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Apple’s inscrutable black box: Services

Tuesday August 2, 2022. 06:41 PM , from Mac Daily News
Apple’s fiscal Q322 quarter ended June 25th, showed that the company’s Services business posted a 12% growth rate that was significantly slower than the 25% that the segment averaged over the previous four quarters. Why?

Martin Peers for Bloomberg Opinion:

On Thursday’s earnings call, Apple attributed the slowdown to foreign exchange, “the macroeconomic environment” and a pullback in Russia. But a weaker performance at the App Store also seems to be a factor. In a Friday securities filing about the quarter, Apple conspicuously didn’t include the App Store as one of several businesses driving growth in services, as it has done for several years. Instead, Apple said services growth was “due primarily to higher net sales from advertising, cloud services and AppleCare.”
What’s going on? Could regulatory and legal pressures on App Store practices and fees be having an impact? We don’t know, and that’s the point. Apple’s services segment is a mystery. We know the businesses it covers, which include cloud services, payments, subscription services like Apple Music and Apple TV+, and offerings like AppleCare. And we know it’s important. In the first three quarters of Apple’s current fiscal year, services overall is responsible for a hair under 20% of Apple’s revenues but nearly a third of its gross profit. Services growth is important to smooth out fluctuations in product sales.
But which part of services contributes what? That’s a secret. Yes, Apple’s services segment is the Manhattan Project of the tech industry.

MacDailyNews Take: Peers’ point is that most assume, likely correctly, that the App Store is Services’ biggest revenue component, but it’s the App Store that’s under increasing regulatory and legal pressure. Apple’s occlusion of Services makes it very difficult for investors to know what to expect from the increasingly important segment if the App Store profitability is negatively affected by regulation, lawsuits, etc.
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The post Apple’s inscrutable black box: Services appeared first on MacDailyNews.
https://macdailynews.com/2022/08/02/apples-inscrutable-black-box-services/
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