Apple's iPhone sales down 13% in Q3, accounts for less than half of total revenues

AppleInsider

In a continuing downward trend, Apple's iPhone revenue was down 13% year-over-year, according to Apple's recently released earnings report, with the segment now accounting for less than half of the company's total quarterly revenue.

Apple released earnings for its third fiscal quarter of 2019 after the close of trading on Tuesday. This quarter historically is the slowest in terms of sales as customers anticipate the release of the new iPhones, expected to debut at a special event in September.

As with the past three quarters, iPhone revenue suffered a year-over-year decline. Apple did see a decrease in sales in China year over year -- dropping $300 million compared to this quarter last year, but it was offset by growth in nearly every other geographical region.

Cook made note that Apple has experienced better year-over-year growth in China than in the last two quarters. This is largely due to government stimulus in the form of VAT decreases, pricing action, trading, and growing engagement in mainland China. The App Store in China has been the driving force behind Services growth.

There was a silver lining to this quarter's iPhone results, however, as Cook said sales in retail and online stores returned to growth on a year-over-year basis. Further, the handset's active install base reached a new all-time high and was up from the same time last year in Apple's top 20 markets, Cook said.

Apple no longer provides iPhone unit sales, leaving only revenue figures to provide insight to iPhone performance.

While Apple has suffered reduced iPhone sales this quarter, it saw substantial growth in both wearables as well as services such as Apple News+ and Apple TV.

anantksundaram

In the long run, this is a good thing. Apple had way too much dependence on the iPhone.

macpro

This is, in fact, fabulous news.  It means no 'One Trick Pony' crap from the media (haha as if that won't stop), Apple is this doing this well with their many-legged stool folks.

avon b7

MacPro said:

This is, in fact, fabulous news.  It means no 'One Trick Pony' crap from the media (haha as if that won't stop), Apple is this doing this well with their many-legged stool folks.

I wouldn't call it fabulous news. Three years of flat sales followed by three consecutive quarters with YoY declines is worrying seeing as iPhone still represents a huge chunk of revenues.

However, you are very right that those other areas are providing a safety net of sorts and giving the company more balance.

Clearly China, a key market, has taken a hit for obvious reasons but the iPhone question for many will be: has the worst passed? And what does that mean? Is iPhone likely to regain it's more than 50% slice of revenues or are sub 50% numbers the new norm? Perhaps barring the blowout quarter.

edited July 2019

spamsandwich

anantksundaram said:

In the long run, this is a good thing. Apple had way too much dependence on the iPhone.

Agree. And by the way, AAPL up 4%(!) in after hours trading!

ireland

Maybe reducing the prices a bit so people can afford an iPhone would be a start. The average phone buyer can’t afford to give $10M to marine research, Schiller. Most people struggle financially. Wish they weren’t so greedy. Base storage model XS at $999 is ridiculous.

edited July 2019

steven n.

ireland said:

Maybe reducing the prices a bit so people can afford an iPhone would be a start. The average phone buyer can’t afford to give $10M to marine research, Schiller. Most people struggle financially. Wish they weren’t so greedy. Base storage model XS at $999 is ridiculous.

Are you saying people can’t afford an iPhone? Why get the XS and not an XR? Do you have a trade in?

This is just another everything should be free type of mindset. People have a choice to buy or not buy and based on these numbers (remember, overall cell phones are in harvest), people are buying. 

melgross

I don’t know where to put this, but on the conference call, Cook said that they were going to build the Mac Pro here. I’d like to see some follow up on that. No one asked a question about it when he made that revelation, but it was surprising. It was in conjunction with a short discussion about where Apple parts and materials are sourced, and where they’re assembled, though not much about the latter.

edited July 2019

80s_apple_guy

steven n. said:

» show previous quotes

ireland said:

Maybe reducing the prices a bit so people can afford an iPhone would be a start. The average phone buyer can’t afford to give $10M to marine research, Schiller. Most people struggle financially. Wish they weren’t so greedy. Base storage model XS at $999 is ridiculous.

Are you saying people can’t afford an iPhone? Why get the XS and not an XR? Do you have a trade in?

This is just another everything should be free type of mindset. People have a choice to buy or not buy and based on these numbers (remember, overall cell phones are in harvest), people are buying. 

