Apple continues its transition from products to services

Quarterly revenues for gadget giant Apple were up year-on-year but down for the full year, as the company increasingly relies on services.

The headline of Apple’s latest quarterly announcement read: ‘Services Revenue Reaches All-Time High of $12.5 Billion’. This achievement masked the fact iPhone revenues continue to decline, which in turn dragged full year revenues into the red. On the whole, however, these were solid results for Apple and it seems to be managing its strategic transition well.

“We concluded a groundbreaking fiscal 2019 with our highest Q4 revenue ever, fueled by accelerating growth from Services, Wearables and iPad,” said Tim Cook, Apple’s CEO. “With customers and reviewers raving about the new generation of iPhones, today’s debut of new, noise-cancelling AirPods Pro, the hotly-anticipated arrival of Apple TV+ just two days away, and our best lineup of products and services ever, we’re very optimistic about what the holiday quarter has in store.”

The services side of things was the focus of the tech press in its analysis. Apparently Apple pay transaction volume overtook that of PayPal in the most recent quarter. A significant initiative that illustrates the symbiosis of the services and hardware side is Apple’s decision to offer interest-free financing of new iPhones through its own credit card. This will also be a significant blow for the postpaid phone contract sector as subscribers will no longer be dependent on operators for handset financing.

The fact that iPhone shipments are declining is not disastrous, so long as Apple maintains the massive iOS installed -base. As the Apple Pay numbers show, Apple’s services are bound to do well so long as there are lots of iPhones in use. The financing initiative implies Apple is worried about that installed-base declining, however, and may not be the last time we see Apple further incentivising people to buy iPhones.

The columns in the table below are as follows: fiscal Q4 2019, Q4 2018, full fiscal year 2019, full year 2018.