“Judging from the pundits, the sky has started to fall on Apple’s halcyon days,” Matt Asay writes for ReadWrite. “One analyst goes so far as to say that ‘the only thing that is plainly clear concerning Apple is that it has saturated the market with its legacy, hardware products and largely achieved its total addressable market.'”
Asay writes, “The truth, however, is very different.”
“What this analyst and others seem to be missing is that the future for Apple’s iPhone business has less to do with hardware and more to do with services,’ Asay writes. “[Apple’s] second largest revenue-generating category in the quarter was “Services,” or things like App Store sales, Apple Music, and Apple Pay. Each of these businesses is soaring, and isn’t dependent on stratospheric sales of devices to grow.”
Read more in the full article here.
MacDailyNews Take: And only Apple has all of the pieces required.
Our installed base of over 1 billion active devices continued to grow strongly. We added a huge number of Android switchers and new-to-Mac customers, and we generated very strong growth from Services…
Services… was our second largest revenue-generating category during the quarter. Setting aside the amount we received from a patent settlement in the December quarter, the March quarter Services revenue was our highest ever. Services revenue jumped 20% to $6 billion. App Store revenue was up 35% to beat last quarter’s all-time record. And Apple Music continues to grow in popularity, with over 13 million paying subscribers today. We feel really great about the early success of Apple’s first subscription business, and our Music revenue has now hit an inflection point after many quarters of decline.
The Services business is powered by our huge installed base of active devices, which crossed 1 billion units earlier this year. As we discussed on this call in January, those 1 billion-plus active devices are a source of recurring revenue that is growing independent of the unit shipments we report every three months. In fact, the purchase value of services tied to our installed base was a record $9.9 billion in the March quarter, up 27% over last year, accelerating from the 24% growth rate we reported in the December quarter.
The reach of Apple Pay also continues to expand following a very successful launch in China in the March quarter and last week’s rollout in Singapore. Apple Pay is growing at a tremendous rate, with more than five times the transaction volume of a year ago and 1 million new users per week. There are more than 10 million contactless-ready locations in the countries where Apple Pay has launched to date, including over 2.5 million locations now accepting Apple Pay in the United States, and more expansion of Apple Pay is coming soon. — Apple CEO Tim Cook, April 26, 2016
SEE ALSO:
Spotify dims as Apple Music shines – April 27, 2016
Apple services now reach 124 million U.S. adults as user base expands – April 21, 2016
Apple’s services business saw massive 60% profit margins in 2015, more growth expected – April 20, 2016
Credit Suisse: Apple’s underappreciated services business could be growth engine – April 4, 2016
Apple highlights services in search of Wall Street’s love – January 26, 2016
Apple reaps $18.4 billion quarterly profit, the largest ever recorded by a single public corporation – January 26, 2016
Apple beats on earnings; sets all-time records for revenue, net income, and EPS – January 26, 2016
MacDailyNews presents live notes from Apple’s Q116 Conference Call – January 26, 2016
Apple beats Street with all-time record quarterly earnings – January 26, 2016
Service revenue is also very high margin, and becomes even more profitable as it scales up.
Yup 9-10 billion today.
Apple total revenue is 200 billion plus.
Apple has to be strong in all areas. Not shift between here and there. Hardware/goods , software and sevices!
True, but Services always depends on a steady stream of *new* customers to grow .. and if you allow your hardware to stagnate and sales drop off a cliff, your existing customer base isn’t going to renew, but go to a competitor – –
– – and take their recurring Services revenue stream with them.
Bottom line: without a constant stream of returning customers (existing + new), the foundational basis for any Services business model shrinks and ultimately implodes.
Are you sure about that? App and music sales pay out 70% to the content owners. If Apple are not counting that as revenue then the remaining 30% will include distribution costs, credit card fees etc.
Revenues are key for services since there are fixed costs for the system.
Let the flaming begin!
As a rather large holder of AAPL (not Icahn-sized, but significant), I can only hope for the company to go private soon . . . very soon. They have the capital right now to leverage a self-repurchase, and god knows they’re doing nothing else with that pile of money. An offer anywhere near $100 per share and we’re out forever. We’ll continue buying Apple products, or course. But enough–enough–of this volatility and pain.
And now one star/one star/one star/one star . . . .
That might possibly be the best idea I’ve ever heard for how Apple should use it’s cash reserves!!
Really you brain dead moron. The cash reserves CANNOT be used to take apple private. that cash already belongs to the shareholders. you will need complete outside money. that said, its possible to leverage the cash and the brand to get a loan big enough to take apple private. gosh I hope that happens in the near future so I can get the f out of AAPL stock at a decent price.
Idiot, He’s God. You do not own AAPL.
AAPL will not go private. Period.
>Apple’s first subscription business
I guess eWorld doesn’t count.
The author seems to think that because the U.S.S. Apple is sinking slowly that this is a good thing. I would agree. It’s much easier to save a floundering ship than salvage one resting on the bottom.
You totally relate to those things “resting on the bottom” as a floundering bottom feeding scavenger. Brainless Joe from Hannibal, MO.
I see that your have no aversion to publicly embarrassing yourself. Keep it up, I always could use a good laugh.
It’s always worked for idiots like you.
Publicly embarrassing yourself is your forte, don’t stop now.
Certainly it doesn’t stop you. By now you’ve amassed a PhD in lifelong embarrassment. Richly deserved.
Say hi to your mom for me.
Helpful constructive criticism just isn’t possible in your low level of intelligence capability. It must be lonely being a lifelong clueless pariah. Misery loves company and in your case it’s the only company you got.
BTW I don’t completely disagree with some of the things you say, just how you brainlessly say them, contributing nothing to the conversation and sounding like a buzzing gnat in our ears – to be summarily swatted away.
“We added a huge number of Android switchers…..”
The market share figures point to the opposite happening. There was never any increase big enough in Apples market share and fall in Androids to justify this and now Apples share is falling and Android increasing in a flat market it seems it is IOS users switching to Android.