There is a major difference between wanting free things and the price increases over the last few years. 4 years ago the top iPhone was $649 IIRC. That's a huge jump. Yes I know there's more tech in the phones but Apple hasn't dropped pricing on storage which is much cheaper etc. There is a balance. 

Of course majority of the product means less sales anyway. Maybe Apple needs to switch to a new phone cycle of two years. They've do fast now the difference between a X and XS and by most indications XI is so small who wants shell our another $1100-1500

edited July 2019

entropys

steven n. said:

» show previous quotes

ireland said:

Maybe reducing the prices a bit so people can afford an iPhone would be a start. The average phone buyer can’t afford to give $10M to marine research, Schiller. Most people struggle financially. Wish they weren’t so greedy. Base storage model XS at $999 is ridiculous.

Are you saying people can’t afford an iPhone? Why get the XS and not an XR? Do you have a trade in?

This is just another everything should be free type of mindset. People have a choice to buy or not buy and based on these numbers (remember, overall cell phones are in harvest), people are buying. 

Clearly the decline in iPhone revenue shows in fact less people are buying, particularly as ASP is up this year. And I didn’t see where Ireland said he wanted it for free. would his position meaningfully change if he had said XR rather than XS? Don’t verbal him because that is a very ordinary argument and suggests as you can’t factually rebut him, you just make stuff up.

The iPhone sales are the only poor* bit in this report, wearables are rocketing up, Apple actually updating macs means they are up too, and services are growing, which TBH I have mixed feelings about.

* “poor” is probably overegging things, but it is a decline, the third quarter in a row. Not great.

edited July 2019

mike wuerthele

melgross said:

I don’t know where to put this, but on the conference call, Cook said that they were going to build the Mac Pro here. I’d like to see some follow up on that. No one asked a question about it when he made that revelation, but it was surprising. It was in conjunction with a short discussion about where Apple parts and materials are sourced, and where they’re assembled, though not much about the latter.

To be specific, he said that they'd like to make the Mac Pro here. Not that they were going to.

We've got some questions out.

spamsandwich

melgross said:

I don’t know where to put this, but on the conference call, Cook said that they were going to build the Mac Pro here. I’d like to see some follow up on that. No one asked a question about it when he made that revelation, but it was surprising. It was in conjunction with a short discussion about where Apple parts and materials are sourced, and where they’re assembled, though not much about the latter.

That would be good news. Whether it makes financial sense at this moment or not, Apple needs to wean themselves off of China manufacturing. Such overreliance on China is a long term loser until such a time as China is willing to actually open their own markets and obey WTO rules.

melgross

If you noticed what was said, and there are charts to back this up, the only real problem in a major market region was China. Sales in Europe were pretty much flat, but everywhere else, other than China, they were up. I do agree, as one whose family buys a new top iPhone model every two years, that prices have risen a bit too much. Believe it or not, it’s that top 10% in in price that can hurt the most. But sales in China were most heavily impacted by the action against, first, Huawei’s CTO, unheard of previously, the shutdown of Huawei’s access to American goods, which since has been relaxed, and Trump’s trade war. The Chinese government, through government owned/controlled media outlets has harangued the increasingly nationalistic Chinese public, to not buy foreign, particularly American, goods in favor of Chinese ones. Large organizations were even fining people for buying Apple phones instead of Huawei models. I don’t know if they’re still doing that.

edited July 2019

spamsandwich

melgross said:

If you noticed what was said, and there are charts to back this up, the only real problem in a major market region was China. Sales in Europe were pretty much flat, but everywhere else, other than China, they were up. I do agree, as one whose family buys a new top iPhone model every two years, that prices have risen a bit too much. Believe it or not, it’s that top 10% in in price that can hurt the most. But sales in China were most heavily impacted by the action against, first, Huawei’s CTO, unheard of previously, the shutdown of Huawei’s access to American goods, which since has been relaxed, and Trump’s trade war. The Chinese government, through government owned/controlled media outlets has harangued the increasingly nationalistic Chinese public, to not buy foreign, particularly American, goods in favor of Chinese ones. Large organizations were even fining people for buying Apple phones instead of Huawei models. I don’t know if they’re still doing that.

And the economic ruin that awaits China would end tomorrow if they’d simply stop acting like and expecting the benefits of being a growing third world country. They need to crack down on IP infringements and theft, smash the counterfeiting rings which operate in full view of the public and authorities (presumably with their blessings) and abide by WTO rules.

bombdoe

People upgrading their iPhones on a longer timeframe is not a surprise. The need to upgrade is less compelling as the phones remain highly functional over many years. 

