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I think if I want to invest in AAPL today I'd rather focus on this: "Services generated over $10.8 billion in revenue during the quarter, growing to a new quart

I think if I want to invest in AAPL today I'd rather focus on this: "Services generated over $10.8 billion in revenue during the quarter, growing to a new quarterly record in every geographic segment, and we are on track to achieve our goal of doubling the size of this business from 2016 to 2020." Apple is definitely trying (successfully IMO) to diversify its business to services-centric and that is exciting to me!

acomjean 8y ago
But most apple services really work only/ best on apple devices. If they're selling fewer phones, its less itunes/imusic/icloud revenue.
- jklinger410 8y ago
  Yes, I agree completely. Their services are all tied to their hardware. It's not the same as other services companies.
- berberous 8y ago
  I think they are generally selling fewer phones because people are sticking to their iPhone 6 or 7 rather than switch to a $1500 XS. They are not switching to Android.
- askafriend 8y ago
  What you're suggesting isn't really a problem. Here's what I posted elsewhere in this thread that addresses it: "The actual product is the Apple ecosystem and that's the bet Apple is making. Right now, the ecosystem is tied together by iOS whose most popular incarnation is iPhone. But iOS was so successful that it has an install base of over 1 billion users. That's nothing less than an incredible user-base - a hell of a foundation. If they can sustain that install base with iterative iPhones while strengthening their ecosystem through value-add products like Apple Watch, AirPods, HomePod and Apple Music, then they have potentially many cash cows with dramatically high ceilings and reach. This is a good bet for them because it plays to their strengths and they've earned incredibly loyal customers over the years. iPhone may not be the future of Apple, but it is the core from which many futures will emerge. It'll still be a critical product for Apple, but no longer a key top-line growth driver. And that's OK, that's how innovation cycles go. iPhone made it possible for them to start on 3rd base for the next cycle."
- londons_explore 8y ago
  iTunes/iMessage/iCloud will all become available on Android if it looks like the iOS platform is failing.
  - scarface74 8y ago
    Apple Music is already available for Android.
- scarface74 8y ago
  Selling fewer phones doesn’t have any effect on the installed base if people are keeping phones longer.
sct202 8y ago
The services business includes the app store fees like the one that Netflix is getting out of, so that revenue stream might have some challenges of it's own.
- dawhizkid 8y ago
  Yes - I think that will become a bigger trend among apps that have hit mass scale, which are probably the exact apps that make up the bulk of those fees.
  - votepaunchy 8y ago
    How much is Netflix contributing to services revenue vs in-app game purchases? The latter seems less likely to flee.
- votepaunchy 8y ago
  Services also includes Apple’s anticipated video / TV offering, which will be 100% additive vs 30% (15% recurring) from Netflix customers willing to pay the upcharge.
ariwilson 8y ago
How much of this is Google's increased revenue sharing from search on iPhone? From looking at a few news articles, looks like revenue sharing increased from: $1B ('14) -> $3B ('17) -> $9B ('18) -> $12B ('19) Example article: http://fortune.com/2018/09/29/google-apple-safari-search-engine/ http://fortune.com/2018/09/29/google-apple-safari-search-eng... Looking at the increase in Apple's services revenue ($8.5B, Q1 '18 -> $10.8B Q1 '19 -> $2.3B YoY increase) vs. increase in service revenue due to Google sharing ($9B - $3B = $6B / 4 quarters = $1.5B), we get that approximately 65% of Apple's incremental services revenue is due to increased revenue sharing from Google. IMO, this doesn't seem like a long term sustainable source of revenue growth for Apple.
- ryanwaggoner 8y ago
  Actually, that's just some analyst's guesstimate. The actual numbers have not been released since 2014.
  - londons_explore 8y ago
    The actual numbers are in Google's quarterly reports as "traffic acquisition costs". That figure bundles in the costs paid to Dell and hp to have Google the default search engine on those machines, but I think we can be pretty sure that is dwarfed by the amount paid to Apple...
    - ariwilson 8y ago
      Based on Q1-Q3 earnings, TAC to all distribution partners in Google's reports is approximately $13B in 2018. This is approximate since Q4 results are not released yet. Comparatively, TAC in 2017 was $9B.
redditmigrant 8y ago
As an investor what you would be betting on is that services revenue growth will be enough to compensate for the negative iPhone revenue growth. For the previous quarter, iPhone revenue was ~3.7x the services revenue. So if the iPhone revenue drops by ~30% in the next 2 years and the services revenue hits the goal of doubling since 2016(~12B), you would essentially see a flat overall revenue which is problematic.

