Apple, founded in 1976, made history by becoming the first U.S. corporation to surpass $1 trillion in market capitalization in 2018.1 The company’s remarkable growth in sales, profits, and share price was historically driven by robust sales of its iPhone products.
As sales of the popular smartphone and other technology hardware devices slowed down, Apple made aggressive efforts to transform into one of the world’s leading providers of digital services. This article examines Apple’s most profitable business lines and their contributions to the company’s success.
Key Takeaways:
– Apple was the first American company to reach a $1 trillion market capitalization.
– The company’s main business segments include the iPhone, Services, Mac, iPad, and its Wearables, Home, and Accessories unit.
– Apple continues to make aggressive efforts to become a leading provider of digital services.
– The iPhone unit remains the primary driver for growth in sales, profits, and share price.
– Despite the COVID-19 pandemic, sales for the iPhone 13 are expected to surpass those of previous models.
Apple’s Turnaround:
Even though Apple’s fiscal year 2019 was marked by a series of ups and downs, it successfully boosted its revenue from its services division. However, earnings from its most popular products, such as iPhones and MacBook laptops, fell somewhat below 2018 levels. For the first fiscal quarter of 2020, Apple forecast revenue between $85.5 billion and $89.5 billion.2 The company announced revenue of $91.8 billion and profit of $22.2 billion—an all-time record for both net income and revenue.3
In the 2019 fiscal year, Apple posted sales of $260.2 billion on a net income of $55.2 billion.4 In the first quarter of 2019, earnings came in at $4.18 on a per-share basis.5 This was a record high for the company. But in the first fiscal quarter of 2020, earnings per share were up to $4.99.6
A more detailed look at Apple’s five most profitable business lines as they perform today:
iPhone:
Apple’s core product, the iPhone, is among the top five smartphone vendors globally.7 Demand remained strong after the release of the iPhone 13, which the company states is “setting a new standard for performance and empowering our customers to create and connect in new ways.” Sales for this model reportedly exceeded those for the iPhone 12, which still “skyrocketed” as of December 2021.89
The company reported net sales for the iPhone unit of $192 billion for the 2021 fiscal year compared to $137.8 billion reported in the year before. Sales hit $38.9 billion during the fourth quarter—up 47% from the same quarter of 2020, which earned $26.4 billion.10
Apple blamed the ongoing challenges of the COVID-19 pandemic for lower-than-expected iPhone sales.11 Previous declines in iPhone sales were attributed to a slowdown in China, a longer iPhone replacement cycle, and heightened competition in the global smartphone market.
Apple is facing supply chain challenges that have reportedly led to a reduction in iPhone 13 production due to ongoing issues with supply reductions from its manufacturing partners.
The company’s services business, spearheaded by the App Store and Apple Music, encompasses a variety of services including AppleCare, Apple Pay, iCloud storage services, AppleCare warranties, and subscriptions to Apple Music, Apple Arcade, Apple TV+, and the Apple Card. This segment generated a revenue of $68.4 billion in the 2021 fiscal year and $18.3 billion for the fourth quarter, marking an all-time high compared to $53.8 billion and $14.5 billion in the previous year and Q4-2020, respectively.
Notably, the end of Apple’s fiscal year does not account for the holiday season and the three most lucrative months of the year—October, November, and December—which are crucial for Apple’s sales.
Apple’s personal computer business, centered around the Mac, includes MacBook laptops and iMac desktop computers. This unit saw sales of $35.1 billion in 2021 ($9.2 billion for Q4-2021), an increase from the $28.6 billion reported in 2020 ($9 billion in Q4-2020). Despite a consistent decline in Mac’s contribution to Apple’s growth due to slowing global demand for personal computers, the Mac remains strategically important as part of a broad, interlinked product family running on the iOS operating system.
Apple’s iPad, launched in 2010, quickly became the first commercially successful tablet computer. It sold over three million units in the first three months. Despite a decline in worldwide demand for tablets, Apple continues to lead the market, with sales of $31.9 billion during the 2021 fiscal year and $8.3 billion in the fourth quarter, up from $23.7 billion and $6.8 billion in 2020 and Q4-2020, respectively.
Apple’s Wearables, Home, and Accessories segment, which includes AirPods, Apple Watch, and HomePods, posted $38.4 billion in revenue for 2021 and $8.8 billion for the fourth quarter, compared to $30.6 billion and $7.9 billion for the same periods in 2020.
