After the forecasts attempted in previous years, I continued to monitor their accuracy and gather the data Apple reports each quarter. Unfortunately, my results weren’t much better than last year: back in 2014 I underestimated the iPhone sales generated by the introduction of larger screens, then in 2015 I overestimated continued demand, so much so than my yearly forecast for 2016 was 45 Mio. units larger than actual sales. There are of course some reasons for this, first of all the tendency of all forecasts to assume current trends will continue for the near future. On a more concrete note, I just realized last week that there was an error in a formula estimating ASP that impacted the expected revenues; with this now fixed, hopefully the fit will improve. Third time’s the charm I suppose?
My iPad prediction was more in line with reality (46 Mio. actual sales versus my estimation of 41 Mio.), as was the Mac forecast (18.5 Mio. versus 20 predicted). Let’s see what I can come up to for the following fiscal year.
The iPhone hit a ceiling this past year, growing just slightly in the first quarter and with declining sales in the other three compared to the previous year. There are several factors at play here, from a natural rebound after the huge increase in 2015, to an overall saturation of the smartphone market in developed countries. The replacement cycle is getting longer, and the iPhone 7 offers very little compared to last year’s models to drive people to upgrade. Demand for iPhones in China looks depressed and, despite its apparent popularity in the USA, pricy iPhones have a hard time attracting first-time smartphone buyers elsewhere in the world. The only bright side seems the continued appetite for ever larger screens, which will likely drive more customers towards the more expensive Plus model. With that in mind, my forecast would be smaller sales than last year (around 70 Mio. units) with a higher ASP in the range of $720 – $730, leading to stagnating revenues for Q1 2017. But I feel the actual sales could be lower still.
There isn’t much to be said about the iPad: despite two new Pro models, the sales numbers barely registered the updates, only the ASP rose slightly. Barring some major changes, I fully expect the downward trend to continue for the entire year.
How to upgrade your Mac in three easy steps! pic.twitter.com/KlyAINVQPU— Daniel Singer (@danielsing3r) January 8, 2017
The Mac is another story entirely: while Apple delivered new MacBook Pro models as consumers were asking for, their reception was very mixed or dare I say negative? Many customers and tests complained about inconsistent battery life, much lower than Apple is advertising. Apple first responded by removing the estimated time left, and more recently by saying the methodology of the tests was wrong. Under these circumstances, it’s hard to say how the sales will look. Recent sales were in decline, but I think the pent-up demand will overturn this trend, for the first couple of quarters at least. The ASP is also likely to rise, as it happens at each product launch.
The Watch situation is also hard to evaluate, since Apple has yet to release any actual sales numbers. There were conflicting reports from third-party market researchers, but if you look at the evolution of revenues from ‘Other products’ it’s pretty clear sales have fallen off a cliff in 2016: after the peak in the 2015 holiday quarter, revenues dropped in half and never recovered. This category includes every other accessory Apple sells (oh, Apple TV too!) and has been in decline for years because of the aging iPod, but it’s hard to imagine a sudden drop being caused by older mature products instead of the new, unproven Watch.
Based on my rough extrapolations, the Watch sold only 7.5 Mio. units in Apple’s fiscal 2016 (or 3.86 billion in revenues), with 45% of the sales in Q1 alone. The holiday 2016 quarter (Q1 2017 for Apple) will probably see a new sales boom, but it’s unclear if that can translate into sustained growth. Separating the Watch from the other products will get increasingly difficult as Apple adds more products lines here, from the variety of dongles for the MacBook Pro to wireless AirPods.
This year I added a forecast for the services revenues so that I can more accurately compare my results to Apple’s guidance for this quarter. The only segment showing sustained growth, ‘Services’ also shows a small discernible seasonal component, probably tied to increased hardware sales. Hopefully for Apple the correlation is not very strong, otherwise decreased hardware sales will also impact the growth of their software business.