This is Apple’s rocket fuel

“Last week featured WWDC 2018, Apple’s annual developers event that took place in San Jose, California,” D.M. Martins Research writes via Seeking Alpha. “Amid a wave of interesting news and updates that included the launch of iOS 12 and AR Kit 2.0, one piece of information that I find very relevant to investors may have gone unnoticed: revenues earned by iOS developers have reached $100 billion inception-to-date (i.e. since the App Store’s launch in 2008), according to CEO Tim Cook.”

“Apple is primarily a device manufacturer that generates about 70% of its revenues from the sale of iPhones,” Martins writes. “But in the not-too-distant future, a very significant chunk of Apple’s profits will come from high-margin sales of services and software to an increasing installed base – the total number of iPhones, iPads and other gadgets in operation increased to 1.3 billion in February 2018 from 1.0 billion only two years ago”

“The updated developers’ earnings figure of $100 billion suggests, per my estimate and relying on a couple of assumptions about revenue sharing arrangements, that App Store revenues are on track to grow at a healthy 33% pace this year,” Martins writes. “Should my extended projections prove accurate through 2020, the year by which Apple has committed to doubling Service revenues from 2016 levels, I believe App Store revenues to Apple (i.e. excluding the larger chunk that is passed on to developers) will come very close to $25 billion annually, in a clearly positive trend… Services, led by the App Store, is Apple’s rocket fuel.”

Read more in the full article here.

MacDailyNews Take: Yes, Apple’s Services (which include revenue from Digital Content and Services, AppleCare, Apple Pay, licensing and other services) are a meaningful contributor to Apple’s bottom line today and will only grow in importance.

Apple’s services revenue rose 31% year over year to $9.19 billion in the fiscal 2018 second quarter ended March 31, 2018.

Morgan Stanley: Buy Apple shares on the ‘emerging power’ of its services – May 24, 2018
Apple as a service: Services offer growth, visibility, and profitability – May 15, 2018
AAPL’s paradigm shift – May 11, 2018
Apple Services: The nitrous in Cupertino’s profit engine – November 27, 2017
Inside Apple’s massive services results – August 9, 2017
Misunderstanding Apple Services – August 7, 2017
Dispelling the Apple Services myth – May 3, 2017
Apple’s Services business: $7 billion in revenue last quarter alone – May 3, 2017
Apple’s Services (App Store, Apple Music, Apple Pay) business is an unstoppable juggernaut that’s still just gathering strength – May 3, 2017

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