Apple’s 5 Most Profitable Lines of Business

Founded in 1976, Apple (AAPL) became the first U.S. corporation to surpass $1 trillion in market capitalization in 2018. The company’s spectacular growth in sales, profits, and share price were historically driven by solid sales of its iPhone products.

But as sales of the popular smartphone and other technology hardware devices slowed down, the company made aggressive efforts to transform itself into one of the world’s leading providers of digital services.

But what are the company’s most popular and most successful business segments? This article examines Apple’s most profitable business lines and how they contribute to its success.

Key Takeaways

• Apple was the first American company whose market capitalization reached $1 trillion.
• The company’s main business segments are the iPhone, Services, Mac, iPad, as well as its Wearables, Home, and Accessories unit.
• Apple continues to make aggressive efforts to transform itself into one of the world’s leading providers of digital services.
• Its iPhone unit is the main driver for growth in sales, profits, and share price.
• Sales for the iPhone 13 are expected to eclipse those of previous models despite slowdowns due to the COVID-19 pandemic.

Apple’s Turnaround

Even though Apple’s fiscal year 2019 was characterized by a series of ups and downs, it successfully boosted its revenue from its services division. But 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. The company announced revenue of $91.8 billion and profit of $22.2 billion—an all-time record for both net income and revenue.

In the 2019 fiscal year, Apple posted sales of $260.2 billion on a net income of $55.2 billion. In the first quarter of 2019, earnings came in at $4.18 on a per-share basis. This was a record high for the company. But in the first fiscal quarter of 2020, earnings per share were up to $4.99.

Here is a more detailed look at Apple’s five most profitable business lines as they perform today.

iPhone

Apple’s core product is the iPhone. The popular smartphone is among the top five smartphone vendors in the world. Demand remained strong after the company released 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.

The company reported net sales for the iPhone unit of $192 billion for the 2021 fiscal year compared to $137.8 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.

The company blamed the ongoing challenges of the COVID-19 pandemic for lower than expected iPhone sales. 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 reportedly had to cut production of the iPhone 13 because of ongoing issues with supply reductions from its manufacturing partners.

Services

The company’s services business is led by the App Store and Apple Music. The segment’s revenue also comes from selling a range of services, such as AppleCare, Apple Pay, iCloud storage services, AppleCare warranties, and subscriptions to services like Apple Music, Apple Arcade, Apple TV+, and the Apple Card, which competes with other financial payment giants.

Apple’s Services segment posted revenue of $68.4 billion during the 2021 fiscal year and $18.3 billion for the fourth quarter. This is compared to $53.8 billion for the previous year and $14.5 during Q4-2020. This represented an all-time high for the unit.

The end of Apple’s fiscal year doesn’t include sales for the holiday season and the three most lucrative months of the year–October, November, and December. This period is a very important period for Apple.

Mac

Apple’s personal computer business is built around the Mac and includes its MacBook laptops and the iconic iMac desktop computers. This unit generated sales of $35.1 billion ($9.2 billion for the fourth quarter of 2021), which is an increase from the $28.6 billion reported in 2020 ($9 billion in Q4-2020).

Mac’s contribution to Apple’s growth has consistently fallen as the personal computer industry experiences slowing demand worldwide. Keep in mind, though, that Apple’s personal computer business is very important for the company from a strategic perspective. That’s because it’s part of a broad, interlinked product family running on the iOS operating system.

iPad

When Apple launched its iPad in 2010, it quickly became the first commercially successful tablet computer to hit the market. In the first three months after it was released, the device sold more than three million units.

Although worldwide demand for tablets is waning, Apple continues to dominate this part of the market. This unit drew in sales of $31.9 billion during the 2021 fiscal year and $8.3 billion during the year’s fourth quarter. That’s compared to $23.7 billion and $6.8 billion for the 2020 fiscal year and Q4-2020, respectively.

Wearables, Home, and Accessories

Apple’s Wearables, Home, and Accessories segment is made up of devices such as AirPods, Apple Watch, and HomePods. The segment posted $38.4 billion in revenue during 2021 and $8.8 billion for the year’s fourth quarter. That’s compared to $30.6 billion and $7.9 for the same periods in 2020, respectively.