Published: Thu, May 02, 2019
Culture | By Margie Dunn

Apple's services are making more money than ever

Apple's services are making more money than ever

Apple is also attempting to shift its reliance on the iPhone towards services and last month unveiled its new TV streaming platform, Apple TV+, to take on the likes of more established companies such as Netflix.

The Cupertino, Calif. -based company has been jockeying with Microsoft Corp and Amazon.com for the title of most valuable us company as all three have passed the symbolic trillion mark.

In a report on its financial results for the fiscal second quarter ending on March 30, 2019, the company said its quarterly earnings per diluted share declined by 10 percent to stand at 2.46 dollars, and worldwide sales made up 61 percent of the quarter's revenue.

Instead Apple chose to highlight its services division, which brought in revenues of $11.5 billion, an all-time high for the company.

The research budget remains one of the world's largest, some measure of Apple's need to generate a new cash cow as investors worry about the extent to which cheaper competitors are eating into the iPhone's global dominance.

Apple offset news of a quarterly sales decline Tuesday with strong forecasted third-quarter revenue that beat analyst expectations - backed by chief executive Tim Cook saying that the company's China sales problem may finally be letting up thanks to its generous iPhone price cuts. Wall Street was expecting earnings of $2.36 per share on revenue of $57.37 billion.

Apple has been scrambling to develop new revenue streams amid stagnant growth and increased competition in the smartphone market, which has been the company's main profit driver.

Apple (AAPL) - and Apple investors - have been touting the opportunity represented by the services business for years. The company made $58 billion in revenue this quarter, which is on the higher end of its expected revenue spectrum ($55 to $59 billion), but down 5 percent year-over-year. iPhone sales made up $31 billion of that total amount, down from $37.5 billion during the same quarter in 2018. The execs said that November and December were the worst months of the current iPhone dip, that March was the best of the bunch, and that the last couple of weeks of March were the best weeks of the entire quarter. During that quarter Apple sold 52.2 million iPhones, 9.1 million iPads, and 4.1 million Macs.

For most of the last decade, smartphone sales have ticked upward at double-digit rates every year.

Also of note is the fact that Apple it'll initially have a very limited number of original shows for subscribers to watch, although Apple plans to spend $2 billion on programming. Apple also is launching a credit card in partnership with Goldman Sachs and a mobile gaming subscription service.

Apple's services segment, which includes products like Apple Pay, Apple Care and Apple Music, posted a record $11.5bn after reporting a record $10.9bn in the last quarter.

In the meantime Apple is repositioning itself as a services and software company as well as the manufacturer of hardware. "We have 390 million paid subscriptions, all growing in strong double-digits", Apple CFO Luca Maestri said during the call.

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