Is this a surprise?
No surprise here. I think the technology has reached a nexus of sorts. There's only so much more that a phone can do and incremental upgrades aren't compelling enough for most users to upgrade if the device they have still does everything they want. Couple that with a move from cellular providers away from phone subsidies and you have a scenario where people are now scrutinizing the value of a new $600-$800 smartphone.
When something new enters a market and there is no equivalent it is easy for there to be year-over-year increases in sales until you reach market saturation. Once that point is reached, older devices will need to be replaced and/or upgraded but this won't happen at the same clip as the initial adoption. Along with that, you now have a used device market that didn't exist previously and this will also drag on new device sales.
Wearables was supposed to be the next big "thing" but that hasn't been the case. I think that if we had better battery technology we'd have a stronger wearables market and higher adoption. Engineers have some really great ideas but are handicapped by a lack of reliable, portable, long term power.