Every Apple (AAPL) Investor Should Keep an Eye on This Number
Key Points
Apple's services revenue has been growing at a much faster pace than product sales.
Services are a critical factor that strengthen the company’s economic moat.
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Apple (NASDAQ: AAPL) sells some of the most admired products on the face of the planet. Its iPhone, a device in the 18th year of its lifecycle, is still so successful that it generated $44.6 billion in revenue in the third quarter (ended June 28). Add this to more items in the lineup, and it's no surprise this business is a consumer favorite.
Without a doubt, hardware is important to Apple's success. But here's a number that every shareholder should keep an eye on.
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Apple's services are a critical component of the business
Investors should be paying close attention to revenue trends within Apple's services segment.
During the third quarter, services, which include advertising, cloud, Music, Pay, and TV+ (among others), raked in $27.4 billion in sales, up 13% year over year. This revenue figure was 108% higher than the same period five years ago, a much faster pace of growth than the products division.
Services introduce recurring revenue, allowing the company to lower dependence on less predictable hardware sales. Services are also significantly more profitable, with a gross margin that's above 70%.
"We have well over 1 billion paid subscriptions across the Services on our platform," CFO Kevan Parekh said on the Q3 2025 earnings call. Ongoing success in services means that Apple's ecosystem is in strong shape, as users are increasingly interacting with its devices. This supports the company's economic moat.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.
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