Apple's services division, which includes Apple Pay, Apple Music, Apple TV+ and the App Store - among others - reached an all-time revenue high in the fourth quarter of fiscal year 2023. Apple’s quarterly services revenue climbed to $22.3 billion in the three months ended September 30, up from $10 billion five years ago. Thanks to an installed base of more than two billion active devices and constant investment in new service offerings over the past decade, Apple now has more than one billion paid subscriptions, nearly double the number it had three years ago.
While traditionally viewed as a hardware company, Apple has made major strides to expand its services business over the past few years. The reason behind the services push is quite obvious: as smartphones, tablets and other devices have matured and breakthrough innovations have become few and far between, replacement cycles have gotten longer, making it harder and harder for a company like Apple to keep growing or even maintaining revenue at its incredibly high level.
Enter services, which provide Apple with a steady stream of recurring (and high-margin) revenue, which, considering Apple‘s immense installed base of more than two billion active devices, is just too good an opportunity to pass on. Moreover, Apple‘s services are tightly integrated with its hardware, meaning they help with customer lock-in, i.e. binding users to the company’s ecosystem. The fact that customers can now do pretty much anything within Apple’s (in)famous „walled garden“ makes them even less likely to buy non-Apple devices when they‘re in the market for a new smartphone, laptop, tablet or smartwatch.
