News

Services revenue still growing strongly for Apple


Tags:

Apple reported its latest quarterly financial results yesterday, for the final quarter of 2019 – the company’s fiscal Q1. They were good: “Apple’s highest quarterly revenue ever,” according to CEO Tim Cook, who highlighted sales of iPhone 11 smartphones as well as new records for Apple’s services category (which includes Apple Music) and Wearables, Home and Accessories category (which includes the Home smart speaker and AirPods earphones).

The big figures: $91.8bn of quarterly revenue, up 9% year-on-year, and a net profit of $22.2bn, up by 11%. Services generated $12.7bn of revenue for Apple last quarter, up by 17% year-on-year, while the wearables, home and accessories category grew by 37% to $7.3bn. There wasn’t a new figure for Apple Music subscriptions, despite our hunch that the service may have reached 70 million subscribers now, but Apple said its music streaming offering “set an all-time revenue record” last quarter.

Music Ally has been crunching the last two and a quarter years’ worth of Apple financials to explore the growth of that larger services category. It’s been consistently showing strong year-on-year growth for Apple: 19%, 16%, 13%, 18% and 17% in the last five quarters respectively. It breaks out of the spike-cycle of Apple’s hardware products too: services revenue has been growing by an average of 4.3% quarter-on-quarter since the start of 2018.

Services is also growing in importance for Apple’s business overall. In the final quarter of 2017, it accounted for 10.3% of Apple’s overall revenues. A year later, it was 12.9%, and a year after that (the final quarter of 2019) it was 13.9%. Bear in mind Q4 is Apple’s biggest period for hardware sales every year: in the first three quarters of 2019, services accounted for 19.7%, 21.3% and 19.5% respectively of Apple’s total revenue.

(Also notable: Apple’s cost of sales for services has been shrinking as a percentage of its services revenues: from 41.7% in Q4 2017 to 37.2% in Q4 2018, and now 35.6% in Q4 2019. Remember, while music-licensing costs are part of this, they’re far from the full story, but it’s an interesting trend nonetheless.)

More figures? Apple’s active installed base of devices is now 1.5bn, up by more than 100m in the last year. “We now have over 480 million paid subscriptions across the services on our platform, up 120 million from a year ago,” CFO Luca Maestri told analysts in Apple’s earnings call. The company expects that to reach 500m this quarter, and has increased its target for the end of 2020 to 600m paid subscriptions.

Apple Music is part of this, of course, but the company will be hoping its TV, news, games and iCloud subs also fuel this growth. It also says that its previously-announced goal of doubling its fiscal 2016 services revenue in its fiscal 2020 is on track.

Stuart Dredge

Sign up for Music Ally’s free weekly newsletter, The Knowledge – at-a-glance analysis of the modern music industry

Read More: News
Leave a Reply

(All fields required)