Wearables become fastest growing category at Apple as iPhone revenues slide

Global tech giant Apple Inc. announced its financial results for the first quarter of fiscal 2019 on Tuesday, reporting 33% growth in revenues in its “wearables, home and accessories” segment compared to the same period in 2018, as iPhone sales fell 15%, their first decline in over two years.


Apple's "wearables, home and accessories" segment includes the Apple Watch and AirPods - Photo: Apple
 
The increase in the company’s "wearables, home and accessories" segment, which includes the Apple Watch and AirPods, makes it the company’s fastest growing category, ahead of services, which also saw impressive growth of 19%. Apple’s iPad and Mac categories saw revenues rise 17% and 9%, respectively.
 
While the wearables segment still represents a relatively small portion of Apple’s business, accounting for $7.31 billion in revenues compared to the $10.9 billion brought in by services and the whopping $52.0 billion resulting from iPhone sales, its sharp acceleration in growth is a significant development for the company.
 
Indeed, in an interview with CNBC on Tuesday, Apple CEO Tim Cook highlighted that “on a trailing basis, […] the revenue for wearables is already 50% more than iPod was at its peak,” a particularly striking revelation as the release of the iPod is widely seen as a major turning point in Apple’s development as a company.
 
The executive further pointed out that, since launch, both the Apple Watch and AirPods had each generated between four and six times more revenue than the iPod over a comparable period of time following its own release.
 
The news of the growing importance of wearables to Apple’s business comes on the heels of the company’s addition of an ECG app to its Series 4 Watches in December, the latest move in an effort to expand the range of health-related functions available on its devices as it squares off against leading wearables rivals Fitbit and Xiaomi.
 
Wellness and healthcare are major markets being explored by wearables companies and while Fitbit has been busy multiplying its partnerships with health authorities and related brands, CNBC recently reported that Apple has hired up to 50 doctors over the last few years. The company itself then announced a range of health-related services to be launched in 2019 – quite what these services may be remains to be seen.
 
Overall, Apple reported $84.3 billion in revenues in the first quarter ended December 29, 2018, a 5% decline compared to the prior-year period, while earnings per diluted share rose 7.5% to $4.18.
 
Apple’s net income for the period totaled $20.0 billion, down from $20.1 billion in Q1 2018.

In a press release, Cook described the results, which came in under expectations, as “disappointing” but highlighted the company’s successes with its active installed base of devices and services business.
 
Despite the company’s lower-than-expected revenues, Apple stock rose more than 5% in after-hours trading on Tuesday, according to figures cited by MarketWatch.
 
Looking to the second quarter of 2019, Apple is currently expecting to see revenue of between $55 billion and $59 billion.

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