Apple Services Revenues Gain 12% as Paid Subscriptions Top 860M 

Volatile supply chains.

Slowing hardware-related sales growth – and depending on where you look, some outright declines.

Apple’s latest results shine a spotlight, perhaps, on the reasons why the tech behemoth wants to make its mark as a services company, crafting an ecosystem where the devices are only part of the equation.

Revenue growth slowed to 2% year-over-year to $83 billion. That’s a marked change from past periods, when the top line growth rate topped 35%.

And in drilling down into the  results, iPhone revenues were up 3% to $40.7 billion.

Macs? Down 10% year-over-year to $7.4 billion, and iPad sales slipped 2% in the period to $7.2 billion.

As for the supply chain challenges, the company has pointed to rising costs for components and other operational inputs.

The bright spot in the quarter has been the services segment, where sales were up 12% to more than $19 billion, though that’s a slowdown from roughly 27% growth seen in the same quarter last year.

CEO Tim Cook said on the conference call with analysts that the demand for content across news, fitness and gaming boost the services revenues. And though not broken out in results, management also said that payments activity was at record highs.

Asked on the call about the company’s recently announced foray into buy now, pay later — and the affordability of Apple products —  CFO Luca Maestri stated that “buy now, pay later is the latest thing we are doing on this front, fundamentally … installment plans have become more widespread around the world.”  Trade-in programs are also widely available around the world, he added, noting that “the residual value of our products is a huge differentiator for our users.”

Maestri also said that, with some granularity on the services revenues, transacting accounts, paid accounts and accounts with paid subscriptions grew by double digit percentages year over year. There are now 860 million paid subscriptions in place, up more than 160 million across the last 12 months.

See also: Apple Said to Eye Grocery Delivery for Apple Pay

Management said on the call that revenues will continue to grow but decelerate from the June quarter due to macro factors (the services business also is poised to decelerate, said management).

Cook noted later in the call that “there are a number of levers in our services business,” adding that “the installed base is the engine for our company.”  The second lever, he said, is customer engagement, which is growing.  Management also said that recent changes to privacy policies (where users opt in for app tracking) represent a view of “privacy as a fundamental human right,” as Cook said.