NEWS ANALYSIS
going to drop a $100bn holiday quarter on us, and I’m
not sure my brain can count that high.
In any event, after dunking on us all via press
release, it was time for Apple’s executives to do their
quarterly ritual of spending an hour on the phone
with a handful of questioning financial-industry
analysts and a bunch of silent journalists. There’s
always something interesting to glean from that call,
especially when Apple CEO Tim Cook and CFO Luca
Maestri show restraint and don’t just spend an hour
running around the conference room high-fiving.
They’re very professional and polite, those two.
The Services double-whammy
Four years ago, Apple announced it was going to start
replacing the explosive growth once generated by
the iPhone with a new source of growth: its Services
accounting line. The goal was to double its Services
revenue by 2020, and it’s basically reached that goal
as of this quarter.
This quarter, Services generated $12.7bn in
revenue and grew 17 percent from the year-ago
quarter. (It’s been a staggering run of growth; Services
has been growing by double digits every single
quarter since 2015.) It now accounts for 14 percent
of Apple’s business, more than any other product
line. It’s twice the size of the iPad and almost twice
the size of the Mac.
That’s a huge change in the composition of Apple’s
business, purely by revenue. But it misses an important
multiplier: profit. As reported by Maestri last month,
Apple’s gross margin on products was 34.2 percent. Its
NEWS ANALYSIS
goingtodropa$100bnholidayquarteronus,andI’m
notsuremybraincancountthathigh.
Inanyevent,afterdunkingonusallviapress
release,itwastimeforApple’sexecutivestodotheir
quarterlyritualofspendinganhouronthephone
witha handfulofquestioningfinancial-industry
analystsand abunchofsilentjournalists.There’s
alwayssomethinginterestingtogleanfromthatcall,
especiallywhenAppleCEOTimCookandCFOLuca
Maestrishowrestraintanddon’tjustspendanhour
runningaroundtheconferenceroomhigh-fiving.
They’reveryprofessionalandpolite,thosetwo.
TheServicesdouble-whammy
Fouryearsago,Appleannounceditwasgoingtostart
replacingtheexplosivegrowthoncegeneratedby
theiPhonewithanewsourceofgrowth:itsServices
accountingline.ThegoalwastodoubleitsServices
revenueby2020,andit’sbasicallyreachedthatgoal
as ofthisquarter.
Thisquarter,Servicesgenerated$12.7bnin
revenueandgrew 17 percentfromtheyear-ago
quarter.(It’sbeenastaggeringrunofgrowth;Services
hasbeengrowingbydoubledigitseverysingle
quartersince2015.)Itnowaccountsfor 14 percent
ofApple’sbusiness,morethananyotherproduct
line. It’s twicethesizeoftheiPadandalmosttwice
the sizeoftheMac.
That’sahugechangeinthecompositionofApple’s
business,purelybyrevenue.Butitmissesanimportant
multiplier:profit.AsreportedbyMaestrilastmonth,
Apple’sgrossmarginonproductswas34.2percent.Its
