Apple Is Innovating Towards An Augmented Reality Future

While terming Apple Inc. AAPL as a pioneer of the mobile-first world in we live today, Loup Ventures’ Gene Munster said in a report Q1 2017 results indicate “the company is driving towards a future where natural user interfaces (e.g., Augmented Reality) replace the smartphone as the dominant computing platform.”

Munster mentioned that Apple is innovating towards an Augmented Reality [AR] future and is focusing its efforts on the Services business, which will be “increasingly important” once smartphones cease to be the primary computing platform.

Results Highlight AR Future

Apple reported 78.3 million in sales of iPhone units for the quarter ended December 2016, beating Street expectations of 77.4 million.

“The iPhone 7 Plus was the star of the quarter, driving ASPs [average selling prices] to an all-time high of $695,” Munster noted, adding that this device would be the company’s “most powerful driver” in gaining a lead among AR devices for a broad user base.

The iPhone 7 Plus indicates Apple’s transition “from a mobile-first company to a company with a strong position in an AR-centric world,” the analyst mentioned. He expects AR-capable wearables to eliminate the need for smartphones in the next ten years. This would be a time when Services revenue would become “even more important.”

Apple reported 18 percent year-over-year growth in Services business to $7.2 billion, beating Street expectations of 17 percent growth. Tim Cook said he expects this business to double in the next four years. If this happens, the Services segment would constitute ~25 percent of Apple’s total revenue, Munster noted.

“This revenue [from the Services business] is very important as mobile devices become less important and AR-capable wearables become the dominant computing devices,” the analyst pointed out.

In an interview with Benzinga, Munster said Apple’s transition to AR could “create some anxiety for investors,” while expressing confidence around Apple being able to ultimately “come out on top” and retain its position among the world’s leading tech companies.