The iPhone may be in decline, but Apple’s services are $20 billion and rising

It says a lot about a company when it can sell almost 75 million things and bring in nearly $76 billion in sales and still prove a disappointment. But, such is the life of Apple.

Investors took out their ire on Apple early Wednesday, driving Apple shares down by almost 5 percent at one point, to $95.27 following the company’s fiscal first-quarter results. Apple’s late-Tuesday report included sales of 74.8 million iPhones during the last three months of 2015, and Chief Executive Tim Cook said that iPhone sales in the company’s current fiscal quarter would decline from a year ago.

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So, now that the dust is settling following the initial reaction to Apple’s quarterly results and outlook, the question of “what’s next?” is facing Cook and Co., Apple customers and those investors, who have seen Apple’s stock price fall by almost 29 percent since the shares reached a 52-week-high of $134.54 last April.

It might lie in services, which include all those things you buy after you buy an iPhone, iPad, Mac computer or even an Apple Watch and Apple TV. For example, Apple will see you 200 gigabytes of iCloud storage for $2.99 a month. Sign up for Apple Music, and Apple gets $10 a month. Then there’s Apple’s cut of all the apps sold via the App Store, music and videos purchased through iTunes, and its own product-service plans.

All together, Apple said it took in $19.9 billion from services alone in its 2015 fiscal year, up 10 percent from the year before. And the company is on track for more services growth this year, as it reported $5.5 billion in services revenue during the first quarter of its 2016 fiscal year, which ended in December.

Cook called Apple’s services business “an unbelievable asset” for the company, and noted that Apple now has 1 billion “active” devices in use that can drive services sales. The iPhone may still dominate Apple’s overall business — it accounted for 68 percent of revenue in Apple’s first quarter — and with the so-called iPhone 7 likely to launch later this year, it will continue to be the point on which Apple pivots.

Services may be just a drop in the bucket of Apple’s sales. But it’s still a $20 billion drop, and one that might help refill that bucket if the iPhone’s era of growth truly is at an end.

Photo Credit: Getty Images

 

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  • Mike Snoow

    the reason for iphone decline is coz apple ran out of #dumbblondes to sell to

  • marketbuy

    Which is why I had always believe that AAPL should spin off this service division to unlock shareholder values. The pieces are worth more than the whole.

  • Ultima Choice

    Spin off the services division? Are you crazy? Don’t worry in 12 months all the expectations will move to AAPL services and the hardware will just be another number. With that many devoted users its going to easy to grow services to a $100B a year with margins around 80% etc.

 
 
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