In the first quarter of 2017, Apple iPhone sales peaked at 78 million units worldwide. Worried that sales of the device were dropping off, Apple decided to start focusing on selling services to the 728 million iPhone users worldwide as the second quarter of 2017 started. Apple set a goal to double its services related revenue to $50 billion from $25 billion by 2020. This was best accomplished by having iPhone users sign up to make recurring monthly payments for subscription services such as Apple Music, Apple News+, and more. And for fiscal 2020, which ended in September, Apple generated $53.77 billion in services revenue topping its goal right on time.
Apple’s Services unit will take over as the company’s most important business unit replacing the iPhone by 2024
Also interesting is word that Apple’s Services units are now experiencing stronger profit margins than what Apple’s hardware has been generating. During fiscal year 2020, profit margins for Apple’s hardware products came to 31.5% compared to a much stronger 66% for services. If margins remain at current levels, gross profits for Services would be $54 billion in fiscal year 2024 topping the iPhone’s $53 billion gross profit for the same year.
Some of these forecasts are dependent on what happens with the Justice Department’s suit against Google. The latter pays Apple to be the default search engine on iPhone models and if the DOJ blocks Google from making these payments, the result could negatively impact Apple’s Services growth.