Apple’s Services Growth Slows to 11%, Paid Subscriptions Top 1 Billion

Apple’s ecosystem continues to grow, albeit with some puts and takes.

The segment logged 11% growth year over year, slowing from the 16% growth rate that had been logged in the previous quarter.

CEO Tim Cook said on the call that the latest metric represented an “all time revenue record with paid subscriptions growing double digits year over year.”

The installed base of devices stands at more than 2.2 billion, he said.

Mixed Results in Hardware

The company’s latest earnings report shows that during the fiscal first quarter, product sales were up less than 1% to $96.5 billion. Digging more deeply into the product lines, iPhone sales were up 5.9%, but iPad sales slipped by about 25% and Wearables slid 11%. Cook said that the iPads had a “difficult compare” with the launch of newer iterations such as the 10th generation iPad in the December quarter of last year.

Mac sales grew by less than 1% during the quarter to $7.7 billion.

Overall revenue growth was 2%.

CFO Luca Maestri said that paid subscription showed “strong double-digit growth” and noted that there were “well over” 1 billon paid subscriptions across the company’s platform, more than double the tally that had been seen four years ago.

Guiding to Similar Growth Rates

Looking ahead, said the CFO, the services business should see a “similar double-digit growth rate to what we reported in the December quarter.” And, he contended, the 11% growth rate is stronger than it might appear, given the fact that last year’s quarter had an extra week.

Asked on the call about regional growth, Cook said that emerging markets have been strong, as India grew at double-digit percentages. China slipped by 13%. “We were down mid-single digits” on the iPhone, Cook said of the region.

“We’ve been in China for 30 years,” Cook said, “and I remain very optimistic about China over the long term.” He added that in general in China, “I feel good about hitting a new installed base ‘high watermark’ and very good about the growth in upgrades, year over year.”

Cook also noted on the call that there remains the opportunity to increase its hardware presence with enterprises, moving beyond what one analysts said has been a traditionally consumer-centric approach.

“Employees are in a position in many companies to choose their own technology that is the best for them,” said Cook, who added that “They’re using a Mac at home. They’d like to use one in the office as well.” The upcoming Vision Pro, debuting this week, also may find use within enterprises, Cook said.

Those sentiments were also offered up by the CFO, who said on the call that Walmart, Nike and others are examining ways to harness the Vision Pro for their customers or employees to help improve everyday productivity.

Investors send the shares 3.2% lower in after-hours trading.