Apple earns more than half its revenue from the iPhone sales.
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Mr Maestri said comparisons to the second quarter a year ago, when iPhone 6 sales surged 35%, made its performance seem worse than it was.
Services is such a huge chunk of sales, CEO Tim Cook said he expected the division to “be the size of a Fortune 100 company next year”, in a call with analysts.
Apple’s shares rose as much as 8 percent to $104.35 on Wednesday – its biggest percentage gain since April 2014 – adding roughly $42 billion to its market cap in the first few minutes of trading.
Apple’s services business, which includes the App Store, Apple Pay, iCloud and other services, generated almost $6 billion in revenue, up 18.9 per cent from the previous year. This is despite a large amount of investment by Apple in appealing to Chinese consumers, including partnering with popular Chinese apps and services like WeChat and Didi Chuxing.
Apple forecast fourth-quarter revenue of $45.5 billion to $47.5 billion, largely above Wall Street’s average estimate of $45.71 billion, according to Thomson Reuters I/B/E/S.
One area we know Apple is investing is it autonomous vehicles, AKA the self-driving auto. In one change, Apple is reducing its commission on apps that are sold on a subscription basis.
In another change, Apple has begun selling App Store ads to developers, so iPhone owners who search for new apps will now see a paid listing along with other results.
As this chart from Business Insider Intelligence shows, Apple has continued to increase its R&D spend on an annualized basis even as its revenue has started to decline.
“The growing iPhone installed base could enable Apple to grow its higher-margin services business through additional iTunes, apps and software sales, as well as through services such as Apple Pay and Apple streaming music service”, Canaccord Genuity analyst Michael Walkley said. Apple’s iCloud storage service, meanwhile, has a host of online competitors.
According to Apple, sales of iPhone, iPad, and Mac all dropped year-on-year and the iPhone took the most significant hit, dropping 15 per cent year-on-year. Despite the decline in sales, Apple beat the average analyst forecast of 40.02 million.
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The iPhone drives about two-thirds of Apple’s total sales. But these numbers are still down from past year, when Apple had reported revenue of $49.6 billion in Q3. Apple is expected to introduce new watch features later this year.
