A funny thing happened during Apple Inc. (NASDAQ:AAPL)‘s recent earnings call. CEO Tim Cook, in his prepared statement, repeatedly name-dropped a category that had been completely left out of his previous prepared earnings statements. Cook’s new favorite word? Services.
Cook is trying to drill into the market’s thick heads that Apple Inc. (NASDAQ:AAPL)‘s income from online services is quickly becoming a key component in the company’s growth trajectory.
Need some convincing? Take a look at the iTunes/Software/Services line item from Apple Inc. (NASDAQ:AAPL)’s April earning report, which shows the folks from Cupertino booking $4.1 billion in revenue last quarter from this (until now) little-discussed category.
Also note that despite the company’s seasonal Q2 slowdown, Apple’s online services revenue was up 12% sequentially and 30% year over year. (Additionally, notice that online services is now the second-fastest-growing category at Apple Inc. (NASDAQ:AAPL), behind the iPad.) And next quarter, for the first time, Apple will likely book more revenue from online services than it will from its entire Mac business.
What Are Services? Why Should I Be Excited?
Representing almost 10% of company revenues, there’s a reason why Apple recently began breaking the online services category out in the company’s earnings report. Clearly, Apple believes online services will be a key category for driving company profit and revenue growth going forward.
Source: Asymco. Used with permission
Why Apple Is Poised To Win In Mobile Services
With a user base of more than half a billion high-value costumers, the ability to quickly launch online services integrated directly into iOS, the rapid move from PCs to tablets, the global adoption of smartphones, and the high margins associated with online services, I believe Apple investors have reason to expect that online services will become a key revenue and profit driver for Apple Inc. (NASDAQ:AAPL) well into the future.
The article Apple Online Services: The Quiet Profit Juggernaut originally appeared on Fool.com and is written by Bill Shambllin.
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