Apple’s #2 Business Keeps Growing

Apple issued its quarterly earnings last week. Predictably, iPhone dominated the results and the discussion. For the past several years, Services has been Apple’s second-largest segment. It is bigger than each of iPad, Mac, Wearables, Home, and Accessories. It also has grown the fastest compared to all other segments. We want to take a closer look at Apple’s Services segment, and get a better understanding of this critical, non-hardware business. 

Apple has a diverse and robust Services segment. Our survey data tracks much of it, including iCloud storage, AppleCare extended warranties, Apple Music and Apple TV streaming services, and media services such as Apple Podcasts and Apple News. Unfortunately, our survey methods do not capture App Store revenues. Based on our data, we continue to see uneven uptake of the broad range of services across all Apple customers.

The most successful product, as measured by market penetration (though perhaps the least expensive) remains expanded iCloud storage. 60% of Apple customers pay for more than the standard free 5GB allotment (Chart 1). The least successful service, at least in terms of penetration, remains AppleCare extended warranties for iPhone at 15%. AppleCare extended warranties for iPad have greater penetration, at 31%.