The puzzle of Apple's wearables sales, solved

MAV, the pseudonymous author of the occasional AAPLTree blog, shows his math.

How much revenue do Apple’s AirPods, Watches and Beats accessories generate? Apple does not serve up that information without a struggle, but eight clues, scattered like breadcrumbs over four quarterly earnings calls, gave Mav just enough information to crack the code. The bottom line is this bar chart:

“I know, just a simple revenue chart’s kinda boring,” writes Mav in today’s post, “and seems like an anticlimactic way to end a connect-the-dots Apple financial ‘research’ post. So, sure, I can throw out some things that jumped out at me and add extra (entertainment) value.”

(1) The last eight quarters of Apple Wearables added around $17B of revenue, and the trailing four quarters represent a combined ~60% growth rate over the prior four-quarter period. Not only is that considerably better than the 37% or so combined growth from all of Other Products in that same period of time, it also implies that Other Product Non-Wearables is a relatively unexciting business for Apple in comparison. Yes, it’s an extrapolation of an extrapolation with all that implies, but Non-Wearables revenue growth over the same period looks to be mid-single digits, making it abundantly clear what set of products is breathing life into this revenue category.

(2) Apple Wearables, over the trailing four quarters, is approaching two-thirds of Other Products Revenues. “Clue 8” alone was all that was needed to arrive at this conclusion, but it’s a fun observation nonetheless given the semi-symmetry with iPhone, which tends to represent more than 60% of total Apple revenues in any given quarter.

(3) Bet you didn’t know this one – Apple Wearables, on a trailing-four-quarters basis, has quietly surpassed iPod’s all-time annual revenue record: $9.15B, set in FY 2008, if memory serves. It took iPod around seven years from an October 2001 launch to get to that then-unfathomable revenue level as a product family. Meanwhile, Apple Watch has been around for nearly 3.5 years, and the red-hot-selling AirPods are less than two years old. (Beats is tough to get a handle on, but it’s safe to say that the Beats wearables line will be directly influenced by – heck, be an extension of – the AirPods suite of technologies headed into the future.)

(4) The presumptive Apple Watch Series 4, with a potential assist from improved/redesigned AirPods sometime down the road, could continue Apple Wearables towards a $15B/year run-rate. That’s getting impressively close to the revenue scale of iPad, which is around a $18B-20B annual business for Apple these days.

(5) Perhaps most intriguingly, Tim’s provided a separate set of clues related to Apple Watch. Which, combined with somewhat-derivable Apple Wearables data, may yield specific Apple Watch revenue data points, or at least a handy means of spot-checking Apple Watch revenue/unit assumptions if that’s your game… Further breaking down Apple Wearables into Watch and Not-Watch is rather beyond my bandwidth at the moment. But given the surprising wealth of clues Apple management has left behind, maybe some of you can give it a try.

My take: This is good, solid investigative spade work, and it’s free! Available here and on Apple News.