Service revenue hit $25 billion in fiscal 2016
Apple (AAPL) has the ambitious plan of doubling its service revenue in the next four years. Its Services business produced ~$25.0 billion worth of revenue in fiscal 2016, meaning that doubling the business’s growth would bring its revenue to $50.0 billion by fiscal 2020.
How big is the Services business?
At $25 billion in revenue, Apple’s Services business is already larger than several S&P 500 companies, and it’s growing at a decent pace. In Apple’s fiscal 1Q17, sales in the segment rose 18% to $7.2 billion, making up 9% of total revenue in the quarter and emerging as Apple’s fastest growing business.
Apple’s Services business includes products such as iTunes, the App Store, Apple Music, iCloud, and Apple Pay. The App Store, which is an important part of Apple’s service revenue push, registered its best month in terms of sales in December 2016, during which sales topped $3.0 billion. Attracting more developers and consumers to the platform could help Apple drive significant service sales growth.
Apple Pay transactions up 500%
Apple’s mobile payment service, Apple Pay, is crucial to its dream of doubling its service revenue in the next few years. The great thing is that the business is already gaining currency. Apple Pay transactions rose 500% in fiscal 1Q17, according to the company. However, Apple faces competition from PayPal (PYPL), Alibaba’s (BABA) Ant Financial Services Group, and other players in the mobile payment space.
Exclusive video content
As part of its efforts to double its Services business’s revenue, Apple is reportedly considering joining Netflix (NFLX) and Amazon (AMZN) in signing exclusive video content deals, according to a Financial Times report. Apple has long been rumored to be interested in venturing into the video streaming business. It could add video content as part of its Apple Music service.