Revenue rose 18.9% YoY
Revenue from services for Apple (AAPL) rose 18.9% YoY (year-over-year) in fiscal 3Q16 to almost $6 billion from $5 billion in fiscal 2Q15. The services segment is now the second-largest revenue producer for Apple. It consists of revenue from the iTunes, App Store, AppleCare, and Apple Pay businesses.
Services revenue accounted for 14.1% of Apple’s total revenue in fiscal 3Q16, a rise from 10.1% in fiscal 3Q15.
App Store revenue drives overall services revenue for Apple
In fiscal 3Q16, Apple’s App Store revenue rose 37% YoY (year-over-year). The CEO of Apple, Tim Cook, stated, “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. Most of our terrific Services performance during the quarter was fueled by our active installed base of devices, with installed base-related purchases of $10.3 billion accelerating to 29% growth year on year.”
On Apple’s earnings call, Cook further stated that the firm’s installed base-related purchases rose 29% YoY to $10.3 billion this year. Although Apple’s revenues were earlier driven by hardware products such as the iPhone, iPad, and MacBook, its Services segment has quickly become a lucrative space in the last two years.
In the last fiscal year, China’s (FXI) regulators banned some of Apple’s digital services such as iBooks and iTunes. The Chinese government has prohibited a number of foreign products and services in the past to protect domestic companies from competition. However, Cook mentioned that the ban has had a negligible impact on Apple’s revenues in 2016.