Apple CEO Tim Cook wants to double his company’s Services segment revenues by 2020. As smartphone sales struggle all around the world along with other devices, Apple’s Services segment is the fastest growing one for the company, so it’s not really a surprise that Cook wants to double the size of the Services unit as soon as he possibly can.
“In services, the App Store was up 40 percent, and our developer community is growing by over 20 percent,” Cook told CNBC. “There is a lot of momentum. If you add up the number of subscriptions across Apple-branded services and third-party, we have over 165 million paid subscriptions,” he added.
Between 2014 and 2015, Apple Services revenue only grew by 10%, from $18.063 billion in 2014 to $19.909 billion in 2015. Mirroring Apple’s push on Apple Music and Apple Pay in 2015, things started moving faster in 2016, when Services revenue hit 22% growth to reach $24.348 billion in 2016.
As Apple’s bread and butter iPhone sales – which still account for nearly 70% of its revenues – moves into a period of stable growth, Apple needs other sources to help its overall sales numbers grow, and their best bet is Apple Services.
Apple has more than one billion active devices around the world, and the number of Apple users around the world should be close to that number. Apple’s chances of bringing those customers into its services net are high, provided the company is able to build applications and services that users love to keep using. If they can do that, Apple will not only double its current Services revenue, but go beyond that and even rival iPhone sales some day.
But one big question pops up here. Is Apple doing “enough” to reach that lofty goal of doubling its Services segment revenues in the next four years? The company took more than two years to go from $18 billion in 2014 to the current $24+ billion as of 2016. To double that by the end of 2020 is a major feat, and not one they’re going to achieve unless they seriously ramp up on their Services.
How many of these Apple services below have you actually heard of or use on a regular basis? And which of them generate revenues for the company?
It’s true that Apple is getting into new things like augmented reality, self-driving car technology and even original content programming, but all of those could take years to bear fruit in terms of top line income. Apple Music and Apple Pay should be their immediate areas of focus, because they leverage platforms that the company has already created and deployed.
Adding $25 billion to the Apple Services segment in four years is not going to be a piece of cake. It means growing at a steady 20% or more every year between now and then. That’s what’s needed. Can Apple actually do it? Cook seems confident that it can.
In the meantime, we’ll be watching the Apple Services segment numbers quarter after quarter, and tracking their goal of $48 billion from Services by the end of 2020.