Evercore: Apple's iPhone replacement cycle has grown to 39 months, but it's OK

Each month adds or subtracts 7.5 million units, says analyst Amit Daryanani.

The iPhone replacement cycle is the most commonly discussed Apple data point along with services growth, but we think install base growth should be the KEY metric to focus on.

We estimate replacement cycle for iPhone users has grown to ~39months (each month adds/subtracts ~7.5M units). Despite the longer replacement cycle and declining unit sales, iPhone install base continues to grow with Apple noting it currently stands at ~900M.

Our analysis implies a new iPhone install base of ~650M, indicating there are ~250M used iPhone users. We think the base of used buyers has doubled from ~125M in 2015 as both carriers and Apple have pushed more favorable trade-in plans and new iPhones have become more expensive.

We see a robust used market as a positive for new iPhone sales as it supports demand for new phones by enabling better trade-in offers, while also bringing new users into the ecosystem – eventually bolstering the services and wearables narrative. Net/Net: We think sustained growth in install base (900M+ counting), limited churn and high engagement rates are key to ensuring AAPL can continually monetize their 900M+ iPhone install base via both services and wearables assets.

Maintains Outperform rating and $253 price target.

Cue the chart:

Apple replacement cycle evercore

My take: Keep your eye on the grey bars.


  1. Gregg Thurman said:
    Absolutely f*cking outstanding (as sailors the world over would say), an analysis that addresses iPhone unit sales that take into consideration the totality of the iPhone market (new/used) and the impact of one against the other.

    October 28, 2019
    • Mark Visnic said:

      The analysis is something far less than outstanding. This analyst doesn’t account for growth of the installed base at anything close to a reasonable rate. The installed base is growing faster than the graph depicts because of the aspirational brand strength of the iPhone. Incremental new iPhone sales to new iPhone customers who leave Android are not part of the “replacement” cycle (until after their first buy). It is the new to iPhone buyers who goose the growth of the installed base.

      And, I expect the replacement cycle lengthening comes from those aspirational iPhone driven purchasers. Existing iPhone users have a greater propensity to add every 1-2 years.

      October 29, 2019
  2. Dan Scropos said:
    The replacement cycle lengthening to 39 months is a death sentence for iPhone competitors. After 3+ years in an ecosystem as good as Apple’s, combined with the stickiness of the associated Service offerings, there is virtually no chance that iPhone users will switch platforms.

    The lengthened cycle is also indicative of the spending being deferred elsewhere, like Services, Apple Watch and AirPods. This is better than a shorter replacement cycle. This locks people into the ecosystem far more. This was a great piece.

    October 28, 2019
  3. Robert Paul Leitao said:
    I’ve been singing this song for years. I’m glad the lyrics have been picked-up by at least one analyst on the Street. A robust market for pre-owned iPhones supports new iPhone sales while increasing the global base of iPhone users.

    In my view the average economic life of an iPhone handset has reached a practical limit as it moves beyond three years. This will support strong upgrade activity in FY2020 and FY2021. Services attachment rates are higher among users of newer iPhone handsets so strong upgrade activity also supports Services revenue segment growth as well.

    October 28, 2019
  4. John Butt said:
    The market size growing due to used AirPods is panning out in NZ.

    We bought new AirPods this morning and so I checked the secondary market. Gen 2 used AirPods are ~$230, while a gen 2 without wireless case is just $280.
    Unfortunately the AirPod Pro is $445, but the gap is tiny for a well used, older product.

    Ie our older but fantastic battery life AirPods will join the owner stats and the new ones have cost us very little extra. Battery life on the AirPods seems very long, possible due to recharging well before running low since you are always carrying a fast charger.

    October 28, 2019

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