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The vast majority of Apple's revenue is from selling hardware. Yes, there's revenue from services, which is growing fast. The trailing 12 month revenue for Mac

The vast majority of Apple's revenue is from selling hardware. Yes, there's revenue from services, which is growing fast. The trailing 12 month revenue for Mac, iPhone, iPad and Apple Watch (+ HomePod, AirPods, etc.) was over $220 billion. And while $20 billion is not nothing, it's actually not that big a deal for Apple, especially when you consider its $2 trillion market cap.

forrestthewoods 6y ago
You’re mixing a lot of numbers there. Apple makes about 60 billion a year in the profit. The 10 billion they get from Google constitutes 16% of their annual profit. That’s significant! Apple trades at a 37x P/E ratio. An additional $20B profit could be worth about an additional $760 billion in market cap. You can’t dismiss 10 billion in pure profit because their market cap. Those numbers are directly related and far closer in meaning than you give credit.
- wyattpeak 6y ago
  > The 10 billion they get from Google constitutes 16% of their annual profit. You're playing funny buggers with figures there. According to your standard the sales of physical devices constitutes over 350% of their annual profit.
  - forrestthewoods 6y ago
    Yes, gross revenue is larger than net income. Particularly when manufacturing is involved. The $10B Google money is basically pure profit. It costs Apple nothing. Maybe a few million in lawyer time to negotiate the fee each year. Hardware sales generates enormous revenue and also very large profit. I believe more than half of Apple’s profit is still hardware sales. But they’re working very hard to increase their services income.
    - wyattpeak 6y ago
      > The $10B Google money is basically pure profit. It costs Apple nothing. If they didn't spend all that money on producing the phones they'd have nothing to sell to Google. You can't meaningfully divorce the two, all profit centres of a business rely on the cost centres.
      - forrestthewoods 6y ago
        I have no idea what point you’re trying to make. You’ve moved the goal posts too many times.
        Cogito 6y ago
        You are claiming the Google money is 'pure profit' while making phones is not. They are saying that you can't account for the Google money as pure profit, even though the costs aren't as obvious. In particular, their argument says, you have to make and sell the phones before Google will give you money to make their search engine the default. So the Google money is not pure profit, in the same way the phone sales are not pure profit (even though the underlying costs are not as obvious).
        forrestthewoods 6y ago
        Apple’s profit is increasingly derived from non-hardware sales. That profit is dependent on them having sold hardware. If they sell no hardware they will generate no services revenue or profit. Scroll way back to the root of this conversation. Someone said that $20B is not nothing but is a small fraction of their revenue. I think this is a poor characterization because you need to consider the source of both gross and net revenue. Yes, services revenue is dependent on hardware sales. And yes the margin on services is significantly higher than the margin on hardware. Apple has been working very very very hard to increase services revenue because it is so profitable. Yes that profit is dependent on their ability to continue to sell hardware. Apple’s ability to grow their annual profit is highly dependent on their ability to both maintain hardware sales and increase services revenue. There is a LOT of room to grow services revenue. There is much less room to grow hardware revenue. I look forward to seeing where the goal post gets moved next.

forrestthewoods 6y ago

You’re mixing a lot of numbers there. Apple makes about 60 billion a year in the profit. The 10 billion they get from Google constitutes 16% of their annual profit. That’s significant! Apple trades at a 37x P/E ratio. An additional $20B profit could be worth about an additional $760 billion in market cap. You can’t dismiss 10 billion in pure profit because their market cap. Those numbers are directly related and far closer in meaning than you give credit.

wyattpeak 6y ago
> The 10 billion they get from Google constitutes 16% of their annual profit. You're playing funny buggers with figures there. According to your standard the sales of physical devices constitutes over 350% of their annual profit.
- forrestthewoods 6y ago
  Yes, gross revenue is larger than net income. Particularly when manufacturing is involved. The $10B Google money is basically pure profit. It costs Apple nothing. Maybe a few million in lawyer time to negotiate the fee each year. Hardware sales generates enormous revenue and also very large profit. I believe more than half of Apple’s profit is still hardware sales. But they’re working very hard to increase their services income.
  - wyattpeak 6y ago
    > The $10B Google money is basically pure profit. It costs Apple nothing. If they didn't spend all that money on producing the phones they'd have nothing to sell to Google. You can't meaningfully divorce the two, all profit centres of a business rely on the cost centres.
    - forrestthewoods 6y ago
      I have no idea what point you’re trying to make. You’ve moved the goal posts too many times.
      - Cogito 6y ago
        You are claiming the Google money is 'pure profit' while making phones is not. They are saying that you can't account for the Google money as pure profit, even though the costs aren't as obvious. In particular, their argument says, you have to make and sell the phones before Google will give you money to make their search engine the default. So the Google money is not pure profit, in the same way the phone sales are not pure profit (even though the underlying costs are not as obvious).
        forrestthewoods 6y ago
        Apple’s profit is increasingly derived from non-hardware sales. That profit is dependent on them having sold hardware. If they sell no hardware they will generate no services revenue or profit. Scroll way back to the root of this conversation. Someone said that $20B is not nothing but is a small fraction of their revenue. I think this is a poor characterization because you need to consider the source of both gross and net revenue. Yes, services revenue is dependent on hardware sales. And yes the margin on services is significantly higher than the margin on hardware. Apple has been working very very very hard to increase services revenue because it is so profitable. Yes that profit is dependent on their ability to continue to sell hardware. Apple’s ability to grow their annual profit is highly dependent on their ability to both maintain hardware sales and increase services revenue. There is a LOT of room to grow services revenue. There is much less room to grow hardware revenue. I look forward to seeing where the goal post gets moved next.