The Apple Ecosystem
Apple is one of the most interesting companies of our lifetime. Personally, I used to be an Android fan and was vocally against Apple products- I hated everything about Apple. Then one drunken night, I dropped my phone and broke the screen on my Android. The next day. I decided to take the plunge with Apple products and bought the iPhone 6. Shortly thereafter, I bought a MacBook Pro laptop. I have become fully immersed in the Apple ecosystem and now own an iPhone X. Why is the Apple ecosystem important? Next time you have the chance when you go to Starbucks or a Shake Shack for lunch, look around you at how many people have an Apple iPhone. Every one of my friends other than a handful are blue. If you don’t know the significance of the color blue, you are dead to me.
Q2 2018 Earnings
In all seriousness, Apple is primarily a product hardware company today continually setting internal records. Q2 2018 Apple’s revenue was $61.1 billion. According to the Q2 2018 earnings call, revenue was up 16% from the previous year. In Q2 2018, iPhone revenue was up 14%, services were up 31%, and wearables were up 50%. iPhone revenue for the first half of the year totaled $100 billion. Customers chose the iPhone X more than any other in the quarter. Q2 provided solid performance.
Q3 2018 Earnings
Moving into Q3 2018 earnings, Apple generated $53.3 billion in revenue, a Q3 internal record. Another 17% increase to the prior year. The iPhone X remained the most popular iPhone of the quarter as it did in Q2. The highlight of the Q3 2018 quarter was services side of the business, which generated a total of $9.5 billion making up 18% of the Q3 2018 revenue. In comparison to Q2, services was $9 billion- only 14.7%. By 2020, Apple wants to hit their target of doubling services revenue to $19 billion.
Service revenue is a clear differentiator and has the potential to add to Apple’s current success and Apple’s sustainability in the longer term. Many companies have failed when strictly focused on hardware and not venturing into other ways to generate revenue. Apple’s diversification from becoming hardware company to focusing their efforts on growing the service revenue will put them in a good position if the iPhone is disrupted by future technology.
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