Apple’s growth streak over the past decade and a half has been simply amazing—and its end could be in sight.
While Apple is expected to report solid revenue growth today in its third fiscal quarter—with $49.3 billion in revenue expected, representing 32% growth from a year earlier—the financial analysts that cover the company are projecting growth to slow significantly by the end of 2016.
Specifically, the current Wall Street consensus for Apple’s calendar-year 2016 sales is $248 billion. That represents just 5% growth from the consensus for 2015 sales, which stands at $236 billion.
That would mark a big slowdown from the incredible growth Apple has posted since 2001, with sales increasing from $6 billion a year to almost $200 billion in 2014. Its most dramatic growth years were 2010, when sales increased 82%, and 2011, when they grew by $51 billion (67% growth, but on a much larger base).
Why the anticipated slowdown in growth? The biggest reason is that the iPhone business, which has driven much of Apple’s growth and represented 60% of its sales last year, is maturing along with the broader smartphone market.
While the iPhone led Apple’s overall revenue growth to accelerate last year to 15%—and is fueling its projected 18% growth this year—there are questions about how much more share Apple can take as the broader smartphone market flattens. Analysts from Jefferies, the investment bank, wrote in June that they expect the overall smartphone market to grow 11% in 2016, down from 12% this year. In a research report this week, Piper Jaffray analyst Gene Munster wrote that his team is modeling “flat iPhone growth” in 2016.
Of course, things could change before then. Analysts update their long-term models as the picture becomes clearer, and the end of 2016 is still a year and a half away.
One big question, meanwhile, is the Apple Watch. Could it possibly become popular enough to drive meaningful growth for Apple? By the end of next year? It’s simply too early to tell. Smartphone competition in China—where the iPhone has recently thrived—is another question. As is any potential recovery for the iPad.
Apple has already rebounded from slowing growth a couple times in this streak, most recently last year, when the iPhone 6 release drove record sales. And in the meantime, the company has adjusted to its role as a maturing company, including buying back shares and introducing a dividend.