Apple’s AirPods continue to be a runaway hit but Wall Street is wondering just how much juice is left in the wireless headphones.
AirPods are expected to keep flying off the shelves well into 2020, Toni Sacconaghi of Bernstein said in a note Friday (via CNBC). But despite confidence for next year, the pricey wireless headphones could go the way of the iPad and see a rapid drop off in sales in later years.
The analyst notes that Apple could sell as many as 85 million AirPods next year, amounting to around $15 billion USD in revenue for the year. Saccanaghi also points out that if the growth continues into 2021 AirPids will become Apple’s third-largest business.
The strength of AirPods this holiday season is made clear when you see the difficulty stores are having when trying to keep stock levels high. Apple itself is struggling to provide AirPods and AirPods Pro to customers before Christmas and it’s been that way for some time.
However, despite all this Sacconaghi suggests caution should be in the air, especially if market saturation becomes an issue for Apple. “Given AirPods’ extraordinarily steep adoption curve and rapid saturation of the iPhone installed base, we see a dramatic deceleration in AirPods revenue growth by 2021 or 22, to single-digit growth rates or possibly lower,” he explains.
According to the note, there are roughly 900 million iPhones out in the wild, but only 650 million of them are first-hand, and there is some doubt that people who buy iPhones second hand would be willing to fork over the money needed for a set of AirPods to match. In Sacconaghi’s worst-case scenario, there are probably only 300 million audiophiles, based on his estimates of subscribers to Spotify, Apple Music, and other services, who will actively buy and update their AirPods.
Even in Sacconaghi’s best-case scenario, the drop off in sales would be dramatic. If 2020 sees a 110% increase in unit sales, 2021 may only see a 10% bump, he said.
“The faster they grow, the harder they fall?” Sacconaghi wrote in his note. “Growth tends to slow down a lot once you reach the top of the curve, and AirPods are simply growing so fast today that they risk reaching the top in record time.”