In an overview Tuesday afternoon of the company's earnings over the last fiscal third quarter, Apple CEO Tim Cook highlighted the positive, despite the humid nature of the three-month period. The quarter just before the summer begins, for example, does not include the busy holiday shopping season or a school startup for units. Nevertheless, this is a publicly traded company that presents the results for Wall Street over a three-month cycle, and that analysts and investors expect to see as many improvements as possible each time new revenue is presented.
But how do you satisfy Street's expectation that public companies will always show growth when the company's signature product, in Apple's case, has matured ̵
Cook has telegraphed for a while now as Apple's service business, which includes offerings such as iTunes, Apple Pay and subscription products such as Apple Music, will be a growth vehicle for the company going forward. In the comments on the last quarter, Cook singled it out as "our biggest June quarter ever", with results so promising that as a result of what the rest of 2019 has "we're confident of what's ahead."
Services are a big reason for that. Apple, which did not even bother to drop device sales for any of its consumer products anywhere, declared Tuesday that service revenues had reached an all-time high of $ 11.46 billion over the period.
Granted, it's still far from the $ 25.9 billion that iPhone sales generated for Apple (and $ 53.8 billion in sales overall), but it's not just a positive sign to see Apple hit a new record at all times in this category for which so much importance is attached. Doing well here also reflects Apple's ability to pull off a difficult metamorphosis – because the skill of selling phones doesn't automatically translate into an ability to sell subscriptions to products like Apple Music or the company's upcoming Apple TV +. It's a whole other thing from selling shiny dipping things.
The quarter's $ 11.46 billion in service revenue, we should add, is up from $ 10.17 billion over the same period in 2018 and increased slightly from $ 11.45 billion during the previous quarter to early 2019.
Among the quarter's other service-related highlights:
Apple now has 420 million subscribers paying for its various services. Cook used the results to repeat Apple is in line with hitting $ 14 billion in service revenue by next year. During the June quarter, Apple also began adding more first-time users than PayPal, and its monthly payment volume is also growing faster. In addition, Apple Pay is now in nearly 50 markets.
The new subscription and revenue generating service products continue to come. In just a few months, Apple launches a video game subscription service (Apple Arcade), while an Apple credit card arrives in August. This fall, Apple launches TV + at a yet to be announced price point that will make original series available to subscribers, Netflix style.
Managing Apple's continuing trajectory along those lines will very much be a core and perhaps even a defining element of Tim Cook's legacy – this notion of how well he is steering Apple into the time following the iPhone. It is easy to mistake all this as a shift or a change in weight, but of course, iPhone revenue will remain the crown jewel of Apple's empire for the foreseeable future. But kudos to the CEO who had to follow one of the most successful CEOs in the history of Corporate America – and who continued to do so as he had to plot a way forward that didn't cling too close to everything that came before.