trouble.

  9. the_risner

    I suspect Apple's strategy with low-priced iPads is proliferation. Get a bunch of them out there until their potential is realized ... if ever.

    That said, I bought my first iPad (an iPad Pro 10.5) since the iPad 2. I chose it for drawing, though. Consumption is just a nice by-product. My young teen son just bought the low-cost iPad ... for simple consumption. We're in the Apple ecosystem (by careful choice, not fandom), so it makes sense to have devices that integrate with phones and PCs.

  10. 2ilent8cho

    I think anyone with half a brain can workout whats really going on. Even though iPad sales were declining every quarter for last few years it was only slightly, Apple has been consistently shifting around 10 million iPads every 3 months. That has been made up of mostly new iPad users, the majority of iPad users have not been upgrading to new ones.

    What is happening now and hence the increase in sales is Apple is still attracting new iPad customers but the iPad 2, 3 and 4 customers are starting to finally upgrade. Apple are now seriously eating into enterprise, but some people are just not noticing it. Walmart for example are about to deploy 19,000 iPads for staff training, you know full well 5 years ago these would have been 19,000 Windows computers, but not today.

    The iPad is far from the doom and gloom, it will have a very good future.

  11. Angusmatheson

    I am going to sounds like an Apple apologist, but I never understood the whole iPad is doomed. 1) I am amazed how the iPad dominates the tablet market - around me I see lots of iPads, a few kindle fires, and a very few surfaces (being used with keyboard). Stores that use a tablet for point of sale all have iPads. 2) they last a long time. We have an iPad 1 and iPad 3. They they used a ton - for Netflix, reading, and games. But haven't felt the need to buy new ones. These are ancient. Someday we will buy new ones, but because of the apps we bought I can't imagine we wouldn't buy iPads again. 3) all new programs are being written for iOS and android not for x86. The future of computing is iPad or iPad like devices running modern OSes. 4) it was Microsoft who went all in with windows 8 - a tablet interface for all PCs. Apple hasn't turned the mac into a big iPad in the same way. So falling iPad sales, a good sign? And we'll see if they continue to recover. But the iPad made tablet computing a common thing. And that changed the world.

  12. Bob Shutts

    iPad rules in the world of aviation. ForeFlight is an amazing app, and is iPad-only. Very popular in general aviation and in the professional area, esp. charters.

    In commercial aviation, you'll see an iPad by both the left and right seats. These can display airport diagrams and the route charts. They have replaced the heavy briefcase that the crew used to have to carry onboard.

  13. jimchamplin

    I have two iPads, one is the original retina version, and the other is the first retina mini. The one that’s a scaled down Air. The old 9.7” is starting to show its age. Locked at iOS 9, there are more and more newer pieces of software that won’t run on iOS 9.x and required 10 at least. Starting this fall, things will move forward again with 11.

    Then, I’ll start to feel like it NEEDS to be replaced. But it runs everything I have on it so well, still gets all day on a charge (but I leave it plugged in usually anyway) and offers no impediment to anything I want to do on it.

    I play a few games on there, a little browsing but mostly SMS and iMessage and lots of writing using Pages, as well as OneNote.

    The mini is is used the same way. I have a feeling that I’ll be using it for a while too. Might get a refurbished version of this year’s iPad in a couple of years. Who knows?

  14. harmjr

    I think people need to study how long users keep their mobile PHONES vs mobile TABLET. I feel the need to upgrade phones much sooner then I do a tablet. I have a Samsung Galaxy Note 8 android TABLET that came out in 2013. I have an ASUS VivoNote 8 Windows tablet that came out 2014. I am still using both and see no need to upgrade. They both work great. Why upgrade. Tablets are meant to support your phone or desktop computer experience they are not replacements. Lets be honest not everyone needs a Tablet. My Android tablet simply doubles as larger screen when I am too tired to read on my phone's screen remember the days of Large Print Readers Digest well that's what Tablets are to me. Tablets will never have the power the of the desktop or the mobility of the phone form factor. Understand that Android/iOS/Windwos Tablets are a bridge technology maybe this will change in the future but not anytime soon. Its not a dying market its a slow market. One other thing to keep in mind that their are no new cool features for tablets. Paul quit trying to kill Tablets.

    • jrickel96

      In reply to harmjr:

      I think this is exactly right. I know many people still happily rocking an iPad 2. The lower price on the iPad is an incentive to finally upgrade, but the iPads generally keep working well.

      Our phones get a lot more daily use, a lot more abuse, and have the carriers subsidizing them still through zero interest payment plans. I'm very likely to upgrade my iPhone 7+ in 6-8 months, but the iPad Pro 9.7 that I got last year is probably going to not get upgraded for a long, long time. Honestly, the same goes for my laptop. We are no longer getting massive leaps in speed, storage, etc that justifies a fast replacement cycle. That's why PC sales decline - coupled with having a lot more devices to do things on. They all cause the sense of urgency for an upgrade to lessen.

      Completely agree on them being a bridge. I think the mini tablets are definitely more of a dead end because phones have nearly matched their size, but the iPad at 9.7 inches or slightly larger is just about a perfect size for casual movie watching, light gaming, reading, etc. I have an iPhone, and iPad Pro, and a Spectre x360 15" laptop. I can think about what task I want to do before picking one up. Both the iPhone and iPad are LTE, so they are great on trips. Last trip I went on, I only used them. The laptop is great if I want to do work and there's no way I'd want to type for any length of time on the iPad or the iPhone, even with the foldable BT keyboard I have. The laptop is lightyears better if I want to do that or access non-mobile web sites. There's something to be said about the precision of a mouse pointer as well.

  15. Michael Miller

    There has always been a flavor of handwringing from Thurrott about Apple's IPAD sales. Even when IPAD sales have declined (quarter over quarter), they sell millions in a quarter, tens of millions in a year. Microsoft would love to have that type of volume. Apple dominates the tablet market; they always have and always will--no matter the Thurrott spin.

    • William Kempf

      In reply to Michael_Miller:

      It's not spin, and you're reading the wrong thing out of it. Paul also says the Surface line doesn't do well, and that's not just tablets. He's not knocking the iPad, he's pointing out that tablets (all tablets, iPad, Android and Windows) are not doing what the industry pundits predicted... replace the PC. Before you misinterpret that as well, he's not saying the PC isn't in decline either. What he says is replacing these devices is the "phablet". Interestingly, I think that's in decline as well, now. They've matured, and people are no longer replacing their phones every year to two years. I think we're settling into a period (again) where most people have a device the continue to use for years, rather than rushing to "upgrade" frequently.

  16. Jules Wombat

    And yet iPad sales outstrip the entire Surface range by a long long range. This smells of sour grapes from a die hard Windows Desktop PC users.

    BTW I Love my Surface Pro 4, But My cheap Fusion5 Windows Tablet exposes what a horrible W10 experience on low end Intel Atom devices. If Tablets are for consumers, then Windows 10 is really poor platform.

  17. red.radar

    curious how the kindle fire devices are doing.

    could be another data point to add color to the story.

  18. hrlngrv

    s/out there is pro-Apple land/out there in pro-Apple land/

  19. Darmok N Jalad

    There is a report out there that said the average sale price of an iPad during this quarter was $1 less than the previous quarter. That suggests that the more expensive iPads managed to offset the price of the now cheaper base iPad. I'd post the link but the comment system won't let me.