Apple Services has had an impressive performance, constantly. For the second consecutive quarter, Apple Services set an all-time record with $20.9 billion in revenue for the March quarter of 2023, an increase from the $19.821 billion revenue reported in Q2, 2022.
Over the years, the tech giant has expanded its Services categories and has seamlessly integrated them into its ecosystem. Today, consumers can subscribe to Apple Music, Fitness+, TV+, News+, iCloud+, Apple Arcade, Books, Podcasts, Apple Pay, Apple Card, and others.
Although some of the Apple Services are also available for Android and Windows users like Music, and TV+, most of them are exclusively available on Apple devices like Fitness+, the new Emergency SOS via satellite, Buy Now and Pay Later, and others presumably to drive sales of its devices like iPhone, iPad, Mac, Apple Watch and open new sources of revenue.
Even with record sales, CEO Tim Cook said Apple Services are “underpenetrated”
Commenting on UBS’s David Vogt’s query about changes in consumer behavior in post COVID era related to Apple Services in the past six months at Q2, 2023 earnings call, Apple CFO Luca Mestari said adoption continues to grow, especially of paid subscriptions.
We are doing particularly well, obviously in some of the services that we’ve launched more recently, like payments where our growth rates are very strong as the adoption of Apple Pay and Apple Card and now the new services that Tim mentioned, the adoption continues to increase. Cloud is an area that continues to grow very consistently. Users want to store more photos and videos and more content on their devices and so they adopt our cloud services and in general the model in the App Store around paid subscriptions continues to grow very strongly. I mentioned we now have more than 975 million paid subscriptions on the platform and that’s almost twice as much what we had only three years ago. So obviously, the growth in subscriptions is very strong.
In the first quarter of 2023, Apple Service generated record revenue of $20.8 and hit 935 million paid subscriptions. And the segment had a slightly better March quarter with $20.9 billion in revenue.
In spite of consistently performing better than products like Mac and iPad, Apple Services still have a lot of room for improvement. When asked where the company sees the largest opportunity in its Services offering, and areas where it can do better, CEO Tim Cook said there were many opportunities for improvement in Apple Services as a whole.
I think we can do better on everything. And so I wouldn’t just point to one of them. If you look at the number of active devices and the growth of active devices, I think, our services are underpenetrated in a number of different ways. And so the way that I look at it is there’s opportunity in many of them.