Here are my five key takeaways from today’s Apple’s Q1 2019 earnings call:
- iPhone sales were down 15%, mainly driven weak greater China sales. The company cited macro economic and foreign exchange fluctuations, a reduction in subsidies, and the battery replacement program as contributors to lower sales. This is an indicator that many consumers are holding onto their devices longer and that consumers do not want to pay full price for a ~$1k device. China revenues might also be down due to the straining US-China relationship and Chinese consumers buying habits changing accordingly.
- Apple indicated that the iPhone XR, XS Max, and XS were their top sellers for the quarter. In order to keep these flagship sales numbers high, Apple is ramping up its trade-in program. A trade-in device can be used to discount a newer device for consumers which may incentivize consumers to upgrade. This also allows the OEM to get more involved in the growing refurbished business.
- Services continue to grow although slightly lower than prior rates, now at 19% YoY. As seen in previous announcements and in its Q3 earnings call, the company wants to expand its service revenue to $14 billion by 2020. Services such as the Appstore, Apple Pay, iCloud, AppleCare, and Apple Music all are contributing towards service revenues. With 1.4 billion active devices, the company wants to increase the percentage of people opting for a service such as Apple Pay and Apple Music which are expanding into more markets. The company also has future plans to create more video content, more information to come soon.
- Wearables, home and accessories grew a strong 33%, with over 50% growth in wearables such as Airpods and Watch sales alone. Look for these areas to continue to see expansion as Apple goes further into the connected home space and builds out its ecosystem here.
- Lastly, we might see a strong push from Apple into the health and wellness space in the future. While nothing was indicated directly on the call, there were several qualitative comments made that might hint at some more developments coming our way. Just yesterday Apple and Aetna announced a new app called Attain that rewards healthy behavior through incentives such as a new Apple Watch. Users can track their exercise and sleep, while also signing up for nudges to take their medication on time or get an annual flu shot.
