More than $40bn was wiped off Apple’s market cap last night, as shares dipped by more than 8% after its latest quarterly financial results.
Analysts were spooked by the company missing their revenue and earnings estimates, as well as by an anticipated year-on-year decline in sales of iPhones. But on the music side, there was some good news for Apple: the latest milestone for its Apple Music streaming service.
“Apple Music continues to grow in popularity, with over 13 million paying subscribers today,” CEO Tim Cook told analysts in the company’s earnings call last night. “We feel really great about the early success of Apple’s first subscription business, and our music revenue has now hit an inflection point after many quarters of decline.”
If all those 13 million subscribers were paying $9.99 a month, Apple Music would be bringing in $129.9m a month, but with some paying $14.99 for its family plan, the actual revenues will be higher.
Apple was keen to talk up the wider strength of its services business – apps, iTunes, iBooks, iCloud storage etc – to alleviate the gloom of its topline financials. Cook reminded analysts that Apple now has an install base of more than 1bn active devices.
“Those one billion-plus active devices are a source of recurring revenue that is growing independent of the unit shipments we report every three months,” said Cook. “In fact, the purchase value of services tied to our installed base was a record $9.9 billion in the March quarter, up 27% over last year.”
Those topline figures though: revenues down 12.8% year-on-year to $50.6bn; iPhone sales down 16.3% to 51.2m units, and dips for iPad and Mac sales too. Be wary of too much doom-mongering around these results though: Apple still recorded a net profit of $10.5bn for the first quarter of this year alone.
And as its services division becomes more prominent in Apple’s overall business, there will be an incentive to channel more funds into the development of those services – Apple Music included.
The question now is whether that investment can light a fire under Apple Music’s product development, not just artist exclusives.