iPhone and Services Continue to Shine for Apple

Thanks to strong iPhone sales and (yet another) record in services revenue, Apple returned to growth this holiday quarter after four consecutive quarters of declining sales. The overall results were slightly better than expected, beating analyst estimates at the top and bottom line. Revenue was up 2 percent to $119.6 billion for the three months ended Dec. 30, making the past quarter the second best ever for Apple in terms of sales. As our chart shows, growth in iPhone and services sales once again glossed over weaker results in Apple's other operating segments, including a 25-percent drop in iPad sales that the company had already warned of three month ago.

iPhone sales, still at the heart of Apple's business, grew 6 percent to $69.7 billion in the December quarter, which is traditionally the strongest in terms of iPhone sales as new models are typically released just before it begins. Apple's services business was once again the star of the show, as it grew 11 percent to a new record of $23.1 billion, almost 20 percent of total sales. Tim Cook later pointed out that the 11 percent increase was actually an acceleration from the September quarter, as it was achieved despite this year's holiday quarter being one week shorter than last year's. "We achieved all-time revenue records across advertising, cloud services, payment services and video, as well as December quarter records in App Store and AppleCare," Cook said. Considering that Apple now boasts an installed base of more than 2.2 billion active devices, services look like a cash cow for years to come for the company.

Looking ahead, Apple warned that year-over-year comparisons will be unfavorable in the March quarter, as last year's quarter was boosted by pent-up demand following supply constraints in the preceding holiday quarter. Excluding this impact, which Apple puts at roughly $5 billion, the company expects both iPhone and total sales to be roughly flat year-over-year.