Apple services will be size of Fortune 100 company by 2017, Cook says
Apple CEO Tim Cook during a quarterly investor conference call on Tuesday said he expects his company's services sector, which continues to exhibit growth despite slumping iPhone sales, to generate revenues equivalent to that of a Fortune 100 company next year.
Cook said revenues from Apple's services businesses, including iTunes, iCloud, Apple Music, Apple Pay, Apple Care and the various App Stores, grew 19 percent year over year to hit a new June quarter record of $6 billion. Of note, App Store revenue reached a new all-time high after finishing up 37 percent for the quarter.
"In the last twelve months, 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," Cook said.
The increase was also prominently featured in Apple's earnings press release.
As expected, Cook pinned the success on an active customer base of device owners. Specifically, Apple saw $10.3 billion in install base-related purchases, up 29 percent from the same time last year.
While investors and industry watchers concentrate on iPhone, iPad and Mac revenue -- Apple is, after all, a hardware company -- the services sector is quietly becoming increasingly important to the firm's bottom line. Earlier this year, investment bank Piper Jaffray estimated gross margins on Apple's services business hovered at 60 percent for fiscal 2015, making it a much better proposition as compared to physical goods.
On a related note, Cook was asked to comment on China's decision to ban both iTunes Movies and the iBooks Store in April. According to Cook, the shutdown had no discernible effect on Apple's earnings for the quarter. Despite China's massive installed user base, the two online stores generated less than $1 million over their six months of operation.
That being said, Cook noted Apple is working with Chinese government agencies to bring the services back online.
Apple earlier today posted earnings for the third fiscal quarter of 2016, beating Wall Street expectations with $42.4 billion in revenue and net income of $7.8 billion.
Cook said revenues from Apple's services businesses, including iTunes, iCloud, Apple Music, Apple Pay, Apple Care and the various App Stores, grew 19 percent year over year to hit a new June quarter record of $6 billion. Of note, App Store revenue reached a new all-time high after finishing up 37 percent for the quarter.
"In the last twelve months, 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," Cook said.
The increase was also prominently featured in Apple's earnings press release.
As expected, Cook pinned the success on an active customer base of device owners. Specifically, Apple saw $10.3 billion in install base-related purchases, up 29 percent from the same time last year.
While investors and industry watchers concentrate on iPhone, iPad and Mac revenue -- Apple is, after all, a hardware company -- the services sector is quietly becoming increasingly important to the firm's bottom line. Earlier this year, investment bank Piper Jaffray estimated gross margins on Apple's services business hovered at 60 percent for fiscal 2015, making it a much better proposition as compared to physical goods.
On a related note, Cook was asked to comment on China's decision to ban both iTunes Movies and the iBooks Store in April. According to Cook, the shutdown had no discernible effect on Apple's earnings for the quarter. Despite China's massive installed user base, the two online stores generated less than $1 million over their six months of operation.
That being said, Cook noted Apple is working with Chinese government agencies to bring the services back online.
Apple earlier today posted earnings for the third fiscal quarter of 2016, beating Wall Street expectations with $42.4 billion in revenue and net income of $7.8 billion.
Comments
That would be a (minimum) 18% increase from the current level
Those "not so smart analysts" are oh so stuck on your iPhone volume.
They would fail miserably if they were running your Apple!
Fixing the service would eventually put them above Spotty in marketshare soon.
I saw Apple Music on a droid for the first time. I laughed.
Ummm, doesn't seem that quiet to me.
For those that say "yes, but Apple's services is tied to their h/w..." - yes - but don't forget it is tied to "installed base", not simply the rise and fall of quarterly shipments. I am pretty sure Apple has grown their installed base of active users and devices pretty much every year for the last 19 years.
Some may criticize Apple mgmt for focusing so much on this on the calls, but for those here that obsess over the stock price, highlighting the recurring revenue & growing installed base is the best way to get a higher multiple attached to AAPL, and thus move the stock.
Indeed. For a company to be a "great services company" (primary/only focus), they need to be cross platform to reach as many potential customers as possible. Netflix is doing well.
You don't have to buy a company to enhance your own offering. Apple is better served partnering (in one form or another) with these content companies like Netflix, Time Warner (HBO), etc. Making Apple devices the best to serve their content. They are already doing this to some degree, but no doubt it could improve.
NFLX stock price is astronomical. They are executing well on their plan, but don't see anyone valuing their dollars buying them, except to buy top-line growth without regards to profit.