Apple continues to push services and subscriptions

For Apple, the supply chain is a wildcard – and will hit sales up to $8 billion, as management indicated in the latest earnings call.

Consumer demand for hardware that keeps us all connected has remained robust. However, the second fiscal quarter also showed proof as the company continues its efforts to pivot beyond hardware and gain subscribers with the appeal of content and apps.

As CFO Luca Maestri said, the company is setting “all-time highs” for the App Store, for music, and for video advertising and payment services.

“We now have over 825 million paid subscriptions across our platform services, which has grown to over 165 million in the last 12 months alone,” Maestri said.

Management noted on the call that the installed base of active devices provides a “big driver” for the company’s services business. The level of engagement on the platform continues to grow, Maestri and CEO Tim Cook said on the call.

Related: Apple isn’t filling some open Genius tech support jobs

The service segment

This activity helped push services revenue up 17% year-over-year to $19.8 billion. As for hardware, Cook said the company’s M1-powered Macs helped propel a 15% year-over-year increase in revenue, despite supply constraints.

In the March quarter, iPhone revenue grew 5% year over year to $50.6 billion. Meanwhile, apparel, home and accessories rose 12% year over year to $8.8 billion.

“Customers are enthusiastically taking charge of their health with Apple Watch Series 7 and Apple Watch SE,” Cook said.

iPad revenue was $7.6 billion, down 2% year-over-year due to continued supply constraints (which focus on China) .

During the question and answer session, when asked about inflation, Cook said that in reference to consumer spending, “we’re watching that closely, but right now our main focus, frankly, is on the side of the offer”.

Devices and services, of course, are among the building blocks of the connected economy – although there are still pockets of apparent resistance. Although Apple Pay was not discussed much on the call, as we noted in this space earlier this month, seven years after Apple Pay launched, PYMNTS analysis shows that 94% of US consumers who could use Apple Pay to pay in-store still don’t. Data from PYMNTS shows Apple Pay accounts for around 2% of overall US retail sales

See also: The Big Thing Apple’s Project Needed But Didn’t

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