Apple's iPhone Is Still a Cash Machine
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Your Money Briefing. Money and market stories from The Wall Street Journal. I'm J.R. Whalen in New York. Apple iPhone sales rose just 3% in the last quarter. So why is Wall Street still smiling from ear to ear? We'll explain in a moment. First, these news headlines.
Why did Apple’s 3% iPhone unit growth still make headlines?
Hiring at private U.S. employers grew more than expected in April, as firms across the country added 204,000 workers last month. That's according to payroll processor ADP and forecasting firm Moody's Analytics. Economists surveyed by the Wall Street Journal had expected the addition of 190,000 jobs in April. Don't expect much change in the robust pace of hiring or investment by companies. That's the word from the Federal Reserve, which elected to keep interest rates steady this week and remains on track to raise them gradually in the next several months. And there could be a substantial correction ahead for cryptocurrencies like Bitcoin. Investment bank G.P. Bullhound predicts a heavy correction will obliterate cryptocurrencies by about 90% within a year, leaving few survivors.
But the investment bank predicts the expected sell-off will be unique in that it'll have a minimal effect on financial institutions. And the projected sell-off is also expected to spur substantial growth for the virtual currencies that survive the fall. This is your Money Briefing from The Wall Street Journal. Welcome back, everybody. Those clouds of uncertainty that had been gathering around Apple's quarterly earnings report were quickly replaced with golden sunshine when the company cast aside any doubt that iPhone sales declines at any pace could be spelling doom for the tech giant. And Herd on the Street columnist Dan Gallagher joins us to discuss. So, Dan, Apple reported it sold 52 million iPhone units in the last quarter, and that's just an increase of about 3%.
But that number is a figure that some companies would just short of kill for.
Well, actually, a 3% gain is pretty low, and that's part of where people are readjusting how they thought of Apple. This used to be a business that grew double digits in units pretty well for its first several years. Now that it's such a big business, it's hard for them to deliver the unit sales. What they did do, which was interesting, which was a different change from when they had some weak unit sales before, is that they are getting more—they're essentially raising the prices of the iPhone— And they're getting more revenue per iPhone, both from these higher prices as well as the services segment that they have.
Yeah, I was going to say, you know, for investors, whether iPhone sales rise or fall going forward, it's Apple's services business that will bring a smile to Wall Street's face because that really does show, it kind of paints a rosy future.
It's helpful to them. Investors aren't going to be able to ignore the iPhone because it's still more than two-thirds of the business. So, you know, and as long as it has that kind of weight on it, especially the weight from part, you know, hardware sales and that it's that's going to be a very big important factor. But what services is showing is that Apple has a way to beyond just selling, you know, more devices, they're figuring out more ways to make money out of its installed base of users, which is not growing the way it used to, but because services grew more than 30, service revenues grew more than 30% in this last quarter, is a big jump, and it's taking up a little bit more of the business, and that's a positive sign.
You just give us an idea, if you would, about what entails services at Apple.
It's a combination of a lot of things. You know, one, the one that probably a lot of people think of is Apple Music because that's a relatively new one. And it used to encompass the iTunes store. Well, it still encompasses iTunes, but people aren't, you know, buying and downloading music and movies as much as they used to anymore. Those are now streaming services. So Apple Music is a part of that. You know, the old iTunes business is still a part of that.
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