Apple aims to double service revenues by 2021
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Apple plans to double the size of its services business within the next four years, turning revenues from the App Store, iCloud and its Music and video services into a nearly $50bn-a-year business by 2021.
Services were the fastest-growing revenue line in Apple’s December quarter, rising 18 per cent year-on-year to $7.2bn, setting a new all-time record for the company. In its last financial year, ending in December, services revenue grew 22 per cent to $24.3bn.
In an interview with the FT, Apple’s finance chief, Luca Maestri, said that its services division will become “the size of a standalone Fortune 100 company” this year and set out its new target.
“We have a goal to double the size of the services business over the next four years,” he said. “We have a lot of momentum and plenty of opportunity.”
App Store revenues grew by more than 40 per cent in the December quarter, he added, while sales from Music, Apple Care and iCloud storage all hit new all-time records.
Apple’s install base continued to grow despite a 8 per cent fall in iPhone sales in its fiscal 2016, driving use of its services. The total number of Apple devices in active use has increased by “strong double digits” from the 1bn figure the company revealed this time last year, Mr Maestri said, without providing a specific number.
That growth has been helped by the introduction of new products in recent years. Apple Watch saw the “best quarter we’ve ever had” in the three months to December, Mr Maestri said.
However, total revenues from “other products”, which includes Watch, Beats headphones, iPods and other accessories, fell by 8 per cent in the last quarter to $4bn.
Alongside continuing declines of the iPod and standalone displays for Macs, sales of the Apple TV set-top box, which was relaunched in September 2015 with the promise to “revolutionise” the television viewing experience, declined year-on-year, Mr Maestri said.
Apple’s newest accessory, its AirPods wireless headphones, did not make a meaningful impact to the quarter’s overall revenues because they were launched in December. Nonetheless, Mr Maestri said they were selling out as fast as Apple can produce them after an “incredible” response from customers. “This is a product where because of the level of interest, we don’t know when we will be back into supply-demand balance,” he said.