Apple's iPhone Dependence Remains, But Services, Wearables Offer Growth Potential: Analyst

Apple's iPhone has long been the company's cash cow, but as the smartphone market matures and upgrade cycles lengthen, the Cupertino giant is increasingly relying on its services and wearables segments to drive growth. According to a recent report by Counterpoint Research, Apple's services revenue grew an impressive 14% year-over-year in the first quarter of 2024, reaching the highest ever share of Apple's total revenue at 26%. Meanwhile, the wearables segment, which includes the Apple Watch and AirPods, continues to be a significant driver of growth for the company.



The growth potential of Apple's services and wearables segments is underpinned by several key factors. First, Apple's services segment benefits from a large and growing installed base of active devices, which provides a steady stream of recurring revenue. As of November 2023, Apple had an installed base of over two billion active devices, a figure that continues to grow as more users adopt Apple's ecosystem (Richter, 2023). Additionally, Apple's services are tightly integrated with its hardware, making them more appealing and accessible to users, and helping with customer lock-in.

The wearables segment, on the other hand, is driven by the growing demand for connected devices, such as smartwatches and earwear, which offer convenience and functionality to users. According to Statista, the global wearables market is expected to record shipments of around 560 million devices in 2024, with earwear being the most successful wearable segment, with almost 350 million units forecast to be shipped in 2024 (Statista, January 22, 2025). Apple's wearables segment is primarily driven by the success of its Apple Watch and AirPods products, which have maintained their market leadership positions.



However, Apple's iPhone segment still accounts for a significant portion of the company's total revenue, and the smartphone market remains a crucial driver of growth for the company. In 2023, Apple's iPhone sales brought in revenues of over 200 billion U.S. dollars, a figure that is expected to remain relatively stable in the coming years (Statista, January 22, 2025). Despite the growth potential of Apple's services and wearables segments, the iPhone will continue to be a critical component of Apple's overall business strategy.

In conclusion, while Apple's iPhone remains a significant driver of growth for the company, the services and wearables segments offer substantial growth potential for the tech giant. As the smartphone market matures and upgrade cycles lengthen, Apple's services and wearables segments will become increasingly important in driving the company's overall growth and success. By leveraging its strong brand, extensive ecosystem, and continuous innovation, Apple is well-positioned to capitalize on the growing demand for connected devices and digital services.

Sources:
- Richter, F. (2023). Apple Services: A Decade of Growth. Statista.
- Statista. (January 22, 2025). Global wearables unit shipments 2024.
- Statista. (January 22, 2025). Apple iPhone sales revenue 2007-2024.