Missing the Point with Charts (Premium)

In the wake of Apple's revelation that it would no longer report unit sales of its devices, analysts far and wide are trying to figure out what it all means. Maybe they're trying too hard.

Case in point, CNN. This weekend, it published a reasonable enough overview of the situation called Apple has a problem it doesn't want to talk about. It mentions that Apple can't keep raising iPhone prices forever and concludes with, "at some point, Apple will need to figure out what will replace the iPhone, or its growth engine could stall out." Fair enough.

But an accompanying post called The story of Apple and the iPhone in 3 charts had me shaking my head. The three charts are:

iPhone unit sales. Which you can see have plateaued in Q1 2017, or what we will now call "peak iPhone."

iPhone revenues. Which continue to eke upwards since Apple now charges more per phone, as I discussed previously in Apple Jacked (Premium).

Services revenue. Which has arisen in recent years as Apple's next big product.

But something was bothering me about this post. And then I realized what it was: The iPhone revenues and Services revenues charts look like they describe similarly explosive revenues jumps over time, but that's only because they're sized the same. Meanwhile, the time frames and dollar amounts that each shows are on completely different scales.

So I fixed it. And when you look at these two revenue sources accurately together in one chart, it looks like this. Where the big one is iPhone revenues and the small, harder-to-see (and now less spiky) one is Services revenues.

I don't mean to say that CNN is lying with these charts per se. But it is obfuscating the situation. Which is this: Yes, Apple's services revenues are growing strongly. And to be fair, the $9.9 billion that Apple posted this past quarter is more than Mac ($7.4 billion) or iPad ($4 billion) revenues, which CNN's charts do not show. But all this does is support my contention, from 2017, that services---and not the iPad, and not Apple Watch---is Apple's next big business.

What's not clear is whether these services revenues can ever rival iPhone revenues at all. I don't believe they can: Like everything else Apple does, services revenues are still only a tiny fraction of those of the iPhone. And Apple remains the iPhone company. No matter how it reports its financial results each quarter.

 

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