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APPLE WATCH

It’s looking like it’s going to be another rough quarter for Apple

Mike Murphy
By Mike Murphy

Technology editor

It’s been a rough year so far for Apple.

The company is in the middle of an awkward transition. It has discovered there’s a limit to how much consumers will pay for a new iPhone, and that many middle-class consumers in emerging economies aren’t interested in Apple’s devices when others are available for less.

While it’s still trying to figure out what comes after the iPhone, Apple is trying to counteract any softness in its iPhone business by building out its services offerings. For years, it’s had a robust business selling apps and music, but it’s begun selling subscriptions to magazines, and soon, video games and its own original TV programs.

Apple’s iPhone revenue, while still massive, has dropped significantly over the last two quarters, when compared to the same quarters the year earlier. Its services business, on the other hand, has continued to soar and generates steady income all year, unlike sales of devices which are subject to seasonal holiday spikes.

Services has been Apple’s second-largest business for over two years now. Last quarter, it generated $11.4 billion, a jump of nearly 16% over the same period the year prior. In the last four quarters alone, it’s posted $45.8 billion in revenue, which would currently put that business line alone as 68th on the Fortune 500 list.

 

Analysts will be looking at the company’s third-quarter earnings July 30 to see how severe the drop in iPhone sales might be—anything better than terrible could be enough to keep the stock price steady—but also whether Apple’s services business is continuing to grow. Anything else, like growing Apple Watch and AirPods sales, or sturdy Mac and iPad sales (as we move into the back-to-school buying period), would be an added bonus.

Analysts are expecting around $53.5 billion in revenue for the quarter; Apple itself said it expected to generate between $52.5 billion to $54.5 billion. This time last year, the company generated $53.3 billion in revenue.

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