With declining iPhone sales, Apple touts record growth in services
Apple usually makes money from selling you iPhones, iPads and other pieces of hardware — but those businesses aren't exactly growing.
Growth, it turns out, is coming from Apple's non-hardware business, notably its services areas like Apple Music, the App Store and iCloud.
That's the main takeaway from Apple's fourth quarter earnings that dropped on Tuesday afternoon. The tech giant reported a decline in revenue, with sales of $46.9 billion this quarter compared to $51.5 billion the year prior.
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Sales of each of its core products are down. Sales of iPhones are down 13 percent, iPads are down 0.5 percent and Macs are down 17 percent year over year.
The slump wasn't a surprise to analysts, however, who have been tracking declining iPhone sales for the last three quarters. In fact, Apple beat expectations in revenue and earnings per share.
There's one aspect of its business up that Apple is touting as a positive amid all the negatives: services. That's the area of the business that includes App Store, Apple Music, Apple Pay and iCloud. Services is up 24 percent from the previous year's quarter with sales at $6.3 billion.
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“Our strong September quarter results cap a very successful fiscal 2016 for Apple,” Cook said in a statement. “We’re thrilled with the customer response to iPhone 7, iPhone 7 Plus and Apple Watch Series 2, as well as the incredible momentum of our Services business, where revenue grew 24 percent to set another all-time record.”
Apple does not break out the figures for each service, but Cook noted to investors on the call that Apple Music is one of the key drivers. Apple announced it had 17 million subscribers at the iPhone 7 launch event in September.
Apple Pay, which recently launched in Japan, is also growing. The service that allows you to pay with a tap of an iPhone has processed more transactions in September than the entirety of 2015, Cook said.
In other good news for Apple, its cash chest is at an all-time high at $237.6 billion.
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Despite the product slump, Apple and its investors have eyes into the next quarter. On Thursday, the company is expected to release new MacBooks. Sales of the iPhone 7 and 7 Plus are expected to pick up. Currently, demand is ahead of supply.
"Worldwide demand for iPhone 7 and 7 Plus has significantly outpaced supply, particularly on iPhone 7 Plus. And we're working very hard to get the new iPhones into the hands of our customers as quickly as possible," Apple's Chief Financial Officer Luca Maestri said on the call.
Apple issued guidance on its next quarter of between $76 billion and $78 billion, which would be its highest quarterly revenue to date.
One concern had investors worried, however -- Apple's effort to grow globally has been wavering. Despite the company's push to sell more in China and Cook's time over there courting, sales in Greater China are down 30 percent year over year.
Kerry Flynn is a business reporter for Mashable covering the tech industry. She previously reported on social media companies, mobile apps and startups for International Business Times. She has also written for The Huffington Post, Forbes and Money magazine. Kerry studied environmental science and economics at Harvard College, where she led The Harvard Crimson's metro news and design teams and played mellophone in the Band. When not listening to startup pitches, she runs half-marathons, plays with puppies and pretends to like craft beer.
