Apple Marked the End of an Era This Week. And That’s Just Fine With Investors

August 3, 2019, 1:30 PM UTC
Apple end of an era
A man walks past an Apple store in Hong Kong on January 3, 2019. - Hong Kong stocks fell again on January 3, extending the previous day's losses as technology firms were hit by Apple's decision to slash its revenue forecast for the December quarter citing slowing Chinese sales. (Photo by Anthony WALLACE / AFP) (Photo credit should read ANTHONY WALLACE/AFP/Getty Images)
Anthony Wallace—AFP/Getty Images

It’s getting more difficult to describe Apple as the iPhone company.

In the latest quarter, more than half of Apple’s revenue came from products other than iPhones. That hasn’t happened in nearly seven years.

Quarterly iPhone sales slid $4 billion year-over-year to $26 billion. But that decline didn’t matter to investors, who saw a silver lining in the fact that other businesses like services, which includes Apple Music and iCloud, grew quickly.

Indeed, Apple is a decidedly different company than it was even a year ago. And that may have been the story of the week for Apple. In addition to the shift in where its revenue comes from, we learned this week that AirPods wireless earbuds have become a big business, the Apple Card credit card will debut this month, and that Apple apparently has big plans for the Mac.

Read on to learn more:

Don’t call Apple an iPhone company

Apple had $53.8 billion in fiscal third quarter revenue, a 1% increase compared to the same period last year. The results were tempered by iPhone revenue falling $4 billion to $26 billion during the period. However, Apple’s business was bolstered by $11.5 billion in quarterly services revenue, up from $10.2 billion last year, and a $1.8 billion revenue jump in sales from wearable devices, to $5.5 billion. Most importantly for investors, Apple forecast fiscal fourth quarter revenue of $61 billion to $64 billion, on the higher end of the $61 billion that Wall Street had expected.

AirPods are big business

Apple said its wearables division revenue was up significantly last quarter, thanks in no small part to AirPods. Analysts expect Apple to sell 50 million AirPods this year. They said the division is contributing more than $5 billion to Apple’s gross profit—a measure of the difference between revenue and manufacturing costs.

Apple Pay is growing faster than PayPal?

On the earnings call this week, Apple CEO Tim Cook said that mobile-payment service Apple Pay is “now adding more new users than PayPal.” Cook added that Apple Pay’s monthly transaction volume is growing four-times faster than PayPal’s and that PayPal processes nearly a billion transactions monthly.

Dissecting Apple’s Intel buy

Cook also discussed his rationale for acquiring Intel’s modem business last week by saying it pave the way for Apple to “further our long-term strategy of owning and controlling the primary technologies behind the products that we make.” In other words, Apple will use Intel’s modem business to reduce its reliance on third-party component makers. And in the process, it could control its costs and increase profits.

Get ready for Apple Card

Apple Card, a joint venture between Apple and Goldman Sachs, will be introduced in August, Cook confirmed this week. Apple Card will have no late fees and will offer up to 3% back on purchases, depending on what customers buy. Interest on unpaid balances will be 13.24% to 24.24%.

Big MacBook Pro Plans

Last week, we heard rumors that Apple will release a 16-inch MacBook Pro in the fall. This week, supply chain news site Digitimes said that Apple will release the 16-inch MacBook Pro in September. The device will apparently have a design that looks similar to the aluminum 15-inch MacBook Pro, but with slimmer bezels around its screen, will deliver a slightly larger display. Digitimes’ sources didn’t say exactly when the MacBook Pro will debut.

A Mac Pro question

Apple has been manufacturing its high-end Mac Pro desktop in the U.S. for the last several years. But with a new Mac Pro planned, Apple isn’t sure it can continue to produce the $6,000 computer stateside. During the earnings call this week, Cook said that Apple would continue to try to produce the Mac Pro in the U.S. and that it is investing in that plan. His comments followed reports that Apple is seeking tax breaks to manufacture the new Mac Pro in the U.S.

One more thing…

We can’t go a week without at least some iPhone news. This time around, TF Securities analyst Ming-Chi Kuo said that Apple would add a sensor to its 2020 iPhones that would add dimension and depth to photos taken using the device.

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