In the leadup to the iPhone X reveal last year, analysts were visibly salivating at the prospect of an iPhone upgrade “supercycle,” a tidal wave of profitability that would sweep Apple stocks to never-before-seen heights and truly enthrone Apple as the king of all smartphone makers.

By now, nearly six months after the iPhone X release, it’s clear that the supercycle isn’t going to happen. According to everything we’ve seen so far, iPhone X sales will turn out to be decidedly meh, and the real success story of the year is the iPhone 8 and iPhone 7.

But analysts aren’t panicking just yet, and that’s all thanks to Apple’s other revenue streams. Smartphone sales are down across the board, and it seems that the growth elevator that Apple’s iPhone division has been on ever since 2007 has come to an end. Everyone who wants a smartphone has a smartphone, and thanks to a relative lack of innovation, people are holding onto their devices for longer than ever. iPhones will be important for Apple going forward, but the company is more than just one product.

The bigger question now is whether Apple can keep ramping up revenue from other sources, most importantly its services division. Apple Music, iCloud, and the App Store have all been quietly increasing revenue, to the point that Wall Street is expecting $8.4 billion in services revenue, according to the Thomson Reuters consensus. Amit Daryanani, an analyst at RBC Capital Markets, says that they “think the magnitude of investor negativity is likely overdone,” and still thinks that Apple will be able to pick things up, based on “1) Gross margin upside from cost downs, NAND tailwinds & yield efficiencies, 2) Services growth, & 3) Capital allocation.” With any luck, Apple will be able to increase its profit margin on the iPhone X, so even if sales don’t pick up, investors will be happy.

Apple will report its earnings after market close tomorrow, with an investor call to follow at 5PM ET.

 

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