For Apple, the push to become a service-centered ecosystem proceeds apace.
And in the latest quarter, revenues from hardware waned 4.7%, while services-related sales were up 8.2%. Total net sales came to $81.8 billion, down a bit more than 2%, and marking a third straight quarter of declining sales.
Against that backdrop, the company passed the 1 billion paid subscription mark, adding 150 million subscriptions through the trailing 12 months.
CEO Tim Cook said on the conference call with analysts on Thursday (Aug. 3) that the company continues to see “strong results” in emerging markets, tied to strong iPhone sales in those markets such as India, the Philippines and Saudi Arabia. In the greater China region, including the mainland, and Hong Kong — the company reported sales of $15.8 billion, up 7.9%.
iPad sales were down 20% year on year in the quarter that ended on July 1, while Home and Accessories-related revenues were up 2% year on year to $8.3 billion. Management noted on the call that two-thirds of Apple Watch buyers in the quarter were new to the product.
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With a nod to the company’s move into financial services, Cook noted that Apple Pay continues gaining traction, reiterating this week’s news that Apple Card has logged $10 billion in deposits.
CFO Luca Maestri said on the call that within services, the June quarter set records for advertising-related sales, the company’s App store and music, and the services ecosystem is helped through an installed base of 2 billion active devices. Without offering quantitative detail, he said that transacting accounts and paid accounts “grew double digits” year over year. And the number of paid subscriptions roughly doubled that of three years ago. Asked on the call about artificial intelligence (AI), Cook said that “we view AI and machine learning as core fundamental technologies that are integral to virtually every product that we build.”
Looking Ahead
Looking ahead, said the CFO, the company expects iPhone and services results to accelerate from June — while revenue for both Mac and iPad will decline by double digits year over year “due to difficult compares.”
Investors sent the shares down about 1% after hours.
During the question and answer session with analysts, Cook also noted that most iPhones are being sold using installments and other financing programs across developed and emerging markets.
The services segment growth (and expectations for future growth), said Cook, are illustrative of “the high level of engagement of our customers in the ecosystem — the combination of all these things gives us good confidence for September.” He noted on the call that customers that own more than one Apple device are also typically “more engaged” within the ecosystem and thus spend more on services.
