Slumping Apple may be having an unusual downer of a new year, but at least one part of the business isn’t singing the blues.
Apple reported its App Store set a record over the holidays. Sales of new apps reached $1.22 billion in the time between Christmas Eve and New Year’s Eve, no doubt as gift-getters spent to load up on games and such. And on New Year’s Day, app users were right back on it, spending $322 million on that day alone.
The company said gaming and self-care types of apps and subscriptions dominated purchases during the holidays, specifically mentioning “Fortnite,” “PlayersUnknownBattleground,” “Brawl Stars,” “Asphalt 9” and “Monster Strike.”
On New Year’s Day, the big Apple Store action centered on health & fitness, productivity and education apps, including 1Password, Sweat and Lumosity.
Phil Schiller, Apple’s senior vice president of worldwide marketing, said the store “finished off an outstanding 2018 and kicked off 2019 with a bang.”
The Apple Services section of the company had altogether record revenues in the fourth quarter. That part of the business includes the store, Cloud Services, Apple Music, Apple Pay the App Store’s ad search business.
Actually the Services end of the business is one of Apple’s sleeper bright stories.
CEO Tim Cook’s letter to shareholders Wednesday warned Apple’s revenue will fall below its original estimates, partly because the smartphone business is flattening out. That announcement is roiling the stock market.
But in that same letter, he noted, “Our non-iPhone businesses have less exposure to emerging markets, and the vast majority of Services revenue is related to the size of the installed base, not current period sales.”
He continued, “Services generated over $10.8 billion in revenue during the quarter, growing to a new quarterly record in every geographic segment, and we are on track to achieve our goal of doubling the size of this business from 2016 to 2020.”
The sturdiness of the the Services sector was also noted by HSBC analyst Erwan Rambourg last month, when he said Apple would be wise to concentrate on the high-margin businesses in that area of the company.
As for smartphones and the rest, Rambourg said, “Apple’s iconic hardware unit growth is broadly over for now. . . What has made the success of Apple, a concentrated portfolio of highly desirable (and pricey) products, is now facing the reality of market saturation.”