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How Has Apple’s Services Segment Been Performing?

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Revenue rose 24%

In fiscal 4Q16, revenue from Apple’s (AAPL) Services segment rose 24% YoY (year-over-year), to almost $6.3 billion, from $5.1 billion in fiscal 4Q15. 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. It accounted for 13.5% of total revenue in fiscal 4Q16.

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Apple Music drove Services revenue in fiscal 4Q16

In fiscal 4Q16, Apple Music drove revenue in Apple’s Services business segment. Apple Music revenue grew 22% YoY in fiscal 4Q16. Apple Pay transactions rose almost 500% YoY in the quarter ended September 2016.

Apple CEO Tim Cook stated that “we remain very confident about the future of our Services business given the unmatched level of engagement, satisfaction and loyalty of our growing installed base. We have almost doubled the size of our Services revenue in the last four years, and as we’ve said before, we expect it to be the size of a Fortune 100 company in fiscal 2017.”

In the last fiscal year, China’s (FXI) regulators banned some of Apple’s digital services, including iBooks and iTunes. The Chinese government has prohibited a number of foreign products and services, to protect domestic companies from competition. However, Cook stated that the ban has had a negligible impact on Apple’s revenues in 2016.

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