AirPods Pro Evidence of Apple’s Grander Vision for Wearables

AirPods Pro Evidence of Apple’s Grander Vision for Wearables

Apple’s release of AirPods Pro signals the company’s grander ambitions for the AirPods family, beyond maintaining its position as the best-selling Bluetooth headset. AirPods Pro “transparency mode” adds to features like “Hey Siri” and “magic” device pairing to create a new kind of personal computing experience – a category we call hearables. Ultimately, we foresee AirPods adding wellness features including activity tracking and biomarkers as a logical extension into higher ASP AirPods.

Our Takeaways:

  • We estimate AirPods will account for 3% of Apple’s overall revenue in CY19, growing revenue at 86% y/y. We believe Apple has sold 75m AirPods since its release through the end of Sep-19. We expect Apple to sell 50m AirPods in CY19, up from 28.5m last year.

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  • Apple is finding new ways to generate revenue from customers between iPhone upgrades. The $249 price point should net Apple approximately $210 per sale after factoring in retail discounts. This is a 51% increase from the AirPods base model, which has a list price of $159 and a net price of $139. We assume the current $199 wireless charging model accounts for less than 5% of AirPod sales.
  • We expect new colored AirPods sometime at the beginning of CY20. Consistent with the company’s well-honed strategy of adding color as a product feature. AirPods Pro in black or space gray is a no-brainer.

Disclaimer

Apple, Wearables