Apple’s Services (App Store, Apple Music, Apple Pay) business is an unstoppable juggernaut that’s still just gathering strength

“Apple beat expectations Tuesday by reporting that it earned $2.10 per share in its fiscal second quarter, but missed on revenue of $52.9 billion in results released after the market close,” Etan Vlessing reports for The Hollywood Reporter. “Wall Street analysts were expecting Apple, which is led by CEO Tim Cook, to earn $2.02 a share, up 6 percent year-on-year, on $52.97 billion in revenue, according to a Thomson Reuters consensus estimate.”

“Services — which also includes Apple Music, App Store, iTunes, Apple Pay, and other content and licensing businesses and represents opportunities for future growth — saw revenue rise 18 percent to $7.04 billion,” Vlessing reports. “‘We’re happy to see the deep level of customer engagement with all of our services,’ Cook told analysts about the Services segment.”

Vlessing reports, “The Other Products category, which includes Beats, Apple TV and Apple Watch, saw revenue rise 31 percent to $2.87 billion.”

Read more in the full article here.

MacDailyNews Take: Apple’s Services business is a tremendous machine that hasn’t yet even begun to gallop.

Excerpts from Apple CEO Tim Cook during Apple’s Q217 conference call with analysts on May 2, 2017:

For the second quarter in a row, our Services revenue topped $7 billion, and it’s well on the way to being the size of a Fortune 100 company. We’re very happy to see the deep level of customer engagement with the Apple ecosystem across all of our services.

App Store momentum is terrific, with revenue growing 40% year over year to an all-time quarterly record. The number of developers offering apps for sale on our store was up 26% over last year, and we’re thrilled to see their success.

We also saw double-digit revenue growth from Apple Music subscriptions and iCloud storage and overall very strong growth in the total number of paid subscriptions for our own services and the third-party content we offer on our stores. Paid subscriptions now exceed 165 million.

Apple Pay is experiencing phenomenal traction. With the launch of Taiwan and Ireland in the March quarter, Apple Pay is now live in 15 markets with more than 20 million contactless-ready locations, including more than 4.5 million locations accepting Apple Pay in the U.S. alone.

We’re seeing strong growing usage as points of acceptance expand, with transaction volume up 450% over the last 12 months. In the UK, for example, points of acceptance have grown by 44% in the last year, while monthly Apple Pay transactions have grown by nearly 300%. In Japan, where Apple Pay launched last October, more than 0.5 million transit users are completing 20 million Apple Pay transactions per month. And we’re always excited to see our partners bring their customers new ways to use Apple Pay. You can now even send a Starbucks gift card via iMessage with just a touch.

Of course, there are several customers that subscribe to more than one of our services. There is some level of overlap, but the total number of subscribers is very, very large, obviously less than 165 million. But it’s very good for us to see the breadth of subscriptions that we offer and that customers are interested in. It’s a large number.

And if you remember, we quoted the same number a quarter ago and we talked about 150 million. So when you think about a sequential increase of 15 million subscriptions from the December quarter to the March quarter, it really gives you a sense for the momentum that we have on our content stores. It’s quite impressive to add 15 million subscriptions in 90 days.

As we look at the dynamics that are happening on our content stores, particularly on the App Store, which is the largest, we see fairly consistently two things. We see that the number of paying accounts is growing a lot. And I mentioned the increase in number of paying accounts that we value in this last 90 days is the largest that we’ve ever had. So this very large number of people coming into the ecosystem, experiencing the ecosystem, which is obviously improving all the time in quality and quantity, and then start paying and transacting on our stores, and that number is growing very, very strongly, strong double digits.

What we’re also seeing as we look at people that start paying on our stores, we see a pretty common trend over time. And we keep track of that across cohorts of customers, that as people come into the ecosystem and start paying on the ecosystem, we see a spending profile that is very similar around the world. People start at a certain level and then they tend to spend more over time. And so obviously, the combination of people spending more over time and adding more people that are now actually spending on the stores contributes to this 40% growth that Tim mentioned for the App Store on a year-over-year basis.

Excerpts from Apple CFO Luca Maestri during Apple’s Q217 conference call with analysts on May 2, 2017:

Turning to Services, we generated $7 billion in revenue, an increase of 18% year over year and our best results ever for a 13-week quarter. We’re very happy with the strong level of growth, especially given the tough compare to last year, as the busy week between Christmas and New Year’s fell within the March fiscal quarter a year ago but was included in the December fiscal quarter this year. As we said last quarter, our goal is to double the size of our Services business by 2020.

The App Store established a new all-time revenue record and grew 40% year over year. We continue to see growth in average revenue per paying account as well as the number of paying accounts across our content stores during the quarter. In fact, the quarterly increase in the number of paying accounts was the largest that we’ve ever experienced. And according to App Annie’s latest report, the App Store continues to be the preferred destination for customer purchases, generating twice the revenue of Google Play during the March quarter.

MacDailyNews presents live notes from Apple’s Q217 conference call – May 2, 2017
Apple Q217 earnings beats on EPS, misses on revenue – May 2, 2017


  1. That’s nice. I use few Apple services but I am a long stock holder. I just want a a real Mac Pro versatile workstation delivered specifically for pro’s and not a misguided and closed off Jony ives wet dream. You don’t get to pick what I need Jony and if you do prepare for the consequences.

    1. Seriously? And what do you think a new Mac Pro will do to Apple’s revenue? Nothing. It will be an insignificant amount. A rounding error – not even that. So, I’m not sure why an “investor” would even care about the Mac Pro?

      The consequences? What would that be? A few thousand Mac Pro users move to a Windows machine or a Hackintosh? So what? Get over yourself.

