What's going on?

The world�s most valuable public company, Apple, has seen happier moments. Its profit fell 27% as it sold about 15% fewer iPhones versus one year ago. Still, its stock jumped more than 5% as its second quarter results beat investors� (low) expectations and the company stressed the importance of its growing �services� division.

What does this mean?

The first thing to mention is that the second quarter is usually Apple�s weakest: the iPhone product cycle begins in September and so sales tend to be lowest in the months leading up to that. Nevertheless, iPhone sales are shrinking and that�s a problem for Apple since they make up about two-thirds of its revenue. On a�positive front, Apple�s �services� revenue (e.g. from iTunes or Apple Pay) increased 19% versus one year ago. As Goldman Sachs pointed out 8 months ago, the �stickier� revenue that Apple gains from the services within its ecosystem (e.g. Apple Music�s subscription model) could be very good for the stock price in the future.

Why should I care?

For the stock: Investors clamouring for �the next big thing� might be missing the point.
Some investors think Apple will suffer a lot if it isn�t able to invent another revolutionary product like the iPhone – but that�s pretty hard to do. Others, like Warren Buffett, are betting on it being a much more stable generator of profits than a Hail Mary-like strategy would suggest. Its services stream is one such example. Relatedly, it could benefit via its HomeKit division from the burgeoning Internet of Things (think: �Hey Siri, turn off the lights�).


For you personally: The average cost of the iPhone is dropping.
Earlier this year, Apple introduced the iPhone SE, which is a smaller, cheaper version of the iPhone. That�s probably why the average sale price of an iPhone dropped more than investors were expecting � to below $600. The launch of the iPhone 7 will probably bring that average sale price higher again, but at least you know there�s a cheaper alternative available!