Could Apple fall to earth with a bump?

Apple is already by far the largest public company in the world by market capitalisation. Its closing share price in New York yesterday gives it a value of more than $780bn (£590bn).

Following an after-hours trading surge overnight, its shares were set to open much more than six per cent at an all-time high this afternoon.

That's thanks to Apple's latest earnings report, which showed an increase in revenues for the three months to June of seven per cent to $45.4bn (£34.3bn).

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The tech giant's profit for the quarter, which Reuters says is "traditionally a soft one… as the market waits for the September launch of the new iPhone models", leapt by 12 per cent to $8.7bn (£6.6bn).

The strong performance – and the huge welcome from investors – largely reflects "better-than-expected iPhone sales" and the company confirming "its upcoming 10th-anniversary phone lineup is on schedule".

Herein the (potential) problem: Apple has become a technological behemoth thanks almost entirely to its pioneering smartphone. Its perceived performance is therefore judged almost exclusively on how many new iPhones it ships in a given quarter. But with increasing competition for smartphone customers, slowing sales in China and a shift in the technological focus to new fields, could the firm's fortunes be changing?

But with increasing competition for smartphone customers, slowing sales in China and a shift in the technological focus to new fields, could the firm's fortunes be changing?

Bumper iPhone sales

Emphasising the reliance on the iPhone, Apple announced yesterday that sales of the flagship product have risen by three per cent over the past three months to $24.8bn (£18.7bn), or significantly in excess of half the overall total.

The tech company's next quarter is its big one, including as it does opening-weekend sales of its new iPhone models, which are typically substantial following months of frenzied press build-up.

Apple have forecast sales of $49bn to $52bn (£37bn to £39bn) for the three months, suggesting they could beat analyst expectations of $49bn.

The smartphone is still the market leader, but observers are concerned that its unique appeal could be waning and that the threat posed by Google's Android, an operating system used on phones produced by a number of Apple's competitors, is growing.

Reuters also suggests that the comparatively bumper sales in this past quarter could reflect "that iPhone buyers may be less inclined than they once were to delay purchases until a new model is out".

While that might not sound like a huge problem, if it reflects a lack of enthusiasm for new launches it's likely to be a problem for Apple's business model.

Celebrating its 10th anniversary

This year is a big one for the iPhone as it marks the ten-year anniversary of the trail-blazing product.

"Apple is widely tipped to adopt higher-resolution... displays for the latest iPhone, along with better touchscreen technology and wireless charging – which could come with a $1,000 plus price tag."

Dave Lee, the BBC's North America technology reporter, says the new device is already being keenly awaited and that "we can expect anticipation for a big upgrade to… step into overdrive".

But this year is a one-off and recent trends suggest this level of interest is hard to sustain year after year.

There's also the issue of China, where local brands dominate and regulations limit the availability of certain apps. Once seen as the engine room of Apple's future iPhone growth, sales in China have fallen by 9.5 per cent to $8bn (£6.1bn).

Apple seems to recognise these issues and is keen to point out increases in a number of product areas, including the iPad (the number of units sold is up by 28 per cent) and the much maligned Apple Watch (sales are up by 50 per cent).

Services revenues, covering everything from the App Store to Apple Music, rose by a hefty 22 per cent to $7.3bn ($5.5bn).

Exploring new horizons

Apple faces an increasing number of competitors, says Adam Levy on The Motley Fool.

Revenues are largely driven by App Store downloads and are therefore tied to the fortunes of its smartphones and other devices, as well as to streaming and digital media downloads.

In recent years, Amazon, Comcast, Netflix and Spotify have earned substantial market share in areas like music streaming and video downloads – Apple's share of the latter has fallen from 50 per cent in 2012 to 20 to 35 per cent now.

"Apple's ability to dominate subscription sign ups the same way it did digital downloads five years ago is suspect at best."

So, if the tech company's two strongest areas – and its two largest-earning units – are under increasing pressure, what can Apple do to maintain its pole position?

According to the Financial Times, the earnings call after yesterday's results suggests Apple is using some of its prowess and pedigree in areas like voice recognition, through Siri, and its investments into Artificial Intelligence to create a "completely new business".

The company is thought to be about to launch a smart home speaker and it's also in the race to develop driverless cars. Some are speculating Apple could press ahead in areas like personal assistance robots.

This is where the iPhone helps. It's generating huge volumes of cash and building up huge research capabilities. This means that Apple has an enormous advantage over most of its peers in its efforts to break this new ground.

As Levy states: "It certainly has the cash to experiment."