Although Apple is primarily known as hardware company, it offers a wide range of services like iTunes, iCloud, Apple Music, Apple Pay, Apple Care, App Stores etc.Now we knew that services is a growing part of Apple’s revenue. We even guessed / estimated that this division was making substantial revenue for Apple. But when Tim Cook announced the actual numbers at last week’s earnings call, it left us completely stunned!
Market watchers are concerned about declining iPhone sales because it has been the standout performer for Apple in the recent past. As it turns out, Apple is more than making up the numbers through its services division.
In terms of share, there’s hardly anything to notice. From 8% of total revenue, the share of Apple Services grew just 3 points to 11%. However, in absolute terms, the services grew by nearly one-fifth (19%) from the same quarter last year.
“In the last twelve months, our services revenue is up almost $4 billion year-on-year to $23.1 billion and we expect it to be the size of a Fortune 100 company next year,” CEO Tim Cook said.
Imagine that? Not a Fortune 500, or even 300. A Fortune 100 company! Basically, just the Apple services by themselves control large enough markets to cause unspeakable damage should they come crashing down some day.
The superstar of all the services turned out to be the App Store that showed a massive 37 percent year-over-year increase in revenue! A large part of that success can be attributed to the massive number of app downloads Apple has been seeing over the past year or so.
Like we’ve told you before, the average iOS user is more willing to spend money on the apps than an Android user. Therefore, it’s no wonder that the App Store raked in a humungous $10.3 billion in sales this quarter. In a quarter!
Apple’s CFO, Luca Maestri, also pointed out that this quarter Apple saw the highest ‘average amount of time spent per user’ on the App Store. With the type of growth Apple is forecasting for their service sector, we wouldn’t be surprised if that number also keeps increasing.
There’s also the fact that Apple is expanding into TV Shows. All they need is just one show like House of Cards, or Orange is the New Black, and their revenue will shoot through the roof!
The focus on services from Apple makes a lot of sense to make sure that they are not dependent on emerging markets for revenue generation. For instance, few months ago, the Chinese government suddenly banned iTunes Movies and iBooks Store sales in China. A global spread of services revenue will guard against a major impact from such unforeseen changes.
Services also give Apple the option to customise offering for different nations. It would be so much better when Apple Services launches custom made TV shows for Indian audiences, instead of copy pasting from the west!