In Depth

How Apple continues to grow despite declining iPhone sales

Smartphone now accounts for less than 50% of the tech giant’s revenue

Apple revenues are continuing to climb despite a drastic drop in iPhone sales. 

The tech giant has posted a 1% increase in revenue to $53.8bn (£44.2bn) for its third financial quarter, narrowly beating the $53.4bn (£43.9bn) forecast by Wall Street analysts, the Financial Times reports.

Although net profit dropped by 12.8% to $10bn (£8.2bn), shares in the company jumped by over 4% in after-hours trading, the newspaper notes. As of 10am UK time, Apple shares were worth $208.78 (£171.67).

It means that Apple is closing in on a market capitalisation in excess of $1trn (£820bn). It’s a feat the company initially achieved exactly a year ago, though lacklustre sales of the current iPhone XS and XR range saw share prices tumble towards the end of 2018 and into the new year. 

So what’s driving sales?

Today’s report suggests that Apple is no longer relying on the once-dominant iPhone to bolster its quarterly earnings.

For the first time since 2012, iPhone sales constitute less than 50% of the company’s overall sales, the BBC says. Device sales dropped by $741m (£609m) year-on-year for the quarter that ended on 29 June.

While iPhone sales are “continuing to shrink”, the BBC’s Dave Lee says Apple’s revenues have been bolstered “thanks to booming success with its Wearables, Home and Accessories category”. 

These include products such as the Apple Watch, HomePod smart speaker, Apple TV (pictured top) and wireless AirPod earphones.

Services such as Apple Music and App Store sales have been particularly lucrative for the company. According to TechRadar, more than 20% of Apple’s net sales for its third quarter were from services.  

“Outside of the iPhone, the company is growing at 17%,” Apple’s finance chief Luca Maestri told the FT. 

“When you combine services and wearables, categories that almost didn’t exist a few years ago, you combine those two businesses and they are already approaching the size of a Fortune 50 company, growing in strong double-digits,” he said. 

The focus on services won’t come at the expense of the company’s hardware ambitions, insists Apple CEO Tim Cook.

He says the company has its “strongest hardware portfolio ever and we have new products on the way”, The Daily Telegraph reports. 

How are its rivals faring?

Samsung, one of Apple’s fiercest rivals in the tech world, has endured a more difficult financial quarter. 

It posted a 56% drop in profits during its most recent quarter, bringing total gains down to 6.6trn won (£4.6bn), which is the lowest point since the Galaxy Note 7 fire fiasco in 2016, The Verge reports.

Huawei, meanwhile, fared significantly better than its rivals. The Chinese tech giant recorded net profit margins of 8.7% for its recent financial quarter, despite “facing political headwinds”, CNBC notes. 

The company was blacklisted by Donald Trump in May over fears the company may be “providing a back door for Chinese intelligence agencies to eavesdrop on communications”, The Sunday Times reports. 

But Huawei is hugely popular in its home market, a region that both Apple and Samsung have struggled with in recent years owing to the rising cost of their products.

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