Apple’s Q3 2016 earnings report reveals that while the company is suffering from slow device sales, its service divisions are booming.
There was a time and space where Apple couldn’t get services right. Beyond the glimmering hope that was iTunes, the Cupertino company struggled through several iterations of .Mac, MobileMe, and iCloud trying to make this right. Now, thanks to its Q3 2016 earnings report, it would seem Apple has reached the position it’s always wanted to be in.
That doesn’t come without cost, however. The company’s hardware sales – which have previously buoyed it for several years – have begun to diminish. Apple reported 40.4 million iPhone sales as compared to last year’s 47.5 million (a drop of 15%) while Mac sales have decreased by 10.5% from 4.8 million to 4.3 million units.
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The company’s gross margin further dipped thanks to the iPhone SE; dropping from 39.7 to 38%, while it sold less iPads than last year but made more money thanks to the heftier price tag of the iPad Pro lineup.
The news wasn’t altogether negative, however; the company’s earnings report depicted a massive spike in its service revenue, stemming from the success of Apple Music, the App Store, Apple Pay, and iCloud.
Apple’s CFO, Luca Maestri, stated that “œOur Services business grew 19 percent year-over-year and App Store revenue was the highest ever, as our installed base continued to grow and transacting customers hit an all-time record”, while CEO Tim Cook quipped, in reference to the company’s service divisions, that “œwe expect it to be the size of a Fortune 100 company next year.“
Apple raked in a reported $6 billion USD in services revenue alone this quarter – that’s up 19% year-on-year. The company’s intent on services is clear from its upcoming redesign of Apple Music, all the way to its minor restructuring of the App Store.
The news will give Cook a reason to smile; many doubted the incumbent CEO’s candidacy to lead Apple after the passing of Steve Jobs based on his lack of experience in the hardware industry as opposed to his expertise on services.
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