Hardware Who? Apple Reports Nearly $11.5 Billion In Services Revenue

Device sales overall are still on the decline at Apple, but services revenue is starting to grow like gangbusters.

Apple generated $11.45 billion in revenue from services during its fiscal third quarter, which ended in June, the company told investors on Tuesday. That’s a 13% year-over-year increase.

Services accounted for 21% of Apple’s overall revenue, which clocked in at $53.8 billion for the quarter. Total revenue was up 1% YoY.

As Apple’s phone sales continue to fall, Tim Cook and Co. has grown increasingly gung-ho on its services business, which includes AppleCare, Apple Music, cloud services, the App Store and app search ads.

Profits from the iPhone dipped 12% year over year to just more than $29 billion.

Yet hardware isn’t all bad news. Apple’s wearables business – Apple Watch, AirPods, Beats, et al. – grew by nearly $2 billion over the past year.

“When you step back and consider wearables and services together – two areas where we have strategically invested over the last several years – they now approach the revenue of a Fortune 50 company,” Cook said.

And although iPhone revenue is down, Apple’s global active install base for iPhone is actually growing – “and that is very, very important for the services business,” Cook said.

In other words, people are hanging onto their phones for longer, which has a negative impact on iPhone sales, but they’re staying within the Apple ecosystem. Apple’s iPhone install base was 900 million devices in late January. Apple didn’t share an updated count.

But Apple did get specific about its paid subscribers, which clocked in at 420 million across all of its services. Apple’s goal is to surpass a half-billion paid subscribers across its platforms by 2020, which is more than achievable based on the current momentum, said Apple CFO Luca Maestri.

Paid subscribers are “an important way for us to monetize our ecosystem,” said Maestri, pointing to Apple’s pipeline of new services, including Apple Card, set to launch in August, followed by Apple Arcade and Apple TV+, both of which are slated to hit the market this fall.

But Apple is already seeing traction with its Apple TV app, which launched in May in more than 100 countries.

The Apple TV app is “benefiting from a broader secular move to over-the-top services,” Cook said.

Monthly US viewers within the app are up 40% YoY, although there was no baseline info on offer.

Enjoying this content?

Sign up to be an AdExchanger Member today and get unlimited access to articles like this, plus proprietary data and research, conference discounts, on-demand access to event content, and more!

Join Today!