Apple Is No Longer Searching for ‘The Next iPhone.’ A Steady Transformation Is Proving to Be More Effective

Apple has completed its 2024 fiscal year, which runs from October 2023 to September 2024. This means it’s the perfect time to reflect on the company’s performance and direction.

The modest revenue growth of 2% signals the end of an era of explosive expansion and indicates a significant structural transformation within the company.

Why it matters. The revenue growth suggests a shift toward stability and diversification as Apple’s strategic focus, leaving the era of explosive expansion behind.

A snapshot. The iPhone continues to lead, generating more than $200 billion in revenue. However, notable changes are occurring at the edges of CEO Tim Cook’s empire. The services sector is nearing $100 billion in annual revenue, while the Mac has stabilized in the $30 billion range.

Data:

• Total revenue: 2% growth after a 3% decline in 2023.
• iPhone: 600 million units sold, which is an increase compared to 2023.
• Services: Close to exceed $100 billion annually.
• Mac: Stabilized at $30 billion annually.
• Wearables, Home, and Accessories: First decline after eight years of growth.

The graph below presents an overview of Apple’s annual revenue differentiated by highlighting each division’s contribution to the company’s total revenue. The dashed yellow line indicates that the iPhone’s share of total revenue has consistently remained around 50% since 2010, when Steve Jobs was still the CEO.

Reading between the lines. In light of the maturity of the consumer technology market, Apple is undergoing a transformation. Instead of seeking “the next iPhone” (a likely unattainable goal), the company is focusing on developing an ecosystem of complementary products and services.

The Mac has perhaps the most successful story of reinvention. Fueled by the Apple Silicon chips and the unique circumstances of the pandemic, it has established a new revenue baseline of $30 billion annually, which is double its historical significance. Despite experiencing several consecutive declines, the iPad still maintains sales levels higher than any year since 2014. Not bad.

Digging deep. Apple’s Services division remains a crucial strategic focus for sustaining future growth. This segment is steadily and significantly increasing ($11 billion this year), which demonstrates Apple’s successful transition from merely a hardware manufacturer to a provider of integrated experiences. This integrates hardware, software, and services, with all of these areas contributing to revenue.

The Wearables, Home, and Accessories division experienced its first decline in eight years despite a potential boost from the introduction of the Vision Pro. This suggests that Apple needs to reconsider its strategy for emerging technologies in this area.

Bottom line. Apple is successfully navigating its first major transformation since the introduction of the original iPhone. The company is building a future where success hinges not on a single revolutionary product but on a cohesive ecosystem of hardware, services, and software. Revenue is generated primarily from hardware and services, while software serves to connect them.

This evolution may be less spectacular and dazzling but is also less volatile and more stable and predictable, attributes that investors appreciate. This will likely be Cook’s legacy.

Image | Sumudu Mohottige

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