Revenue from Apple services reportedly grew 16% year-over-year in 2019 even as sales of iPhones declined. This indicates this company’s growth doesn’t depend on increasing handset sales, according to a market analysis firm.
Investor optimism about Apple’s services may have helped increase its share price almost 2% in the last month.
Apple not just an iPhone maker
Earlier today, Apple revealed that its Services business grew strongly in 2019, though its report was light on specifics.
Gene Munster and Will Thompson, analysts at Loup Ventures, estimate that growth rate to be 16% year over year. And this happened even as sales of iPhones declined 9%, according to these analysts.
“We believe these results, given the context of the iPhone softness in 2018 and 2019, is further evidence that Services growth is not directly linked to iPhone units,” said Munster and Thompson in a research note.
And it’s not just people buying apps. Loup Ventures estimates App Store accounted for 39% of Services revenue in 2019, which means a majority came from other Services, like Apple Music, iCloud and other offerings.
Growth in Apple Services is critical
For years, Apple has been considered by many analysts and investors as simply an iPhone maker. It was thought the only way it could continue to grow is by selling more handsets every year.
But the 1.5 billion people who use older iPhones are subscribing to Apple Arcade, Apple TV+, Apple News+, etc. in sufficient numbers to become a significant alternative source of revenue. And a source that’s increasing.
“We believe in the past three years, Services growth has outpaced iPhone unit growth by an average of 28%, confirmation that Services growth is benefiting from Apple’s existing users increasing their spend within the Apple ecosystem as well as the company acquiring new Services customers through secondary iPhone,” noted Munster and Thompson.
Source: Loup Ventures