Apple will lean more on subscriptions as iPhone sales drop

TOKYO: After reporting its toughest quarter since 2001 on slowing smartphone sales, Apple Inc. is eyeing services like Apple Pay and music that come on its gadgets to help drive growth: The company aims to increase the number of subscriptions to half a billion by 2020, from 360 million now.

Apple shares rose 5.5 percent in extended trading on Tuesday.

Loup Ventures, Gene Munster

“Despite a troubled quarter for iPhone sales, mostly in China, Apple’s ecosystem is stronger than ever, and the company is positioned to return to sustainable mid-to-high single-digit revenue growth in Dec-19 after what will likely be a 5% decline in FY19.”

“Decelerating App Store subscription growth was a focus on the call. While subscription growth declined to 33% y/y vs 50% last quarter, the company has consistently added 30 million paid subs each of the last four quarters.”

“Apple as a Service is the notion that the company is transitioning from primarily manufacturing and selling devices to maintaining and satisfying a large and growing customer base with ever-improving hardware and an increasing portfolio of software services. Growth of the installed base of 100 million devices to 1.4 billion, in combination with 19% growth in Services revenue and 33% growth in paid subscriptions all represent confirmation of the Apple as a Service theme.”

“Continue to expect Apple will be the best performing FAANG stock in 2019.”