If you follow Apple, then you likely know how popular the Apple Watch and the AirPods are today. My how things have changed. Both of these devices started their lives as targets of criticism and the butts of numerous jokes. Do you remember when the Watch was slow and didn’t do anything useful and the AirPods were the ugliest things ever? Fast-forward to today and the Apple Watch is the smartwatch market and AirPods set the standard for convenience and portability for wireless earbuds. Again, my how times have changed.
According to a research note from Asymco, Apple’s AirPods business is about to cross another threshold. The Apple Watch crossed the $4 billion mark last year, which put that device ahead of the peak of Apple’s iPod business in the mid-2000s. Now its the AirPods turn. Asymco believes that Apple’s AirPods and AirPods Pro will pass the same $4 billion mark next quarter. That’s a lot of wireless earbuds.
Take that $4 billion worth of Watches, add another $4 billion in projected AirPods revenue, combine them with the HomePod (obviously a lot lower) and all of your Beats sales and you have a category that is suddenly an earnings powerhouse that still has potential for a lot of growth. It’s hard to project too much about the HomePod until Apple actually does something else with it. However, the AirPods Pro shows that there is still opportunity for Apple to grow their wireless earbud and headphone business.
Along those same lines, Apple is broadening Beats’ range to suit a larger audience. I was never very interested in their products in the past because I didn’t prefer the sound mix and considered the products to be overpriced for what you got. Reviews of a lot of those products often read along those exact lines. However, after reviewing the Powerbeats Pro wireless earbuds and using the Beats Studio Pro wireless over the ear headphones for a while now, I am a convert. The sound quality is excellent and I feel like I got my money’s worth for both products. They are still expensive, but the feature sets are strong and the pricing and said features line up with comparable competing products.
Regardless of what Apple does with the HomePod, there is still a lot of potential for them in wearables. The existing hardware still has legs and revenue and profits should continue to grow as these devices mature. The Apple Watch will get slimmer and the battery life will improve. It will likely become a completely independent device, which could also open new doors for people who own Android phones to use one more easily. Smaller and better versions of the AirPods will undoubtedly come in the future, as will additional Beats devices. For example, the latest beta for iOS 13 has references for a new version of the Powerbeats Pro with new and better features.
There is also a lot of room for Apple to introduce new wearable devices. With the Apple Watch being such a big hit as a health, wellness and fitness device, there are opportunities for an entire market of accessories that pair with the Watch to handle specific kinds of health monitoring. So far, Apple has left this to third parties, but I can’t imagine that they will ignore those opportunities forever.
Then you have the most obvious wearable to come- glasses. Whether it’s this year, next year or the year after, it is no secret that Apple is preparing to make a huge splash in VR and AR. If they nail these products, they could blow the doors off anything mentioned above. The Watch and AirPods have gone further than most analysts expected and their growth will help to cushion the blow of declining iPhone revenues. However, AR Glasses have the potential to replace the revenue for the iPhone going forward. There are no guarantees that the market materializes or that Apple ends up successful in it, but as much research, development and emphasis as they are putting into VR and AR, I can’t see them failing.
So what is the ceiling for Apple’s wearables? Considering how far they’ve come and how much they have exceeded their modest early expectations, I believe they have the potential to be Apple’s biggest product category yet. Yes, even bigger than the iPhone. I’m not calling that shot yet, but the potential is definitely there. Only time will tell if that comes together, but for now, the sky is the limit.