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Look How Much More Profitable the iPhone Is Than Android

Source: Compiled by author using reports from Apple and Oracle via Bloomberg.

Of course, this isn't exactly an Apples-to-apples comparison, so to speak. Those numbers don't include the revenue Apple generated from the App Store, iTunes, or iAd thanks to the iPhone. Additionally, Android revenue and profits include tablets and other devices. On the other hand, it only looks at Google's share of the Android ecosystem and doesn't include profits from device sales.

But even while Apple has sold a small minority of all smartphones over the past eight years, it's managed to take a majority of the industry's profits. In the third quarter of 2015, Canaccord Genuity estimated that Apple took a staggering 94% of all smartphone operating profits.

Its next closest competitor, Samsung fell to just 10% of profit share, while some manufacturers posted negative operating profits. Samsung has had trouble selling its high-end devices, and the average selling price of its smartphones that quarter was just $180. Meanwhile, Apple is experiencing increasing ASPs, with the iPhone reaching $690.50 last quarter, up from $670 the quarter before.

Even factoring in the profits from Google's hardware partners, the iPhone is much more profitable than Android.

Hidden profits

Oracle's report only details the direct benefits Google receives from Android -- app sales and advertisements. What it doesn't consider, however, are the indirect benefits Google sees from Android.

Android made it possible for phone manufacturers to proliferate inexpensive smartphones, which caused an explosion in the number of people with access to the Internet. What's more, smartphones are on us all the time, which means we use the Internet more than we did before. As a result, the number of search queries on Google, and the ad impressions from Google's network partners, grew significantly over the past eight years, much to Google's benefit.

Last year, Google announced that it now sees more search queries on smartphones than on desktops and laptops. Although mobile search and display ads typically carry lower prices than their desktop counterparts, it's a revenue stream that hardly existed for the company last decade.

It should be no surprise, then, that Alphabet's market cap is just 8% lower than Apple's. While the iPhone has been tremendously profitable for Apple, it's now facing slowing (even negative) growth after years of hypergrowth. Analysts expect Alphabet's sales growth to slow down at some point in the future as well, but it's still expected to post numbers well above Apple's low-single-digit revenue growth for next couple of years.

That doesn't make Apple a bad ... apple. On the contrary, iPhone sales throw off tons of cash and will continue to do so for the foreseeable future. With the cash cow, Apple can reinvest in R&D while continuing to raise its dividend and share buybacks.

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The article Look How Much More Profitable the iPhone Is Than Android originally appeared on Fool.com.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adam Levy owns shares of Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool owns shares of Oracle. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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