Apple Services Salvage a Blah Quarter

Apple services to the rescue! The part of Apple’s business that includes the App Store and various subscription services was the star of the show in the company’s fiscal third quarter, which ended July 1. It’s a star the company badly needed, too. Total revenue at Apple dropped for the third consecutive quarter, shrinking 1% year over year. At the crux of the issue: iPhone, Mac and iPad sales shrank 2%, 7% and 20%, respectively. Taken together, those three divisions accounted for nearly 64% of the company’s $81.8 billion in revenue in the quarter.

But services. That business grew 8% to its highest level ever. Go services! It accounted for over one fourth of Apple’s revenue in the quarter, the highest proportion it’s been in each quarter since at least 2020. And because Apple’s gross profit margin from services was nearly 71%—nearly double that from hardware products—the category’s growth is good news for the company’s bottom line. Despite that, Apple’s operating income and cash flow fell marginally in the second quarter year over year due to an increase in spending on research and development (those Apple AR headsets and autonomous vehicles have to come from somewhere).