Apple Q4: The Apple Watch Dilemma—Corporate Growth Hides Lagging Wearable Revenue
Apple’s latest Q4.2025 earnings were excellent overall.
The Wearables, Home and Accessories segment told a more nuanced story, reporting a marginal revenue decline of -0.3% YoY ($9.01B vs. $9.04B year-ago, though it beat the $8.31B analyst consensus – a glimmer of positivity).
The muted narrative suggests no exceptional good news story:
- Management focused heavily on AirPods Pro 3 and AirPods 4, hinting that strong early sales of the refreshed models provided much-needed momentum to the category.
- In contrast, statements about the Apple Watch Series 11 and the Watch Ultra 3 were generic. The lack of any specific Ultra 3 mention is notable, suggesting either soft performance or a lack of new, compelling features to encourage take-up for the high-end model compared to the previous year.
Key Apple Watch Positives & The ‘Halo Effect’
Despite the revenue softness, the underlying consumer metrics for the Watch remain powerful:
- Record Installed Base: Management confirmed the Apple Watch active installed base is at an all-time high.
- High Satisfaction: This installed base is highly engaged, backed by 451 Research, citing a 96% satisfaction rating. This figure is a direct rebuttal to the mocking of non-Watch owners over battery life performance, suggesting core users value other features (health, convenience) more highly.
- New User Influx: The most significant reveal was that half of all Watch buyers in the quarter were new to the product. This fact ties into the observed Gen Z fitness market growth and similar trends reported by competing brands. The Apple Watch may successfully drive the entire smartwatch market expansion, using its lower-end models and generational upgrades to attract new users.
Conclusion: A Growth Problem, Not a Demand Problem
Despite a strong influx of new users and high satisfaction, the overall segment’s flat revenue indicates a challenge with the Average Selling Price, plus a drag in upgrade sales from existing users. The lack of enthusiasm for the high-end watch models (like the Ultra) suggests that Apple may need a more impactful hardware innovation to reignite revenue growth from its mature installed base rather than just relying on the ‘halo effect’ of new buyers.
Apple Watch is an awesome product, clearly loved by its owners. Apple needs to paint a picture or give hope about its future awesomeness. I’m not seeing it right now.
Source: Apple.com
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