A survey conducted by investment firm UBS revealed that Apple Services are becoming a “key differentiator” in driving the company’s revenue. Over 4,000 iPhone users from 4 different geographies participated in the survey which also found that users upgrades and retention are high in the United States.
In Q1, 2022, Apple recorded another remarkable earning quarter with $124 billion in revenue and 11% Y-o-Y growth. Apple Services accounted for $19.5 billion an all-time revenue record with 24% Year-on-Year growth.
During the subsequent earnings call, CEO Tim Cook said that the performance of the company’s Services segment was even better than expected and the impressive results of Apple Services like App Store, TV+, Fitness+, iCloud+, and others are positive indicators of an increase in Apple’s paid subscribers base.
Among Apple Services, Music, iCloud, Arcade, and Fitness+ rate the highest
Acknowledging that over half of Apple’s revenue is generated by iPhone sales, the report notes that the company’s Services segment is “increasingly” turning into a significant differentiator. Apple Services that have gained the most traction are Apple Music, Apple Fitness+, Apple Arcade iCloud+, and Apple Pay.
Furthermore, the revenue generated from App Store’s in-app purchases and subscriptions has seen a drop in the post-COVID-19 pandemic situation. And Apple TV+ and Apple News are experiencing slow growth.
Other key findings from the survey include that Music, iCloud, Arcade and Fitness rates are higher (excluding China), while News is “flattish” and Apple TV+ looks to have plateaued.
Users with higher-end devices, such as the iPhone 12 and 13, also drive Apple services revenue. App Store spending has “moderated” a bit following “COVID-related strength” and Apple Pay adoption continues to increase.
“Respondents in the survey noted spending increased in Japan, was flattish in the US and the UK and down in China,” Vogt wrote, concerning App Store spending.
In January 2022, Wedbush analyst Danial Ives estimated that the value of the Apple Services business is $1.5 trillion. The Cupertino tech giant has achieved milestone success in its Services segment in just six years.
Expected to boost the usage and market value of Apple hardware, in 2017, CEO Tim Cook said that its goal was to double the size of the services business in the next four years. Now, Apple Services has more than 785,000,000 paid subscriptions. Apple CFO Luca Maestri said:
Next we continue to see increased customer engagement with our services. The number of paid accounts on our digital content stores grew double digits and reached a new all time high during December quarter in every geographic segment.
Also paid subscriptions continue to show very strong growth. We now have more than 785,000,000 paid subscriptions across the services on our platform, which is 165,000,000 during the last twelve months alone.