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).
Beachman
Publishing my thoughts at @iwannabeontheb2 and beachman.substack.com