Apple’s Q3 2019 results: Evolving from the iPhone to Wearables and Services

Apple’s newest quarterly outcomes are in, and they’re precisely what you’d anticipate: the portrait of an organization that’s massively worthwhile and profitable, however whose essential product is lagging behind whereas new product strains are rising simply quick sufficient to make up the distinction. I assume we yawn at $53.eight billion in income lately—that’s a file for Apple’s sleepy third fiscal quarter, however up just one % over final yr’s file third quarter.

As all the time, the satan’s in the particulars—and fortuitously for us, Apple CEO Tim Cook and CFO Luca Maestri spend an hour on the telephone as soon as 1 / 4 to present a couple of little particulars—or as they like to say on these calls, “more color”—that may assist us perceive the present state of Apple’s enterprise, or at the least how Apple execs need to characterize that enterprise.

iPhone dips underneath 50 %

If there’s a single quantity to stroll away with from this quarter’s outcomes, it’s that the iPhone represented lower than half of Apple’s general income for the first time in seven years. The remainder of Apple’s enterprise is booming—income for the quarter was up 17 % when you don’t embrace the iPhone, which is not something you should really do.

Apple’s executives would really like you to discover that this quarter iPhone gross sales had been solely down 12 % versus the year-ago quarter, as opposed to final quarter’s 17 % drop. So iPhone gross sales are down, however much less down than they had been? It’s not the strongest story.

The reality is, the iPhone is now trying like a cyclical enterprise, the place gross sales shoot by the roof when there’s a serious change in design, and then gross sales simply glide downward till three years later when there’s one other main change. Now, needless to say Apple nonetheless generated 26 billion {dollars} in iPhone income—even with gross sales sliding, the iPhone is a gigantic, worthwhile enterprise. But it’s such an enormous a part of Apple’s enterprise that it dominates how the firm is evaluated. And barring an enormous change in iPhone design this yr or subsequent, that is possible to be the manner issues are for the foreseeable future.

The rise of the relaxation

For the previous few years, Apple has been speaking to everybody who would hear about the completely wonderful progress fee of its nascent Services class. And so it’s value speaking about the quickest rising a part of Apple’s enterprise… Wearables?

Yes, it’s true. While Services continues to be rising quickly—it was up 13 % over final yr’s quarter—it’s not the quickest mover in Apple’s portfolio. That’s the class previously generally known as Other, and just lately relabeled as Wearable/Home/Accessories. The dwelling of Apple Watch and AirPods has seen 10 straight quarters of double-digit proportion progress. After seven straight quarters with progress percentages in the 30s, the class income shot up 48 % this quarter.

Apple says that the wearables portion of the enterprise was truly up “well over 50 percent”,…