Apple’s earnings for its June 2016 quarter gave investors a whole lot to cheer about. Even though iPhone, iPad and Mac sales were all down compared to the same quarter a year-ago, Apple’s quarter was not nearly as grim as many investors were anticipating. What’s more, there was a familiar bright spot amidst Apple’s earnings report yesterday — revenue from the company’s various line of Services.
For the quarter gone by, revenue from Apple’s array of services — Apple Music, Apple Pay, iTunes, the Mac App Store and the App Store — checked in at $5.97 billion, an impressive 19% increase from the year-ago quarter. In fact, revenue from Apple’s services category raked in more cash than both the Pad ($4.8 billion) and the Mac ($4.2 billion).
So while some analysts continue to blindly focus on hardware sales when evaluating Apple’s financial health, it’s important to really take a close look at how successful Apple has become at leveraging its ever-increasing pool of iOS users.
Consider this: Apple to date has doled out more than $50 billion to App Store developers over the past eight years. Breaking things down a bit more, it took Apple approximately 6 years and 6 months before it reached the $25 billion mark. The next $25 billion came just 18 months later. In other words, App Store revenue isn’t just increasing, it’s accelerating at an unprecedented clip.
Speaking to this point, Apple CEO Tim Cook during Apple’s earnings conference call yesterday boasted that Apple’s services category would soon be the size of a Fortune 100 company.
“In the last twelve months,” Cook said, “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.”
While much of this revenue comes from the App Store and Apple Music, it’s worth mentioning that Apple Pay is also becoming increasingly popular. According to Apple, the number of users taking advantage of Apple Pay has increased by a staggering 400% year over year.
Looking ahead, Cook slyly added that Apple continues to pour R&D dollars into services that haven’t even launched yet.