Apple Posts Blockbuster Quarter, but Loses Services Subscribers

Posted on July 28, 2022 by Paul Thurrott in Apple with 16 Comments

Apple isn’t immune to the economy: despite posting a record financial quarter, the firm ended the quarter with fewer paid subscribers than the previous quarter.

“Our June quarter results continued to demonstrate our ability to manage our business effectively despite the challenging operating environment,” Apple CFO Luca Maestri said. “We set a June quarter revenue record and our installed base of active devices reached an all-time high in every geographic segment and product category. During the quarter, we generated nearly $23 billion in operating cash flow, returned over $28 billion to our shareholders, and continued to invest in our long-term growth plans.”

Apple posted a net income of $19.4 billion on revenues of $83 billion for the quarter ending June 25, 2020, the latter of which grew only 2 percent year-over-year. Mr. Maestri admitted it was a “challenging operating environment” and noted that there were “pockets of softness” in its business in the current quarter, in keeping with what other Big Tech firms have reported this week.

iPhone was predictably the company’s biggest business segment by far, with $40.6 billion in revenues, but Services surged about 11 percent in the quarter to $19.6 billion and is Apple’s second biggest business.

All of Apple’s other business units delivered fewer revenues than the year-ago quarter.

Wearables, Home, and Accessories delivered $8 billion in revenues, a decline of 7.9 percent. The Mac provided $7.4 billion in revenues, a decline of almost 10.4 percent. And the iPad brought up the rear with $7.2 billion in revenues, a decline of 2 percent.

The Services business is perhaps the most interesting: despite the revenue gains, Services lost 9 million subscribers quarter-over-quarter, the first time Apple has ever reported that kind of downturn. But CEO Tim Cook sounded an optimistic note by claiming that the firm “had a record level of switchers [from Android],” leading to “double digit growth for customers new to iPhone.” Those customers could begin paying for more and more Apple services in the future.

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Comments (16)

16 responses to “Apple Posts Blockbuster Quarter, but Loses Services Subscribers”

  1. pecosbob04

    "Services lost 9 million subscribers quarter-over-quarter, the first time Apple has ever reported that kind of downturn."

    

    I can't seem to find where this figure comes from the only reference I can find on Google is this post. Can you show a citation?



    • rosyna

      “And paid subscriptions showed very strong growth. We now have more than 860 million paid subscriptions across the services on our platform, which is up more than 160 million during the last 12 months alone.”

      • Stabitha.Christie

        What Paul referenced was quarter over quarter not year over year. Normally when looking at financials you look at year over year rather than quarter over quarter so it's a little odd that he did that.

        • rosyna

          That still doesn’t make much sense. Comparing quarter over quarter: Subscribers for Q2 2022: 825 million. For Q3 2022: 860 million.

          • Stabitha.Christie

            I didn't even bother looking at Q2 numbers. Once I saw it was quarter over quarter I just kind of tuned it out as it isn't how financials are reviewed.


            As for it it not making sense, I think you are looking at it the wrong way. It makes sense in the same way that saying a 1.6 billion dollar increase in revenue is "only 2 percent" and turning around and saying "Services lost 9 million subscribers" (if the number is even true) which would be a hair over 1%. It's because 2% growth doesn't sound as impressive at 1.6 billion and 1% loss in subscribes doesn't sound as bad as 9 million. They are editorial choices used to drive a narrative.


            Look at the recent headlines:

            "Microsoft Misses a Beat" with "results fell short of expectations." in the article

            "Alphabet Revenues Underwhelm" with "lower than expected."


            And now we have:

            "Apple Posts Blockbuster Quarter, but Loses Services Subscribers" with nothing about exceptions. Funny thing about that, Apple beat expectations. So instead we get "only 2 percent" and this seemingly made up number.


            It seems pretty clear that the editorial narrative of Thurrott dot com is that the economy is tanking and tech companies are feeling it. So this article was written to fit that narrative. Forget that Tim Cook said that that he expects year-over-year revenue growth to "accelerate in the September quarter" compared to the June quarter.

            • nine54

              For financials, YoY definitely is the key comparison, bur for a subscription business, subscriber growth over consecutive periods is a valuable metric. Comparing the % of subscriber growth to the year-ago period is interesting for cyclical trends, but subscription companies are expected to steadily increase subscriptions so that it's always a net gain.


              Remember when Netflix reported its first net loss of subscribers? It didn't matter how many subscribers the company had in the same period the year before. What mattered was that for the first time, Netflix had fewer subscribers now than when it previously reported the number.

              • nine54

                I think the more interesting piece is the Mac was down double digits. The move to its own silicon has not somehow insulated Apple from the broader decline in PC sales.

                • toukale

                  It not that deep, they just can't make them, unlike the pc industry. Macs are taken months for delivery which is different from what's going on in the pc space.

          • dkrowe

            That's 860 million subscriptions, not subscribers. A single user may have multiple subscriptions through Apple.

    • RadarOReilly

      Yes, really. Please point to where this 9 million decrease was reported other than here.

  2. SyncMe

    They added subscribers. You eeally need to correct your article.

  3. Truffles

    The Mac provided $7.4 billion in revenues, a decline of almost 10.4 percent


    I take the blame for contributing to the drop in mac revenues. All I want is a return of the 27" imac form factor.

  4. GT Tecolotecreek

    The more important story is about half of new iPhone and Mac users are switchers, new to the platform.

    That its how grow market share.


  5. abdulla77

    iPhone revenues grew (shockingly enough).. that should be the main thing investors should focus on. Services revenue will naturally follow and could compensate for customers that stopped subscription services.


    • rosyna

      But paying subscribers went up quite a bit, up 35 million quarter-over-quarter.

  6. helix2301

    Nice to see the Mac business beat out ipad business for while the Mac had big slow down