Apple is one of the most successful companies in history, and its profits are driven by several of its business lines. This article takes a look at the 5 most profitable Apple business lines, both from an accounting standpoint and from an investor’s perspective. Since many of these business lines aren’t focused on Apple’s primary source of revenue (computers), it’s easy to forget how important they are to Apple’s overall bottom line, but the numbers speak for themselves. Let’s take a look!
Apple’s Turnaround
In the early 2000s, Apple was in trouble. The company was losing money, and its products were failing to compete with those from Microsoft and other PC makers. But then, Apple released the iPod, which revolutionized digital music. The iPhone followed, and it changed the way we communicate. Finally, the iPad brought portable computing to a new level. Thanks to these three products, Apple turned itself around and became one of the most profitable companies in the world.
While Apple has seen steady growth in its traditional computer business, iPhone and iPad sales continue to be strong. In fact, we were surprised to learn that accessories represent a higher percentage of Apple’s profits than any other product line. At first glance, it makes sense—many companies make accessory products for iPhones and iPads, including all kinds of cases, sleeves and screen protectors. But did you know that Apple’s own accessories account for almost half of all its profits from those two products.
iPhone
iPhone is Apple’s most important product and is a top five global smartphone. The demand remained strong after the company released the iPhone 13, which, according to the company, is setting a new standard for performance and empowering our customers to create and connect in new ways. As of December 2021, sales for this model reportedly exceeded those for the iPhone 12, which skyrocketed as of December 2021.
In the 2021 fiscal year, Apple reported net sales for its iPhone division of $192 billion, up from $137.8 billion a year earlier. Sales reached $38.9 billion at the end of the quarter, up 47% from $26.4 billion during the comparable period of 2020. Apple attributed the decline to the COVID-19 pandemic, after previous declines had been attributed to a slowdown in China, a longer iPhone replacement cycle, and increased competition in the global smartphone market.
Services
It should come as no surprise that Apple’s iPhone line is its most profitable business. In fact, the iPhone generated about 61 percent of Apple’s total revenue in the last quarter. But what may be surprising is that Apple’s second most profitable business is its wearables line, which includes the Apple Watch, AirPods, and Beats headphones. This business brought in about $10 billion in revenue for Apple last quarter, or about 15 percent of its total revenue. And it’s only going to grow: analysts expect that the wearables market will be worth $155 billion by 2023.
Apple’s services business generated $9.2 billion in revenue last quarter, making it Apple’s third most profitable business. This is one of Apple’s newer lines of business, but it seems to be growing pretty quickly. At its recent developer conference, Apple announced that 800 million people now subscribe to its various paid music, video and other content services. It also continues to grow Apple Pay—the payments service it offers through partnerships with banks and credit card companies—and now includes transit payments via select city transit agencies.
Mac
The Mac was not always the powerhouse it is today. In fact, when it was first introduced in 1984, it was considered to be underpowered and overpriced. But, thanks to a series of smart marketing moves and steady improvements, the Mac has become one of Apple’s most profitable lines of business. Today, Macs are known for their power, design, and user-friendly interface. And, they continue to be one of Apple’s most popular product lines.
The iPod is another example of a product that has continually outperformed expectations. When it was first introduced in 2001, there were no competitors on the market, so demand for an MP3 player skyrocketed and new competitors jumped on board quickly. Today, MP3 players are ubiquitous and iPods are just one brand among many options. But they still account for a majority of Apple’s revenues and profits. That kind of consistent success is very rare!
iPad
The iPad is Apple’s most profitable line of business, accounting for nearly 19% of the company’s total revenue in the last quarter. This isn’t surprising, given the popularity of the device and its many uses. The iPad is perfect for everything from reading and browsing the web to playing games and watching movies. Plus, with a starting price of just $499, it’s an affordable option for many people.
The iPhone is Apple’s second most profitable line of business, accounting for nearly 16% of total revenue. But despite how dominant it is in terms of profits, iPhone sales actually declined by 11% year-over-year in Apple’s last quarter. This has many people wondering about its future as a consumer device and whether Apple will be able to find new growth opportunities. With competition from Samsung, which controls nearly one-third of all smartphone sales worldwide, Apple might need to develop a less expensive phone with more features to keep consumers interested in their phones over those made by competitors.
Wearables, Home, and Accessories
Apple’s wearables, home, and accessories category includes the Apple Watch, Beats headphones, HomePod, and more. This category was the company’s second-largest source of revenue in its most recent fiscal year, bringing in $32.9 billion. That was up 54% from the year before and made up 21% of Apple’s total revenue.
The growth in Apple’s wearables, home, and accessories category was driven by its newest products. In its most recent quarter, revenue from sales of both AirPods and HomePod more than doubled year over year. Sales were also up significantly for Beats headphones, while sales of older products including iPods were down significantly. The AirPods are Apple’s best-selling headphones so far, and with just one charge they can last five hours per listening session or up to 24 hours on standby mode. Like other wireless earbuds, they’re designed to pair automatically with your iPhone when you open their case, but what makes them stand out is a four-microphone array that helps Siri understand you even when there’s background noise.