Apple Services - Hypergrowth in the making

This morning I posted (on my substack) my insights into Apple’s earnings report. Then I decided to dive deeper into their Services business line.

I think we have a hyper growth business in the making. Not quite there yet, but heading in the right direction and worth keeping an eye on.

Apple does not breakdown details on cashflow, P&L, operational spend etc for the Services business. However they give us enough as laid out below.

Qtr      Q121    Q221    Q321    Q421    Q122
Rev      15.8B   16.9B   17.5B   18.3B   19.5B
YOY%                             25%     23%
QOQ%             7%      4%      5%      7%

GM       68.4%   70.1%   69.8%   70.5%   72.4%

Pd.Subs  620M    660M    700M    745M    785M
QOQ%             6%      6%      6%      5%

Would love to see the revenue YOY comps get into the 50s at least which should pull up the seq. QOQs into the double digits. So the question is how can they do this?

There are 1.8B apple devices in use around the world.
That’s an enormous target market to upsell to - Apple TV, Apple Pay, Car Play, SMB support, Fitness+ (should be tailwinds after Peleton’s recent weakness) etc.

Most of our favorite companies lead with growing the adoption of their devices, but really juice it up later via higher margins on the services side. I suspect that Apple has plans to do the same.

Long Apple (7.5% position).

Publishing my thoughts at @iwannabeontheb2 and


Don’t underestimate the effect of the COVID stimulus. A lot of folks with spare cash spend it on shiny new phones, and this holiday season was likely reflective of the sloppy loose cash on the street. Even I traded in two iPhone 7+ for new iPhone 13s.

I have a big stake in AAPL, but I’ll probably put some hedges on it before next earnings. With the company approach $3 trillion, it’s pretty crazy to keep that machine churning out growth at that pace.