Skip to main content

Once upon a time, an iPhone was the most sought-after fashion accessory of every cool kid on the block.

That's the longstanding cliché about Apple (AAPL) - Get Apple Inc. Report fans, at least, and one that's paid off handsomely for Apple and its shareholders. Apple sold 216.76 million iPhones last year. Between 2008 and now, iPhone sales have swelled from less than 10% of Apple's total revenue to about 62% as of last quarter, and in that time, Apple's stock has skyrocketed roughly 900% and is inching towards a $1 trillion market cap.

TheStreet will be live-blogging Apple's report and call on Tuesday after the close. Please check our home page then for more details.

But the underlying trend is changing. The iPhone X -- Apple's ultra-premium model that it rolled out last September, also marking the 10th anniversary of the device -- hasn't exactly lit the world on fire. iPhone X sales have been under the microscope since supplier reports suggested weak demand for the $1,000-and-up phone last holiday season.

"If I were to compare it to some years ago, when Steve Jobs was still with Apple, then yes -- the coolness factor has gone down," says analyst Tom Forte of DA Davidson.

Even the most devoted iPhone users aren't rushing to drain their wallets on the latest and greatest from Apple. Logan Abbott, who runs the popular smartphone comparison engine Wirefly, says that the iPhone still dominates among his site's users, included in 54% of all searches, as opposed to 16% for the comparably-priced Samsung (SSNLF) Galaxy and Note lines. But interest in the iPhone 8 and 8 Plus outshines that for the iPhone X, with the latter included in only 20% of all iPhone searches.

"Prior to its introduction, I think expectations were too high. We thought it was going to be a game-change; it ended up being more incremental," Forte adds. "It's becoming increasingly difficulty to have a wow factor."

Scroll to Continue

TheStreet Recommends

That, combined with overall market saturation of smartphones compared to a few years ago, mean that users aren't as jazzed about some of the features exclusive to the iPhone, like a 'super-retina' display, FaceID and lack of home button.

What was heart-stopping passion in 2008 has settled into plain old routine: "Most iPhone users are so tied into the Apple ecosystem that they don't even bother looking for another manufacturer that will cause them to have to learn an entire new operating system," says Abbott.

Accordingly, Apple is using its resources to double down on that ecosystem, emphasizing its 'services' segment -- which includes iTunes, App Store, AppleCare, iCloud, Apple Pay. In May, Apple reported revenue of $9.2 billion from that segment and has been also spending big to build out a yet-to-be-announced media streaming service, possibly with Oprah Winfrey anchoring it.  

Apple's iPhone vs. services quandary is igniting debate as Apple prepares to releases its Q2 earnings on July 31 after market close, with some analysts welcoming a post-iPhone paradigm shift for Apple and others, like Forte, expressing some worry that Apple isn't ready for a future where "your phone isn't the control center of a connected universe," with devices such as Amazon's (AMZN) - Get, Inc. Report Echo and Google (GOOGL) - Get Alphabet Inc. Class A Report Home on the rise.

Either way, it's clear that Apple's future isn't riding on ever-tinier bezels and dazzling displays. 

"Cool is less important today as being connected all the time; it's almost a mission-critical issue, not a cool thing anymore," said Allen Adamson, a professor at NYU Stern School of Business. "When your phone breaks, you want to go to an Apple store and have someone in a blue shirt hand you a new one." 

For a phone-addicted generation there might be nothing cooler than a solid battery life and a readily available customer service department. 

Either Apple just isn't as cool as it used to be -- or its users are just growing up. 

Alphabet, and Apple are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells FB, GOOGL, AMZN or AAPL? Learn more now.