Apple seeks to bolster its services division in response to declining sales

Apple Inc.’s recent shift in focus appears to be paying off, literally, with the company announcing that its services division had posted a record quarterly revenue of $6 billion USD – a 19 per cent boost – during its third-quarter earnings conference call on Tuesday.

Sweetening the news for Apple was the diversity in that growth, with revenue from the App Store rising a record 37 per cent and Apple Pay use rising a whopping 450 per cent YoY.

“In the last 12 months, our Services revenue is up almost $4 billion year on year to $23.1 billion, and we expect it to be the size of a Fortune 100 company next year,” Cook said.

With the company bringing Apple Pay to Safari, which will allow users to apply the service to online purchases, this fall, that revenue is only likely to grow, he said.

In fact, three-quarters of contactless payments in the U.S. are now made using Apple Pay, Cook said.

Nor is the service’s success confined to North America: more than half of Apple Pay transactions come from outside the U.S., he said, and it’s now available in nine markets, including six of the company’s top 10.

On the devices end, iPhone sales continued to fall, though Cook called the eight per cent YoY sell-through drop “an even greater improvement over the March quarter than we predicted,” and the future looks bright for Apple’s four-inch iPhone SE, with demand outpacing supply throughout the quarter.

“At its launch, we said that the addition of the iPhone SE to the iPhone lineup placed us in a better position to meet the needs of customers who love a four-inch phone and to attract even more customers into our ecosystem,” Cook said.

“In both cases, that strategy is working. Our initial sales data tells us that the iPhone SE is popular in both developed and emerging markets, and the percentage of iPhone SE sales going to customers who are new to iPhone is greater than we’ve seen in the first weeks of availability for other iPhones launched in the last several years,” he said.

Meanwhile, the company’s iPad sales were at their highest in 10 consecutive quarters, Cook said, with revenue growing by seven per cent thanks to the 9.7-inch iPad Pro.

As for the Apple Watch, Cook didn’t specify sales numbers or the device’s contribution to his company’s overall revenue, mentioning only that it “continues to be the best-selling smartwatch in the world,” and that it was ranked this month by global marketing information services firm J.D. Power and Associates as having the highest customer satisfaction rating among all smartwatches.

Thanks to investment research platform Seeking Alpha for the transcriptions from Apple’s July 26 Q3 earnings call.

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Eric Emin Wood
Eric Emin Wood
Former IT World Canada associate editor turned consultant with public relations firm Porter Novelli. When not writing for the tech industry enjoys photography, movies, travelling, the Oxford comma, and will talk your ear off about animation if you give him an opening.

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