Ridiculous. People who have no inside track on Apple’s plans over the next 5 years, and who lack the necessary clairvoyance to know how any of those plans will pan out — Nevertheless, they can make 5 year predictions. But they know that 5 years from now, they’ll have made other predictions in the meantime and no one will come back to remind them about this one. So long as services are a larger percentage than now (which Cook said he wanted), they’ll claim success. Please MacRumors, file this away and do some Claim Chowder on them in 5 years.
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Apple's Services Category Set to Be the Company's Main Revenue Driver Over the Next Five Years
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It’s always confused me why so many people who come to an Apple fan site have nothing good to say about Apple.
Good question. I hadn’t even noticed the chart showed it being a negative percentage.
The new Mac mini will be a single device in Tim Cook's desk drawer, which you will be able to use via iCloud.
You really ever "raved" about iMessage?
Purely anecdotal, but I'm very pleased with my 2TB iCloud plan. Notes, Photos, files and iMessages reliably kept synced on both my Macs and my iPhone. My Safari history is available on all three devices, and even phone calls now come to all three. Every photo I have, going back a solid 15 years or more, is synced and backed up (at full resolution, not downsized) through Photos, and edits on any one device are non-destructively synced to the others. I'm paying $120/year for all this, and none of it is being used to target ads at me or for any of that "trusted partners" horse**** a lot of other companies try to sneak past the user. Frankly, iCloud and Apple's services in general are worth every penny I spend on them.
Apple's services revenue is growing at a rapid pace and is on track to be the company's primary revenue driver in the future, according to a note Morgan Stanley analyst Katy Huberty shared with investors this morning (via Business Insider).
Huberty believes that over the course of the next five years, services revenue growth will contribute more than 50 percent of Apple's total revenue growth. The iPhone, meanwhile, will make up just 22 percent of revenue growth during the same time period, despite the fact that it's contributed 86 percent of Apple's revenue growth over the past five years.
For the last several years, Apple's services category has been setting continual quarterly revenue records thanks to its rapid growth. In the first fiscal quarter of 2018, for example, services brought in $8.5 billion, up 18 percent year over year.
The services category includes iTunes, the App Store, Apple Music, iCloud, Apple Pay, and AppleCare.
According to Huberty, services revenue is at roughly $30 per device, up from $25 two years ago, but that might not be an accurate reflection of actual spending. Most Apple users do not currently pay for services, which could mean that revenue per active user is well above and "possibly double" the $30 metric.
Just 18 percent of Apple's total device installed base subscribe to paid Apple services, which means there's a lot of potential for growth in recurring revenue sources. Apple Music, iCloud, and Apple Pay are all services that Huberty believes have yet to be fully monetized.
Apple Music, as an example, has seen considerable growth since its launch and now boasts over 36 million subscribers. Just 2.9 percent of Apple customers subscribe, however. Apple Pay usage is also low, despite the fact that it's available in more than 50 percent of retail locations in the United States.
According to Huberty, Morgan Stanley is confident in Apple's growth through services monetization, with the firm setting a price target of $203 on Apple shares, which are currently trading at ~$170.
As Tim Cook often says, Apple's services category has already reached the size of a Fortune 100 company, and Apple has set a goal to double its 2016 services revenue by 2020, a target the company is well on its way to hitting.
Article Link: Apple's Services Category Set to Be the Company's Main Revenue Driver Over the Next Five Years
I can’t really say either. I bought my 8 Plus outright. The way I see it, no matter how they cut it up or try to hide it, you always pay the full price in the end, so a $1000 phone is still a $1000 phone, which is significantly more than a $700 phone. I suppose a lot of people probably don’t think about the fact that even a little extra each month over the course of years can still be hundreds of dollars more.
Well, something's got to offset the general neglect towards hardware and OS (except 1-2 flagships), so it might as well be Services.
Apple services are, at best, subpar. We have all Apple hardware (Mac Pros, Minis, iPads, iPhone), but use a Roku for TV, and Echo for voice nonsense. Still use iTunes library for my music, but if they screw that up anymore, that could change quickly. Don't need a subscription for music, but if so would use Spotify.
I can feel the inertia of Steve Job's vision starting to lose its momentum.
I don't think Tim actually understands that to have real, robust ecosystem - you have to fill ALL the slots with excellence, not just a few. Only filling a few slots means the whole system can die. Then you are just left with separate devices and services. And only the hardware is good. Tim needs to get the boot - and soon!
I can feel the inertia of Steve Job's vision starting to lose its momentum.
I don't think Tim actually understands that to have real, robust ecosystem - you have to fill ALL the slots with excellence, not just a few. Only filling a few slots means the whole system can die. Then you are just left with separate devices and services. And only the hardware is good. Tim needs to get the boot - and soon!
If there was anything Apple produced lately that's worth flaunting, you'd see way more positivity alright.
If you don’t see anything worth flaunting, you’re not looking.
On the contrary. I'm looking close enough to notice the seams coming undone.
From reading these comments i think a lot of people are making the same mistake I first did on seeing this and confusing “revenue” with “revenue driver” ie revenue ‘growth’.
