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Apple's Wearables Business Is Seeing "Explosive Growth"

By Daniel Sparks - Nov 1, 2019 at 7:26AM

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Sales of the tech-giant's wearables devices soared once again in fiscal Q4.

For a second quarter in a row, Apple's ( AAPL 2.15% ) "wearables, home, and accessories" segment contributed more revenue growth to the tech-giant's business than any other segment. The segment's impressive momentum comes as sales of Apple's wearables products -- Apple Watch, AirPods, and Beats earphones -- are soaring.

The segment's strong performance in Apple's fiscal fourth quarter confirms that the company's latest wearable products are resonating with consumers -- a good sign for the segment as Apple heads into the holidays.

A woman wearing Apple's AirPods Pro, standing in front of a subway car

AirPods Pro. Image source: Apple.

A key catalyst

In Apple's fourth quarter of fiscal 2019, wearables, home, and accessories revenue jumped 54% year over year. Highlighting the segment's momentum, this is an acceleration from 48% growth in fiscal Q3 and 30% growth in fiscal Q2.

Even more impressive, though the segment is only about half the size of services and a fifth the size of iPhone, it contributed $2.3 billion of incremental revenue on top of the $4.2 billion it brought in for Apple in the year-ago quarter. The segment's total $6.5 billion in revenue, therefore, accounted for 10% of total quarterly revenue -- up from 7% of revenue in the year-ago period.

The segment's biggest driver, of course, continued to be Apple's wearables products. Revenue from wearables devices increased at a year-over-year rate "well over 50%" said Apple CEO Tim Cook in the company's fiscal fourth-quarter earnings call. Further sales of its wearables devices set Q4 records in every market the company tracks. The Apple Watch, AirPods, and Beats products all benefited from "phenomenal popularity," the CEO added.

"Our Wearables business showed explosive growth and generated more annual revenue than two-thirds of the companies in the Fortune 500," Cook said when summarizing the recent success of its wearables business.

More strong growth ahead

Looking ahead, there's good reason to believe Apple's wearables business will continue driving strong growth for the company.

Research company Gartner estimates that global smartwatch shipments will rise from 74 million in 2019 to 115 million in 2022 -- a forecast that suggests the market has plenty of upside ahead. Further, Apple's fiscal fourth-quarter data saying about 75% of Apple Watch buyers have never bought the device before suggests that these are still the early days for the product. 

The smart earphones market is even hotter, making a good bull case for Apple's AirPods. Gartner estimates that shipments of smart earphones will increase from 33 million units in 2018 to 158 million units in 2022. 

Given Apple's robust fiscal fourth-quarter sales growth in wearables and strong secular momentum in smartwatches and smart earphones, the tech giant looks poised to deliver more big growth in its wearables, home, and accessories segment over the holiday season.

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.

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