03 December 2015

Predicting Apple sales for 2016

Late last year I attempted a sales forecast for Apple products for the following year. Now, almost 12 months later, it’s time to compare my estimation with the actual sales reported during the year and attempt a new forecast, hopefully with better accuracy, for the fiscal year 2016.

As expected, my forecast for the iPhone was much lower than sales, owing to the introduction of two new models at once, both with significantly larger screens – at 231 Mio. units for the entire year, a good 22% higher than my prediction. The iPad forecast was more in line with expectations: nearly 55 Mio. units, very similar with my second estimation, and 8.5% lower than the first. The Mac forecast was spot on, both versions landing very near the actual 20.6 Mio. sales, although the quarterly split was slightly different.

With more data covering the past year, I revisited my methods and extended the forecast for the following year. The seasonal distribution has changed very little, confirming this is a long-term structure of the market. Mac sales appear to have settled into a more regular seasonal cycle, but not nearly as pronounced as for the iPhone and iPad. This time around I wasn’t particularly satisfied with assuming a linear trend for future sales. The iPhone and Mac enjoyed healthy growth in 2015, for obvious reasons in one case, but that is no guarantee of sustained growth for future periods. Latent demand for larger screen has been satisfied by the iPhone 6 line, so there is no reason to expect similar growth rates compared to last year.

With this in mind, I calculated the year-on-year growth rates based on moving-averages (already calculated in the model) for the three products starting with fiscal year 2013 and looked for recent trends that could continue in the following months. The graph clearly shows remarkable growth for the iPhone centered on Q1 and Q2 2015, followed by declining growth rates. The similarly remarkable fall of the iPad is also visible, though it seems to have stabilized recently – unfortunately at a negative growth rate that will continue to drain sales. The more modest growth period of the Mac peaked in Q4 2014 and is slowly returning back to stagnation. Based on these apparent trends I estimated smaller growth rates for all main Apple products in 2016, as seen on the right side of the graph.

Apple sales forecast 2016 Year-on-Year growth

The following table shows my sales forecast for the next four quarters. There are, of course, some factors I haven’t considered, because it’s hard to make clear estimates. iPhone’s growth could be stronger, sustained by larger sales in China for example, although that seems unlikely given the recent cool-down of the Chinese economy. The iPad Pro could improve sales, though it’s more likely it will increase the ASP of the category and consequently revenues rather than unit sales. As marketed by Apple, the Pro remains an unlikely niche, poorly supported by creativity and productivity software, and that’s unlikely to change unless Apple makes important changes to the App Store rules.

Quarter iPhone iPad Mac
Q1 85.42 15.77 5.69
Q2 67.78 10.32 4.60
Q3 52.43 7.71 4.58
Q4 51.52 6.91 5.33
Total 257.15 40.72 20.20
Sales forecast for Apple products in fiscal year 2016

With the sales forecast in place, I realized I could do a quick plausibility check against the revenue guidance Apple released for Q1 2016, in the range $75.5 billion to $77.5 billion. I used the average ASP for the last four quarters (relatively stable for all three categories), multiplied by the expected sales numbers, to arrive at a projected revenue of $70.9 billion. This doesn’t include revenue from other products and services, which could account for another $8-10 billion. So overall I think this years’ forecast will be reasonably close to actual sales numbers.

Apple sales forecast 2016 - iPhoneApple sales forecast 2016 - iPadApple sales forecast 2016 - Mac

And since I started looking at revenue numbers, I might as well continue analyzing the remaining categories of Apple revenues, ‘Services’ and ‘Other products’. There are no discernable seasonal influences in software revenues, just slow and steady growth. On the contrary, ‘Other products’, which pools together different products from the iPod and accessories to the Apple TV and more recently the Watch, varies quarterly in similar fashion to other hardware sales from Apple. At this point I had an idea: since everybody is trying to pin down Apple Watch sales, could this be done with this data? The Watch was available for purchase since late April, so the effect on revenues would start to show up somewhere in Q2 – Q3 2015. I ran my forecast model on the revenue time series up to Q2 2015 and generated a forecast for the following two quarters, then subtracted the forecasted from the reported revenues to approximate the effect of Watch sales. This resulted in estimates of 1.06 billion revenues in Q3 and 1.44 billion in Q4 – very similar to Jan Dawson’s results after the Q3 earnings report. It’s hard to make predictions for the Watch based solely on these two numbers, but I think it’s clear that the speculations before launch were overheated and unlikely to materialize.

Apple sales forecast 2016 - Other revenues and Watch

For clarification, the quarters I’m using here relate to Apple’s fiscal year, so Q1 2016 corresponds to the calendar quarter we’re currently in, the last quarter of 2015.

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