- Apple service revenues, which includes App Store subscriptions, Apple Music, Apple Pay, are showing robust growth as the company is also reporting decline in iPhone sales
Revenue generated per U.S. iPhone grew 36%, from $58/user in 2017 to $79 in 2018. Much of that increase can be attributed to mobile gaming, which accounted for more than half of this per-device average. This service figure includes Apple’s (NASDAQ:AAPL) App Store subscriptions, Apple Music, Apple Pay, iCloud, App Store Search ads, AppleCare and more.
From 2017 to 2018, iPhone users spent an average of $21 or more on in-app purchases and paid app downloads — a 36 percent increase compared with the 23 percent increase from 2016 to 2017, when revenue per device grew from $47 to $58 (below)
The majority of the revenue is coming from mobile games’ in-app purchases such as Activision Blizzard’s (NASDAQ:ATVI) Candy Crush. However, the highest growing category is “Entertainment”, which grew 82% year over year due to popularity of video streaming services like Netflix (NASDAQ:NFLX).
The increase in service revenue comes at a time when Apple has reported slowing iPhone sales and China concerns. The company’s reliance on services is showing signs of paying off.
Article by: Mick Ross
Mick is currently a full-time investor and formerly a buy-side analyst (2yrs) covering healthcare companies. Before that, he was a salesperson at a bulge-bracket firm, based in Dallas, Texas. Mick blogs to clarify and synthesize his investment thought process and to elicit feedback; additionally he likes to connect with other investors and swap ideas.