Well, it’s official: Apple is now the iPhone company. The Cupertino consumer electronics giant sold an astonishing 74.5 million iPhones in the final quarter of 2014, up from 51 million in the same quarter a year ago. But aside from that astonishing rate of growth—all the more impressive given the maturity of the product line—fully two-thirds of Apple’s revenues now come from iPhone alone.
“We’d like to thank our customers for an incredible quarter, which saw demand for Apple products soar to an all-time high,” Apple CEO Tim Cook said in a prepared statement. “Our revenue grew 30 percent over last year to $74.6 billion, and the execution by our teams to achieve these results was simply phenomenal.”
The one misstep for Apple was iPad: Yes, the firm sold 21 million iPads in Q4, but that was down from 26 million units in the same quarter a year ago, and revenues from iPad fell from $11.5 billion to $8.9 billion. Apple sold fewer iPads in 2014 than it did in 2013, and it sold fewer iPads in each of the previous three quarters than it did a year ago. Mr. Cook said that the refresh cycle for iPad was “longer” than that for iPhone, but that it was still a “strong business” for Apple.
Aside from iPad, Apple’s quarter was indeed magical.
“This volume is hard to comprehend,” Mr. Cook said about iPhone sales in a post-earnings conference call. Apple sold 34,000 iPhones every hour, 24 hours a day for the entire quarter, he added. The firm sold its billionth iOS-based device in the quarter (a gray iPhone 6 Plus for those keeping score at home), though of course many of those are no longer in use because of upgrades.
Furthermore, people are actually spending more on their iPhones than before, if you can believe that: the average selling price is now $687, in part because of the more expensive iPhone 6 Plus, and in part because of Apple’s scheme to get consumers to opt for more expensive iPhones with more storage. (the base iPhone only comes with 16 GB of storage, which isn’t enough for most people’s apps, games and content.)
If you still don’t understand how big the iPhone business is, consider the following: $51.2 billion of Apple’s revenues in the quarter were attributed to this one product line. That figure is roughly double the revenues that Microsoft reported ($26.5 billion) in the same time period. All of Microsoft.
Apple also sold 5.5 million Mac computers, up from the 4.8 million it sold a year ago, but flat with the previous quarter. Apple’s services—the iTunes Store, App Store and so on—generated $4.8 billion in revenues, up from $4.4 billion a year ago. And the firm’s nebulous “other” category—iPods, Beats and accessories—generated $2.7 billion, down from $2.8 billion last year.
Looking forward, Apple Watch is “on schedule” for an April 2015 launch (later than most expected, actually), and the firm’s Apple Pay system will expand this year as well. 2015 will be “the year of Apple Pay,” Mr. Cook said. But the biggest upside for Apple in 2015 is—wait for it—iPhone. Cook said that the iPhone upgrade rate was only in the “teens” from a percentage basis. This means there is plenty of life in the iPhone 6 life cycle, a ton of Android switchers still to come, and of course billions of people worldwide looking to get their first smart phone.
That’s great news for Apple. And terrible news for its competition.