Apple's services revenue hit a record $24.2B, lifting high-margin recurring income. But iPhone weakness and a China sales drop are weighing on suppliers like Skyworks and Cirrus Logic.
Apple posted a record $24.2 billion in services revenue for the June quarter, the company said Thursday. The figure topped analyst estimates by nearly $1 billion and pushed total revenue above $85 billion despite a 2% dip in iPhone sales.
The services segment – which includes the App Store, Apple Music, iCloud, and Apple Pay – now accounts for roughly 28% of total revenue, up from 22% two years ago. The margin on services is estimated at 70%, compared with about 36% for hardware, according to analysts at Morgan Stanley.
The read-through hit suppliers and component makers tied to the iPhone. Skyworks Solutions, which supplies radio-frequency chips, fell 3% after Apple's warning that iPhone revenue would decline again in the current quarter. On the services side, companies that process App Store payments or provide cloud infrastructure saw less direct impact, though the broader shift toward recurring revenue is a positive for the ecosystem, several analysts said.
Cirrus Logic, another audio-chip supplier, slipped 2% in after-hours trading. The company gets roughly three-quarters of its revenue from Apple. By contrast, software and services peers like Adobe and Salesforce were unchanged, reflecting the decoupling of Apple's hardware cycle from its services growth.
The services record was driven by a 15% increase in paid subscriptions, Apple said. The company now has over 1 billion paid subscriptions across its platform, up from 975 million in March. That metric is closely watched by investors because each new subscription adds high-margin recurring revenue with little incremental cost.
Apple's board also authorized a new $110 billion share buyback program, the largest in corporate history. The company returned $29 billion to shareholders in the June quarter through dividends and buybacks.
The question for the December quarter is whether the services momentum can offset a steeper iPhone decline. Apple gave a revenue forecast of $89 billion to $93 billion, below the $94 billion consensus. Several analysts cut their price targets after the call, citing weaker demand in China. Apple's Greater China revenue fell 6% to $14.7 billion, the third straight quarterly decline.
For investors tracking the supply chain, the key date is September, when Apple typically launches its next iPhone. The new model is expected to include an AI-focused chip upgrade that could drive a replacement cycle, analysts at Bank of America said. Until then, services growth remains the main support for the stock.
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