No one is saying that Apple is poised to make more money from services than iPhones, just that they aren’t likely to see as much growth now that eveyone who wants an iPhone has one. Always is a very long time, but theres nothing in the forseeable future that suggests Apple could be anything a product manufacturer as the first line of business.
Personally, I think they might might be in for a very good third quarter of iPhone sales given the way the Apple Watch has taken off and Samsung’s lag in creating 3D imaging.
No one is saying that Apple is poised to make more money from services than iPhones, just that they aren’t likely to see as much growth now that eveyone who wants an iPhone has one. Always is a very long time, but theres nothing in the forseeable future that suggests Apple could be anything a product manufacturer as the first line of business.
Personally, I think they might might be in for a very good third quarter of iPhone sales given the way the Apple Watch has taken off and Samsung’s lag in creating 3D imaging.
Apple's services revenue is growing at a rapid pace and is on track to be the company's primary revenue driver in the future, according to a note Morgan Stanley analyst Katy Huberty shared with investors this morning (via Business Insider).
Huberty believes that over the course of the next five years, services revenue growth will contribute more than 50 percent of Apple's total revenue growth. The iPhone, meanwhile, will make up just 22 percent of revenue growth during the same time period, despite the fact that it's contributed 86 percent of Apple's revenue growth over the past five years.
For the last several years, Apple's services category has been setting continual quarterly revenue records thanks to its rapid growth. In the first fiscal quarter of 2018, for example, services brought in $8.5 billion, up 18 percent year over year.
The services category includes iTunes, the App Store, Apple Music, iCloud, Apple Pay, and AppleCare.
According to Huberty, services revenue is at roughly $30 per device, up from $25 two years ago, but that might not be an accurate reflection of actual spending. Most Apple users do not currently pay for services, which could mean that revenue per active user is well above and "possibly double" the $30 metric.
Just 18 percent of Apple's total device installed base subscribe to paid Apple services, which means there's a lot of potential for growth in recurring revenue sources. Apple Music, iCloud, and Apple Pay are all services that Huberty believes have yet to be fully monetized.
Apple Music, as an example, has seen considerable growth since its launch and now boasts over 36 million subscribers. Just 2.9 percent of Apple customers subscribe, however. Apple Pay usage is also low, despite the fact that it's available in more than 50 percent of retail locations in the United States.
According to Huberty, Morgan Stanley is confident in Apple's growth through services monetization, with the firm setting a price target of $203 on Apple shares, which are currently trading at ~$170.
As Tim Cook often says, Apple's services category has already reached the size of a Fortune 100 company, and Apple has set a goal to double its 2016 services revenue by 2020, a target the company is well on its way to hitting.
Article Link: Apple's Services Category Set to Be the Company's Main Revenue Driver Over the Next Five Years
iTunes has such an identity crisis in 2018 that it has to be represented by two different app icons in this graphic.
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Apple TV (the TV and Movie service) is going to make up a large segment of growth. It looks like they're nearly ready to announce the details. I really hope that this isn't just US only. Apple needs to release its new services in more markets at launch.
Hardware is extremely crucial for Apple, but I don’t think others realize how important software is for this company. And when services are up, I see this as a being a huge benefit with offerings like iTunes, the Apple store, Apple Pay, etc. Apple alone could survive on their services if they stop selling hardware tomorrow, that’s how much they have likely accrued in revenue over the years.
You’re confusing ‘revenue growth” with ‘revenue’. I’m not sure why macrumors didn’t use the word growth instead of drivers. Probably fewer page hits.
Couldn’t agree more. Just this morning I upgraded our iCloud Family storage plan from 200 GB to 2TB. Now everyone in the family has access to 17 years worth of photos and videos, and all 14 of our Apple devices are backed up in the cloud. Very happy with Apple’s services.
There is no way Apple could survive on services alone and not only because many of them don’t even work on other platforms. It’s also not what this article is saying. Revenue growth, not revenue.
If services turn out to be the main source of revenue in the future than I think Apple will need to become more platform agnostic.
That also means iMessage, Books and iCal on Android and a vastly improved Siri that actually competes with Google and Amazon.
That also means iMessage, Books and iCal on Android and a vastly improved Siri that actually competes with Google and Amazon.
I'm not the first person to mention this, but this is about revenue GROWTH, not revenue. According to the article, prior to this, services growth have contributed < 14% of Apple's 8% yearly revenue growth. That is about 1% of revenue. Assuming Apple continues growing at 8% annually, in 5 years they expect services to account for 4% of that 8%.
It also refers to last quarter service revenue increasing 18% to $8.5B. That means an increase of $1.3B, or growth of about $5.2B annually. Meanwhile iPhone revenue is ~$250B/year (and still growing).
I don't think Apple is quite ready to abandon their hardware offerings yet.
I'll second that, with the notation that Apple's "Services" only makes sense in the context of Apple hardware and software. Without a great foundation they won't sell any services.
If you look at the projected revenue growth changes you'll noticed that Mac's are a large percent... but won't be in the future. Is that really a reflect of market forces, or just one of Apple's neglect? I suspect it's a bit of both. Sure, people are buying fewer traditional computers, and trading up less often, but to some degree that's because the 'new and improved' devices aren't really much better than the 'old and fully capable' devices.