Has Apple Services growth slowed? — updated

Nineteen of 21 analysts think it has.

The one bright spot for Apple in 2016—a fiscal annus horibilis in almost every other respect—was its 22% growth in revenue from “Services” (iTunes, iCloud, the App Stores, Apple Music, Apple Pay, etc.). By the end of 2017, according to Tim Cook, Apple Services could generate as much revenue as a Fortune 100 company.

Can Apple keep it up? Wall Street doesn’t think so. To grow 22% year over year, Apple would have to report Services revenue on Tuesday in excess of $7.4 billion. Of the 21 analysts we’ve heard from so far (14 professionals and 7 independents), only two—Stifel’s Aaron Rakers and Credit Suisse’s Kulbinder Garcha—believe Apple can do it.

All my analysts expect Services to keep growing; the only issue is at what rate. The average estimate of the full group, $6.9 billion, works out to 14% year over year. You can see the expected falloff in the growth chart below:

Click to enlarge. Not seeing the graphics? Try the website. 

Below: The analysts’ individual estimates, pros in blue, indies in green.

We should find out who was closest to the mark on Jan. 31, when Apple is scheduled report its earnings for fiscal Q1 2017. Tune in here about 30 minutes after the markets close.

UPDATE: Daniel Tello spotted $548 million that I missed:



  1. David Drinkwater said:
    Same story, different details. “Apple’s growth rate is slowing!”

    But its always an unfair compare!

    Apple has a banner year on some particular metric, and the next year, the question is not “will Apple beat it this year?”, but “Will Apple’s growth this year be greater than it was last year?”

    You do not have to achieve 22% growth to achieve double-digit YOY growth. And yet, the former seems to be the standard that Apple is held to.

    January 29, 2017
    • Robert Paul Leitao said:

      Revenue growth for the sake of revenue growth becomes a Sword of Damocles for executives and shareholders of publicly-traded enterprises. While in general the Street does reward fast-growing enterprises with richer or higher valuations, the risk of a miss hangs ominously over everyone’s head.

      Apple is an enterprise approaching one-quarter trillion dollars in revenue and sustaining fast rates of revenue growth every 91 days for the sole purpose of satisfying the Street’s demands would be dangerous and irresponsible behavior.

      Each of Apple’s geographic revenue segments has a distinctly different growth cycle linked in part to Apple’s release schedule for new and upgraded devices, accessories and services. It’s much better for customers and shareholders for management to focus on delivering the best products and services possible at the time they are ready than to artificially push revenue growth for the sake of revenue growth alone.

      In the end it’s the customer and the strength of Apple’s relationship with the company’s customers that deliver sustainable rates of growth and high margins.

      January 29, 2017
    • Fred Stein said:
      Yes !, “unfair compare”
      Or call it a short-sighted compare. From Q1 ’14 with $4.4B to Q1 ’17 with estimated $6.9B, we get 15% CAGR over three years. That’s great growth. The future? If Apple gets video content deals, more gaming revenue or something in AR/VR, services CAGR looks promising. But to set expectations, without some new services offering, we should be happy with 10% services CAGR. Really, that’s fine.

      January 29, 2017
  2. Robert Paul Leitao said:
    The additional week in the December quarter notwithstanding, Apple is now lapping the first year of Apple Music subscriber revenue. A slowing of the rate of Services revenue growth is expected. This isn’t a bad thing. Services revenue will push through $25 billion this fiscal year.

    Combined with double-digit revenue growth in the Other Products segment (inclusive of AirPods and the Apple Watch lines), Apple is demonstrating the company’s expanding global customer base is more important for long-term growth than the number of iPhones sold in a particular quarter or fiscal year.

    January 29, 2017
  3. Robert McDonald said:
    The Pokémon-Go and latest game craze, Super Mario Run, and othe game crazes may superimpose their popularity on Apple Service Revenues for the good and the bad depending on the quarter. Looks to me like Pokémon go may have been a big winner but running out of momentum at year end. Any comments anyone?

    January 30, 2017
  4. David Sauceda said:
    If Apple’s Walled Garden collapses and they lose exclusitivity selling apps direct to consumers through the [sticky-icky] App Store, I wonder how greatly that unfortunate event could affect Services growth in the future.


    While I’m no fortune-teller, it’s very possible Apple could lose all appeal opportunities and maybe a SCOTUS decision and allow developers to sell apps direct to consumers, bypassing Apple’s 30% fee.

    How loyal then will an iPhone/iPad user be to the ecosystem? Would devices be compromised?

    January 30, 2017

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