Apple has a growth problem

What’s next for Apple?
What’s next for Apple?
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For the first time in over 15 years, Apple, the consumer electronics behemoth that has seemed untouchable since the turn of the millennium, announced Jan. 2 that it would likely miss the revenue target it set for the holiday quarter.

Apple has, with only a few minor blips along the way, managed to grow its revenue almost every quarter for over a decade. It’s raked in hundreds of billions of dollars along the way, mainly on the strength of the iPhone. The smartphone that went on to define the mobile era has sold over 1 billion units. Over the summer, Apple became the first US company ever to hit $1 trillion in market capitalization. It’s been an unbridled success story for Apple and CEO Tim Cook, who took over after the passing of founder Steve Jobs in 2011.

But as unprecedented a run as it’s been, many have said for years that Apple will need to diversify beyond the iPhone, that eventually consumers will look elsewhere for their luxury gadgets. Apple has managed to stave off those fears by consistently posting massive revenues, but recently, reality does seem to be setting in.

Growth in all of Apple’s main products, including the iPhone, has been effectively flat for a few years. Apple has combatted this by charging more for its new products—the latest top-of-the-line iPhone starts at $1,100—and by increasing the quality of services it offers, such as Apple Music subscriptions, and movie and app sales.

These have helped shore up any weaknesses in demand for the iPhone in recent quarters, but analysts are warning that Apple’s announcement yesterday may only be the tip of the iceberg and that demand may be “deteriorating,” according to Business Insider. And as Cook mentioned in his note to investors yesterday, increasing trade tensions between the US and China will likely not help the company much either.

For years, critics of Cook have said that the CEO has failed to release a new product that was as revolutionary as the iPod or iPhone were, instead choosing to iterate on existing technologies and designs. The Apple Watch, the first new major product released during Cook’s tenure, has not lived up to the iPhone in terms of sales, and as of right now, it doesn’t look as if there are any other surprises on the horizon. Rumors have bubbled for years about groundbreaking new devices, like augmented-reality glasses, or even a car, but during Cook’s leadership, all we have seen is the iPhone, iPad, and Mac computers released in new shapes and sizes.

That being said, it’s worth keeping things grounded: Apple is not doomed. The company cut its revenue guidance for the holiday quarter to $84 billion, which would still be its second-most successful quarter ever. It has reams of cash in the bank, much of which it’s repatriated to the US thanks to favorable changes in tax laws passed by the Trump administration, and there are few signs of its business completely cratering. But it does seem that Apple is finally losing its ability to plaster over any holes in its iPhone business.