Why Warren Buffett Sold: Apple Hasn’t Grown Revenue In Two Years, And It’s Struggling To Find Ways to Grow

Apple Inc. (AAPL), a tech giant renowned for its record-breaking iPhone sales and ecosystem loyalty, is facing a unique challenge: growing from an already monumental position. The company’s revenue has stagnated since its peak in 2022, totaling $391 billion over the last year—no higher than the previous year and nearly unchanged since 2022’s peak of $394 billion. This revenue plateau is raising eyebrows among investors and analysts, and it may shed light on why Warren Buffett’s Berkshire Hathaway (BRK.A)(BRK.B) recently scaled back its stake in Apple, its once most prominent holding.

Apple’s Growth Challenge

Apple’s financial trajectory over the past four years showcases an impressive rise to dominance, but the numbers now suggest a leveling off. Between September 30, 2021, and September 30, 2022, Apple saw robust growth, climbing from $365.8 billion in total revenue to a high of $394.3 billion. However, subsequent annual totals have shown little movement. Apple’s most recent revenue, for the trailing twelve months ending September 30, 2024, remains steady at $391 billion, mirroring the previous year.

This slowdown is a stark contrast to the previous decade, when Apple saw rapid year-over-year increases fueled by successful iPhone releases, expansion in China, and strong sales in wearables and services. The company now faces a saturated smartphone market, with less room to drive growth in its core products. This challenge is compounded by intensifying competition in global markets, especially from Android manufacturers in Asia, and regulatory headwinds that threaten to limit its ecosystem’s dominance.

Buffett’s Strategic Move: A Sign of Limited Growth Expectations?

Apple’s recent financial stagnation may have caught the attention of Warren Buffett, who has long favored companies with strong growth potential and a competitive moat. Over the past decade, Buffett’s Berkshire Hathaway became one of Apple’s largest shareholders, with Apple once making up over 40% of Berkshire’s equity portfolio. Known for his “buy and hold” philosophy, Buffett’s decision to sell nearly half of Berkshire’s Apple stake has surprised many.

For Buffett, a value investor focused on long-term growth, Apple’s plateaued revenue may signal limited opportunities for further appreciation. As Apple reaches the upper limits of its market potential, its stock may no longer offer the substantial returns that originally attracted Berkshire Hathaway.

Apple’s Prospects: Diversification Efforts and Market Realities

In response to these challenges, Apple has increasingly focused on services, including subscriptions and advertising, to offset slower iPhone growth. It has also pushed into new markets such as health technology, augmented reality, and even an electric vehicle experiment. Despite Apple’s efforts to diversify, significant revenue increases from these initiatives remain elusive, and most recent launches have been considered a flop or complete failure.

In February, Apple announced internally its plan to scrap its electric car project after spending nearly a decade on the project and spending billions. 

Around the same time, Apple launched its Vision Pro, a virtual reality headset that many anticipated would take over the market and take VR mainstream. However, the project was a flop, with Apple expecting to sell under 400,000 headsets per year. Apple was criticized for its clunky design, expensive price tag, and lack of features when compared to Meta Platform’s Oculus. 

Even iPhones have been the center of controversy as the tech giant continues to re-release phones with largely the same features but higher price tags.    

The slow growth environment in tech has made the tech sector as a whole more vulnerable to market shifts. With Apple’s valuation priced for high performance, a lack of growth could expose the stock to sharper corrections, another factor that might have led Buffett to reduce his exposure.

Conclusion: Apple’s “Success Trap” and Buffett’s Calculated Exit

Apple’s recent performance illustrates a challenge few companies ever encounter: the difficulty of scaling further when already at the top. With a market cap approaching $3.5 trillion, Apple's substantial revenues face mounting pressure to increase, yet they remain constrained by saturated markets and competition. For Buffett, who values companies with consistent growth, this revenue plateau may have signaled it was time to rebalance.

As Apple navigates its next chapter, it will need to balance its historic success with the realities of slower growth. For investors, including Buffett, the company’s future may hold fewer surprises, even as it remains a symbol of unparalleled success in the tech world.