Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

The Impressive Growth of the Apple Watch

By Ashraf Eassa - Nov 10, 2017 at 5:06PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Apple's wearable computing device business is now the size of a Fortune 400 company.

Back in late 2014, Apple ( AAPL 0.83% ) introduced its first wearable-device product, the Apple Watch. The device, though limited in functionality, proved to be relatively successful.

Since then, Apple has continued to improve on the Apple Watch, bringing out models with faster processors, more sensors, improved display technology, and -- most recently, with the Apple Watch Series 3 -- support for LTE connectivity.

A line up of Apple Watches.

Image source: Apple.

That relentless pace of innovation is clearly paying off, as Apple's most recent financial results indicated.

Huge growth

On the call, Apple CFO Luca Maestri said the Apple Watch enjoyed unit growth "of over 50% for the third consecutive quarter."

Adding some additional color, Maestri said the company's "entire wearables business was up 75% year over year in the fourth quarter" and noted that for the entirety of its fiscal year 2017, the business "already generated the annual revenue of a Fortune 400 company."

Now, that Fortune 400 tidbit doesn't tell us exactly how big the Apple Watch business is, but it does tell us that it generated at least $6.7 billion in sales during that period. That's the revenue of No. 400 on the Fortune 500 list.

The Apple Watch still doesn't generate anywhere near the kind of revenue its iPad and Mac businesses do, let alone what its services or iPhone businesses do, but the category is still quite young, and the trajectory still looks great.

The future

It's not clear how long Apple can sustain the 50%-plus quarterly growth rates that it has enjoyed in its Apple Watch business, but I do think that with a continued, relentless pace of innovation, it can continue to enjoy double-digit percentage revenue growth in the Apple Watch for many more quarters.

It might not be a stretch to see total Apple Watch revenue begin to rival that of the iPad or even the Mac in due course, especially as those two product categories aren't growing at anywhere near the pace the Apple Watch is.

The good news for Apple is that there's still plenty more room left to improve the device from both hardware and software perspectives. The processing power Apple can cram into future Apple Watches has plenty of room to grow, which could lead to a corresponding increase in the richness and variety of the applications that'll run on them.

There are also opportunities for battery life improvements, even under relatively high-stress conditions, such as streaming music over LTE, as Apple and its suppliers improve the efficiencies of the technologies that go into future Apple Watches.

On top of that, Apple could explore adding new features such as a camera, improved haptics, and better display technology. 

Beyond technology improvements, Apple may eventually introduce form-factor changes that could further boost the appeal of the device, especially to more fashion-conscious buyers. However, considering Apple is still ramping up the features and capabilities of the Apple Watch, my guess is that Apple will prioritize feature enhancements over form-factor changes early on.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$176.53 (0.83%) $1.45

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
652%
 
S&P 500 Returns
145%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/09/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.