      Furthermore, Apple said they were developing a customizable Pro machine. So you’re obviously posting just to hear yourself complain.

      1. As you are anxious to get yourself down-voted. I never said anything about investors and how the Mac Pro effects Apple revenue. Looking for something to argue about that doesn’t exist? If desktop Mac’s would be paid more attention to it would indeed help the bottom line in ways that might surprise you (and them). Even Steve Jobs said he’d “exploit the Mac for all it’s worth” and so far Apple really hasn’t, completely ignoring the Enterprise market and being not only slow to upgrade but completely botching unwanted designs for their pro models.

        Consequences would be ceding the pro market to Windows and all the benefits therein. Listen Bunkie Apple was supported by the pro market during lean times and there is a certain cache and follow trickle through to pleasing and keeping pro users. Plus the amount of effort to make a perfectly acceptable pro level machine is infinitesimal compared to the effort expended on a new iPhone. With their resources there are just no excuses and no reasons to not offer several Mac Pro models (full and mini-towers).

        Okay so Apple said they are developing a new machine but we have no idea what that machine will truly be, be acceptable nor when we would be able to lay our hands on one even after available. This Johnny-come-lately attitude is NOT how you treat the pro market (or ANY market) when there are many other vendors who will bend over backwards for our sizable spending amounts, NOW.

  2. If you want to rent your content, go with gawd. Take it from an agnostic. Pandora is unprofitable as are SoundCloud, Tidal, LastFM. Spotify is hit and miss on profitability with over twice the user base of Apple’s rental rap. If Apple were to break out it’s Rental Music Service as a stand alone you would see it is in the same boat as their terms are similar to Spotify’s. In a world of Billions all the rental services combined have about 100 million suckers/users.

    Show of hands: who is eagerly awaiting Planet of the Apps? Your unborn child will be in College before it shows up at current rates. The Gold Standard for longform series video content in the USA is HBO and that is being bought by AT&T along with CNN, Cinemax, TBS, TNT, TCM, FilmStruck and the Warner Studio and TV/Film Library.

    Apple has never been good at services and still sucks at it. Remember eWorld, iTools, mobile Me, Ping?

    Apple Pay shows some promise, but the margins are razor thin. I still cannot pay my utilities with Apple Pay or a Mortgge or my Car Note, or my Insurance, or the co-pay at the Dentist or Doctor’s office. You can buy a hamburger and fries with it, but not your groceries. How long has Apple Pay been out? Does not seem like they have much fire in the belly.

    Apple is said to be launching a Siri based Amazon Alexa knockoff. Until it ships it is vaporware and color me skeptical considering how bad Siri is. Siri sometimes fails to find music on my iTunes in the Cloud Library- confusing audio tracks for movies and saying it cannot play movies in the car. Is Siri under Eddie Clueless Cue? It sure reeks of his incompetence.

    After all these years Pages, Keynote and Numbers are lagging Google and Microsoft in the document space. Who is the point man or woman for these products? With Apple’s headcount someone should be singularly responsible.

    Then we get to TV. Has Apple ceded the market to Google (YouTube TV), AT&T (DirecTV Now), Hulu (owned by Comcast, Fox, Disney and Time-Warner), Dish (Sling TV), Amazon and Netflix? It sure looks like it as Apple has been playing in this space longer than anyone else and is still fucking clueless as to how to proceed. The hour is getting late. AT&T is zero rating streaming data for DirecTV products on it’s network- something Apple simply cannot compete with for mobile and Comcast is doing the same for the streaming service they are rolling out in an increasing number of markets. While Apple pisses away Billions on stock buybacks and dividends their competition is running toward the goal line and only the punter stands between them and the goal line.

    I do not see a sense of urgency, a unified vision or a shred of innovation coming from Cupertino these days. I see an old Heavyweight fighter past Prime and trading on his rep. We know what Ateve Jobs, Avie, Bertrand, Jon and Tony did at Apple. What has today’s crew done other than Coast on the inertia of others?

    1. You’re entire rant is mainly about “content” which leads me to believe you spend about 85% of your free time with your fat ass planted on the couch watching all that “gold standard” content.

      “I do not see a sense of urgency, a unified vision or a shred of innovation coming from Cupertino these days”

      Urgency? Why does there need to be a sense of urgency? I wasn’t aware that Apple was on their last leg and about to go under. In fact, it’s just the opposite… they have the resources to take their time – and that’s what they’re doing. Don’t like it? Tough shit. Apple doesn’t owe YOU new products when you feel you deserve them.

      Unified vision? Are you blind? Just about everything they do is designed to enhance and expand their ecosystem.

      Shred of innovation? Seriously? They just produced the first product that contained an embedded version of iOS as a single feature. The Touch Bar is a full iOS device that seamlessly interacts with the MacBook which runs macOS. How is that not innovative?

      AirPods and Beats with the W1 chip? No other company has made an advancement in Bluetooth that can come close to offering the ease of use. How is that not innovative?

      Handoff/Continuity… I can leave my iPhone at home and take my iPad out. And anytime I’m connected to the Internet, I can receive and make phone calls via my iPhone. How is that not innovative?

      1. No, I watch little TV, but the cloud is about the generation, collaboration, distribution and consumption of content.
        Apple wants to be a services company so they can suck on your wallet like a Lamprey Eel. They learned it from Microsoft who also wants to rent you software and rented music long before Apple.
        In case you have not figured it out, the monetization of the Internet is via ads and the honeypot is content.
        So no, I do not sit on my ass all day. I walk 5 miles every day rain or shine and swim laps 5 days a week. I also ride my bike a couple of times a week.

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