Apple’s profits surge as services division surpasses 1 billion users

Category: AI Americas Europe
Posted by
Lea Hogg

Apple’s resilience in its recent quarter is evident as the tech giant’s paying subscribers for its digital services surpassed a remarkable 1 billion worldwide, contributing to increased profits even in the face of a slight decline in total revenue. Despite a 1 percent dip in total revenue to US $81.8 billion for the quarter ending in June, Apple’s net profit surged by 2.3 percent to US $19.9 billion, outpacing Wall Street estimates, which anticipated a 3.6 percent decline to US $18.7 billion. Earnings per share also exhibited a notable increase of 5 percent to US $1.26, surpassing the projected US $1.20.

iPhone, Mac and iPad sales are lower than a year ago

Apple’s shares, which had experienced a robust surge of over 50 percent throughout the year, encountered a 2.2 percentdecline in after-market trading. Some analysts attributed this dip to declining hardware sales. Sales of iPhones, Macs, and iPads all exhibited a decrease compared to the previous year, with iPad sales notably plummeting by 20 percent. iPhone sales, accounting for 48 percent of revenues, also faced a decline of 2.4 percent, while wearables such as AirPods and the Apple Watch saw a modest 2.5 percent rise.

Remarkably, Apple’s services division, driven by App Store sales and digital offerings like iCloud and Apple Music, recorded an impressive 8 percent growth from the previous year, reaching a record high of US $21.2 billion. This surge was propelled by a 150 million increase in subscribers. This services division, boasting a strong profit margin of 71 percent, significantly outperformed Apple’s hardware segment, contributing significantly to the overall profit for the quarter.

The total number of subscribers has doubled in just three years, underscoring the significance of the services business in diversifying Apple’s revenue streams and reducing dependence on hardware performance.

Downturn to $81.8 billion for quarter

The tech giant’s revenue in the greater China region experienced a notable growth of 7.9 percent to reach US$15.8 billion, offsetting a 5.6 percent decline in the Americas, which remains Apple’s largest market, generating US $35.4 billion.

CEO Tim Cook highlighted the company’s success in emerging markets, particularly in India, where Apple opened its first two flagship stores this year. Despite the struggles faced in the previous quarters due to supply chain disruptions and a challenging macro environment, Apple demonstrated resilience. A 4 percentage point drop in revenue was reported to foreign exchange headwinds.

Apple’s prudent cost management was evident, with a slowdown in hiring and other cost-saving measures. The company has refrained from providing quarterly guidance since the onset of the Covid-19 pandemic, projecting operating profit margins between 44 percent to 45 percent. The quarter witnessed a record margin of 44.5 percent, marking a notable increase from 44.3 percent a year ago and 37.6 percent pre-pandemic.

AI is central in Apple’s product development

Addressing the perception that Apple differs significantly from its peers in terms of its view on artificial intelligence (AI), CEO Tim Cook explained that AI and machine learning in Apple’s product development is central. He underscored that these technologies are integral to nearly every product the company creates, signifying Apple’s substantial commitment to AI research and development.

In conclusion, Apple’s robust performance in this quarter, characterized by impressive growth in its services division and resilience in the light of certain challenges, reinforces its position as a technological powerhouse with a diverse and thriving ecosystem.

 

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