Apple Watch is soaring right now, but the same can’t be said for all its competitors.
Fitbit, which preceded Apple in the wearables field, has reported its latest quarterly earnings — and they’re not as good as hoped for. Fitbit’s smartwatch revenue decreased 27% year-over-year. That was partly due to “weaker than expected” sales of the Fitbit Versa Lite Edition.
Although revenue increased 5% year-over-year to hit $314 million, this was in other areas not so directly competitive with Apple. While Apple has made the smartwatch more mainstream than ever, it seems to be shrinking the market for rivals. That’s exactly what happened with devices like the iPod in the past, which quickly became a giant-sized hit in an otherwise non-spectacular market.
As a result, Fitbit has revised its earnings for the next quarter. It has cut its projections to around 10-15% lower than they were during the same period in 2018. In a press statement co-founder and CEO James Park tried to reassure investors.
“While we are disappointed to lower guidance for the year, we remain confident in our long-term transformation strategy and have demonstrated good results across key areas of the business. We saw growth in devices sold, increased active users and continued growth in our Fitbit Health Solutions channel, up 42% in the first half of 2019. In addition, we have made progress in diversifying our revenue towards building more predictable, recurring revenue streams with the launch of our premium services in two test markets.”
Apple vs. Fitbit
Apple surpassed Fitbit in the wearables market in the first half of last year. Since then, it has continued to go from strength to strength. According to Counterpoint Research, Apple Watch shipments grew 22% in 2018. This was largely thanks to the “star performer” that was the Apple Watch Series 4. The firm claims that Apple sold 11.5 million units in 2018, making it the year’s best-selling smartwatch.
During this week’s earnings call, Tim Cook noted that Apple’s wearables business is now bigger than 60% of the companies in the Fortune 500. Wearables are also a bigger business for Apple than even the iPad.
While Fitbit is one of Apple’s biggest challengers in this domain, it’s clearly feeling the effects. That’s despite Fitbit’s CFO last year saying that, “I have yet to meet anyone who owns an Apple Watch who’s passionate about the product.”