Apple Is Selling More Expensive iPhones, But Why Are Sales Slowing?

Apple’s (AAPL) fourth-quarter earnings are in and while it beat investor estimates, the company showed a 7 percent share decrease despite increasing the cost of its iPhones to boost sales. Apple has been a strong competitor in the smartphone space with a traditional $1 million market cap keeping it at the forefront, but sales are lagging and may continue to do so.

Fourth quarter estimates for the company were at the $93.02 billion mark, which Apple predicted would be slightly lower in the range of $89 to $93 billion.

With the average price of an iPhone selling at $793, one would guess that Apple would be in a better position to increase revenue, but the company has reported flat iPhone sales year-over-year, keeping it at a modest growth for the last few quarters of 2018. Total iPhone sales are down to 46.89 million versus the 47.5 million estimates forecasted by investors, according to CNBC.

September brought Apple’s most expensive iPhones to date with the XS and XS Max priced at $999 and $1,449, respectively. Consumers are trending towards these higher priced smartphone models, but it may not be enough to bring the growth potential the company was hoping for.

Global shipments were down 8 percent in the third quarter versus the same time last year. While smartphones are becoming the norm, enticing new customers to buy an iPhone has become a challenge for Apple in a market that has matured and has little room for growth, according to CNBC.

With a stagnant growth market for its iPhones, Apple is transforming its business into a service-based model by focusing on subscription services for its 2 billion users. This could allow Apple to regain its strong sales numbers without a heavy reliance on iPhone sales. Apple released its service revenue numbers, which were up $10 billion – an all-time high for the company.

Apple did, however, report a quarterly revenue of $62.9 billion for the sales of all products. This was a 20 percent increase from Q4 2017. International sales accounted for 61 percent of the Q4 revenue from the company.

This will also be the last quarter that Apple will be so transparent about the individual sales numbers of its products, indicating that the iPhone, iPad, and Mac will be lumped into one reporting figure. According to Bloomberg, analysts think this may be a move to hide slow iPhone sales by the company while others applaud the new business model.