This change in growth is best seen as a correction in the "market". Where the high yearly growths of the past reflected the advances in iPhone models, but also people’s reaction to them. It became a thing to upgrade your phone to the newest model.   The market and mindset is probably a lot more mature and settled and this may become the new normal.

The financial markets have this obsession with consumers to spend-spend, and for this to drive growth-growth. Whereas, what we should be hoping for is consumers showing careful and considered spending. That makes for a more sustainable economy and in turn drive longer term benefits. 

1stntenderbits

MacPro said:

This is, in fact, fabulous news.  It means no 'One Trick Pony' crap from the media (haha as if that won't stop), Apple is this doing this well with their many-legged stool folks.

This is, in fact, not fabulous news.  Fabulous news would be the iPhone accounts for less than 50% of Apple revenue because -here's what would make it fabulous- the other categories increased their contribution to the point where they cumulatively contributed more than iPhone revenue which also increased.  That would be fabulous news.  This particular less than 50% contribution is due to falling revenue, not something positive.  

This is, in fact, good news... not fabulous, but good.  It's good news because the other categories' combined revenue growth surpassed the iPhone's falling revenue. If the iPhone's revenue shortfall had still beaten the other categories, that would have been meh news because it always has beaten the other combined categories. 

Now if iPhone sales revenue is up in the holiday quarter AND the combined revenue of the other categories STILL accounts for more than 50%... yeah then we can say fabulous.

 

anotherbrick

Top of the line iPhones are expensive, do not come with physical programs or features that you can't get on an Android, and have spent 3 or 4 years pushing AR without a lot of success. They were first with Touch and Face ID, but that's a security feature (both good ones) that don't really get buyers excited. I don't know what the feature is, but they need to come out with something that other phones don't already have, and probably at a sub $1000 price.

edited July 2019

seanj

AnotherBrick said:

Top of the line iPhones are expensive, do not come with physical programs or features that you can't get on an Android, and have spent 3 or 4 years pushing AR without a lot of success. They were first with Touch and Face ID, but that's a security feature (both good ones) that don't really get buyers excited. I don't know what the feature is, but they need to come out with something that other phones don't already have, and probably at a sub $1000 price.

5G next feature to pull in customers wanting to upgrade from their old 4G phones 

clarker99

Meanwhile the iOS installed user base has grown in every region including China. The grey market is massive positive for Apple. The machine keeps growing.  The Apple narrative should have moved beyond iPhone unit sales many moons ago. The ecosystem is a juggernaut. 

Record quarter, strong guidance, amazing amounts spent on R & D and still enough money left over for $17b in stock buybacks. When will the negativity and false narratives end with Apple?  If you are focusing on iPhone unit sales and price you are doing it wrong. 

rayz2016

80s_Apple_Guy said:

» show previous quotes

steven n. said:

ireland said:

Maybe reducing the prices a bit so people can afford an iPhone would be a start. The average phone buyer can’t afford to give $10M to marine research, Schiller. Most people struggle financially. Wish they weren’t so greedy. Base storage model XS at $999 is ridiculous.

Are you saying people can’t afford an iPhone? Why get the XS and not an XR? Do you have a trade in?

This is just another everything should be free type of mindset. People have a choice to buy or not buy and based on these numbers (remember, overall cell phones are in harvest), people are buying. 

There is a major difference between wanting free things and the price increases over the last few years. 4 years ago the top iPhone was $649 IIRC. That's a huge jump. Yes I know there's more tech in the phones but Apple hasn't dropped pricing on storage which is much cheaper etc. There is a balance. 

Of course majority of the product means less sales anyway. Maybe Apple needs to switch to a new phone cycle of two years. They've do fast now the difference between a X and XS and by most indications XI is so small who wants shell our another $1100-1500

Another blowout quarter, and the armchair CEOs are still telling Apple should do to stave off doom. 

Hilarious. 

macplusplus

2018 was a boom year thanks to the newly introduced iPhone X. We’ve seen that before with the release of iPhone 6. It is natural that sales normalize the following year. This is nothing more than a normalization, or even if there is a drop on a relative base after adjusting for the 2018 boom, it may not be as much as that.