uploads///Apple unit growth

Why Apple’s iPhone Revenue Growth May Not Be Sustainable

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Aug. 2 2018, Published 10:13 a.m. ET

Apple’s iPhone revenue surged 20% YoY

Apple (AAPL) recorded its best-ever revenue in its fiscal third quarter, which is typically its weakest. Its revenue surged 17.3% YoY (year-over-year) in the quarter to $53.26 billion.

While Apple’s iPhone unit sales grew only 0.67% to $41.3 million in the quarter, its total iPhone revenue jumped 20% YoY to $29.9 billion due to a ~20% YoY increase in the iPhone’s average selling price to $724.

The company’s risky strategy of pricing the iPhone X at $1,000 to see whether it could unearth demand for a more premium tier may just be working out, even if it comes at the cost of sluggish iPhone shipment growth.

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Apple’s revenue growth may not last

Apple’s strategy is driving revenue growth, even if it is in the short term. The company can’t keep hiking iPhone prices, though. Also, the effects of higher iPhone prices on revenue growth will likely wane by the end of the year. Apple launched the costly iPhone X during the holiday season last year, so the basis for comparison will be higher during this year’s holiday quarter (the fiscal first quarter of 2019).

While Apple may be hiking the price of the upcoming upgraded version of the iPhone X, the hike will not be as prominent as last year’s. Given sluggish iPhone unit sales growth, as is shown in the chart above, Apple’s revenue from iPhones could decelerate, especially if iPhone shipment growth remains slow.

Meanwhile, Apple’s revenue from iPads and Macs continued to be the biggest drag on its overall revenue. Apple’s revenue in both segments fell 5% YoY.

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