How The iPhone is Taking Over Apple

“The iPhone is Taking Over Apple.” So says Apple watcher financials and market analysis blog Above Avalon’s Neil Cybart, noting that the iPhone’s gravitational pull is now simply too strong for any new Apple product or service to reach escape velocity and become the next big thing for Apple in the near-term.

Cybart maintains convincingly that from a financial and business perspective, the iPhone is the only product that matters to Apple, and has amassed so much market power it is difficult to imagine any other product being able to dramatically surpass the iconic handset in terms of importance over the next five years.

He observed that Apple will be the iPhone company for the foreseeable future, a state of affairs that presents both opportunities and risks for Apple to navigate over the coming years.

Putting the now eight-year-old iPhone into perspective, Cybart cites:

726 million iPhones sold
$443 billion of revenue (50% of total)
$200 billion of gross profit (60% of total)
$120 billion of net income (60% of total)

Continuing to build iPhone momentum, Cybart notes that Apple is now selling up to 250 million iPhones a year, or close to a third of total iPhones sold to date, observing that while everyone knows the iPhone is a crucial part of Apple’s business, few realize the extent to which the iPhone is taking over Apple’s financials — for example In the first half of FY2015 accounting for 69 percent of Apple’s total revenue, up from 57 percent of revenue during the same time period in 2014, while in terms of gross profit, the trend is even more pronounced, with iPhone accounting for 81 percent of Apple’s gross profit over the past two quarters, up from 68 percent year-over-year.

Behind this remarkable phenomenon are the iPhone’s strong margins and short upgrade cycle, with iPhone users likely to upgrade their high-margin phones every two or three years, unlike with say, iPads or laptops, which lead more sheltered lives physically, and where advances in technology and features have been leisurely enough that many users are extending upgrade cycles to four or five years or even more. Case in point; the late 2008 MacBook I’m typing this blog on right now is six years old and still going strong.

For the full Above Avalon iPhone report, visit:
http://www.aboveavalon.com/notes/2015/7/5/the-iphone-is-taking-over-apple