acomjean 8y ago

But most apple services really work only/ best on apple devices. If they're selling fewer phones, its less itunes/imusic/icloud revenue.

jklinger410 8y ago
Yes, I agree completely. Their services are all tied to their hardware. It's not the same as other services companies.
berberous 8y ago
I think they are generally selling fewer phones because people are sticking to their iPhone 6 or 7 rather than switch to a $1500 XS. They are not switching to Android.
askafriend 8y ago
What you're suggesting isn't really a problem. Here's what I posted elsewhere in this thread that addresses it: "The actual product is the Apple ecosystem and that's the bet Apple is making. Right now, the ecosystem is tied together by iOS whose most popular incarnation is iPhone. But iOS was so successful that it has an install base of over 1 billion users. That's nothing less than an incredible user-base - a hell of a foundation. If they can sustain that install base with iterative iPhones while strengthening their ecosystem through value-add products like Apple Watch, AirPods, HomePod and Apple Music, then they have potentially many cash cows with dramatically high ceilings and reach. This is a good bet for them because it plays to their strengths and they've earned incredibly loyal customers over the years. iPhone may not be the future of Apple, but it is the core from which many futures will emerge. It'll still be a critical product for Apple, but no longer a key top-line growth driver. And that's OK, that's how innovation cycles go. iPhone made it possible for them to start on 3rd base for the next cycle."
londons_explore 8y ago
iTunes/iMessage/iCloud will all become available on Android if it looks like the iOS platform is failing.
- scarface74 8y ago
  Apple Music is already available for Android.
scarface74 8y ago
Selling fewer phones doesn’t have any effect on the installed base if people are keeping phones longer.

sct202 8y ago

The services business includes the app store fees like the one that Netflix is getting out of, so that revenue stream might have some challenges of it's own.

dawhizkid 8y ago
Yes - I think that will become a bigger trend among apps that have hit mass scale, which are probably the exact apps that make up the bulk of those fees.
- votepaunchy 8y ago
  How much is Netflix contributing to services revenue vs in-app game purchases? The latter seems less likely to flee.
votepaunchy 8y ago
Services also includes Apple’s anticipated video / TV offering, which will be 100% additive vs 30% (15% recurring) from Netflix customers willing to pay the upcharge.

ariwilson 8y ago

How much of this is Google's increased revenue sharing from search on iPhone? From looking at a few news articles, looks like revenue sharing increased from: $1B ('14) -> $3B ('17) -> $9B ('18) -> $12B ('19) Example article: http://fortune.com/2018/09/29/google-apple-safari-search-engine/ http://fortune.com/2018/09/29/google-apple-safari-search-eng... Looking at the increase in Apple's services revenue ($8.5B, Q1 '18 -> $10.8B Q1 '19 -> $2.3B YoY increase) vs. increase in service revenue due to Google sharing ($9B - $3B = $6B / 4 quarters = $1.5B), we get that approximately 65% of Apple's incremental services revenue is due to increased revenue sharing from Google. IMO, this doesn't seem like a long term sustainable source of revenue growth for Apple.

ryanwaggoner 8y ago
Actually, that's just some analyst's guesstimate. The actual numbers have not been released since 2014.
- londons_explore 8y ago
  The actual numbers are in Google's quarterly reports as "traffic acquisition costs". That figure bundles in the costs paid to Dell and hp to have Google the default search engine on those machines, but I think we can be pretty sure that is dwarfed by the amount paid to Apple...
  - ariwilson 8y ago
    Based on Q1-Q3 earnings, TAC to all distribution partners in Google's reports is approximately $13B in 2018. This is approximate since Q4 results are not released yet. Comparatively, TAC in 2017 was $9B.

redditmigrant 8y ago

As an investor what you would be betting on is that services revenue growth will be enough to compensate for the negative iPhone revenue growth. For the previous quarter, iPhone revenue was ~3.7x the services revenue. So if the iPhone revenue drops by ~30% in the next 2 years and the services revenue hits the goal of doubling since 2016(~12B), you would essentially see a flat overall revenue which is problematic.