Beyond iPhone 12 — Apple looking elsewhere for future growth

Apple Event iPhone 12
(Image credit: Apple)

Apple's clearly been trying to position itself as something other than The iPhone Company for a few years now. And Apple's fiscal fourth quarter performance announced yesterday (Oct. 29) illustrates why Tim Cook has been eager to not put all his eggs in a smartphone-shaped basket.

Revenue from Apple's iPhone business plunged 21% year-over-year for the three months ended Sept. 26, as the iPhone 12 launch got pushed back into October. Despite the hit on iPhone sales, Apple still posted record revenue revenue for the September quarter.

Instead, old reliable segments like the Mac posted record revenues for this particular quarter, as people snapped up MacBook Airs and MacBook Pros for the back-to-school (if still stuck-in-Zoom classrooms) shopping season. Revenue from services saw record numbers, too, while the iPad and wearables business posted strong gains.

In fact, ignoring the iPhone, Apple chief financial officer Luca Maestri told investors, Apple grew 25% in the aggregate, enjoying double-digit sales growth in every other category.

The iPhone, did you say? Huh, that name doesn't ring a bell.

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It's not quite that dire for the iPhone's fortunes. Up until mid-September, Cook said, demand for Apple's phones had risen by double digits, beating the company's own internal forecasts. At that point, phone shoppers snapped their wallets shut in anticipation of the iPhone 12 launch. 

The arrival of the iPhone 12 and iPhone 12 Pro this month — and the iPhone 12 mini and iPhone 12 Pro Max — figures to give Apple's holiday business a lift, though Apple isn't providing any concrete forecast for Wall Street on December quarter revenues. (Something about an ongoing global pandemic making such things hard to predict.)

Even with an added lift from the iPhone 12, it's clear that Apple has plenty to be excited about across its many product lines. In the rapidly expanding services segment, with the App Store, iCloud, Apple Music, and payments doing record business. Wearables, which include AirPods and the Apple Watch, brought in just shy of $7.9 billion, another record. Even the iPad segment, which had been flatlining a few years back, has seen strong growth, thanks to recent updates.

There's one number on the company's balance sheet that Apple didn't talk about with analysts, but that I think speaks volumes about the direction the company seems to be headed. Apple's operating expenses for its 2020 fiscal year included nearly $18.8 billion on research and development, a 16% increase from what the company spent in 2019. R&D spending in the September quarter alone shot up 21%.

Without giving away too much, I can tell you that this year has a few more exciting things in store.

— Tim Cook

What's Apple spending that extra money on? The company doesn't talk up future products during earnings calls with investors. But it's safe to assume that's not all going to things like future iPhone innovations. With rumors suggesting that Apple's working on everything from AR glasses to automotive products, that expanded R&D spending suggests that there's no danger of Apple's pipeline drying up anytime soon.

In fact, we could be in for more products sooner rather than later. Earlier this year, Apple announced plans to make its own chips for its computers, just like it does for phones and tablets. The first of those Apple Silicon Macs should arrive before year's end, possibly at a November launch event.

"Without giving away too much, I can tell you that this year has a few more exciting things in store," Cook said.

Philip Michaels

Philip Michaels is a Managing Editor at Tom's Guide. He's been covering personal technology since 1999 and was in the building when Steve Jobs showed off the iPhone for the first time. He's been evaluating smartphones since that first iPhone debuted in 2007, and he's been following phone carriers and smartphone plans since 2015. He has strong opinions about Apple, the Oakland Athletics, old movies and proper butchery techniques. Follow him at @PhilipMichaels.