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Apple (NASDAQ: AAPL) put up some fantastic numbers this quarter, and its smaller segments were no exception.
In this Industry Focus: Tech clip, host Dylan Lewis and Fool.com contributor Evan Niu go through the growth in wearables, just how huge Apple's wearables segment alone could be, how Apple's services segment is setting the company up for growth even past iPhone saturation, where Apple Music and iCloud storage fit into the picture, and more.
A full transcript follows the video.
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This video was recorded on May 4, 2018.
Dylan Lewis: Looking at some of the smaller parts of the business, Evan, what's going on with wearables right now?
Evan Niu: Wearables, the way Apple defines it, includes Apple Watch, wireless Beats and AirPods. Which is kind of, in my opinion, a dubious definition, because wireless headphones, I don't know if that's what most people think about when they think about wearables. But, for what it's worth, that's how Apple defines it. They're saying it's up almost 50%. They still don't disclose a dollar figure for it.
These products are pretty much driving almost all growth in the Other Products category. They said over 90% of growth was because of these wearables, which they also mentioned is now the size of a Fortune 300 company, which is Apple's way of saying that it's close to a $10 billion business for them. That's pretty impressive, considering the fact that they only got into wearables in 2014 starting with Apple Watch.
Lewis: That's one of my favorite things to see in Apple's conference calls, is the different ways that they refer to the scale and size of these tiny business operations, for their purposes. The idea that wearables is the size of most companies, or larger than most companies. They do the same thing very often for their Services segment. It looks like growth was very strong there, too. This is one I'm particularly happy about as a shareholder because it's a high-margin business for them.
Niu: Right. Revenue in Services was really strong last quarter, up 31% to about $9.2 billion. On a trailing 12-month basis, Services is now a $33 billion business for Apple, which is huge. And it's much more profitable than the corporate average, typically. That's being driven by, now they have 270 million paid subscriptions going through all of their digital storefronts. That means they've added over 100 million in the past year alone. It just shows you how well they're executing on growing this business after they set out this goal a year or two ago that they were really going to try to double this business. These numbers really show that they're making a lot of progress. They're on-target to hit that.