The iPhone now makes up less than half of Apple’s revenues. This improved diversification may help investors feel more confident about Apple’s future.
The iPhone is still the most important Apple product. It’s clear that this hand-held device gets more attention than the Mac, iPad or any other Apple product. There’s a good reason for this — it’s their most popular product. The iPhone pulled Apple from relative obscurity into an obsession.
For a long time, Apple critics have warned investors that they’re putting all of their eggs in one basket. Business cycles, competition and other factors can eat away at iPhone purchases. With nothing to fall back on, Apple could quickly become another tombstone in the ever-growing Silicon Valley graveyard.
Apple recently reported 2019 third quarter earnings that beat their own guidance and analysts’ expectations. With $53.8 billion in revenues and earnings per share of $2.18, they had the biggest June quarter ever.
Tim Cook reported that this quarter saw the biggest increase in services. The services vertical earned $11.46 billion in revenue. This is very important, as services provide a steady revenue stream. Customers may buy an iPhone every one to five years, but they use services every day, and more importantly, they pay for them every month.
Apple will be launching two new services in the fall — Apple TV+ and Apple Arcade. The much-anticipated Apple credit card will launch at the end of the summer, further adding to Apple’s non-iPhone revenues.
Wearables also grew revenues in the third quarter. Apple’s second generation AirPods have been a huge success.
It’s still hard to say if Apple is a safe bet for investors. While some indications show that we’re in a stellar economy, the labor participation rate and corporate debt indicate otherwise. Investors may be weary of buying Apple stock at the height of a business cycle. No one knows what the future will hold for Apple, but weening themselves off of iPhone revenues is key to their success.
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