Apple warned that its sales fell 1% over the last quarter, but its juicy profit came largely from its software services.
👉 Background: Apple is the world's most valuable tech company - we're talking a valuation of $2.7 trillion USD.
👉 What happened: Late last week, Apple warned that their sales fell 1% over the last quarter. But the good news was that Apple's profits increased by 11% for the quarter as well - to just under $23 billion USD. That means Apple could buy Qantas, Medibank, Domino's Pizza, and JB Hi-Fi all at once from this quarter's profits.
👉 What else: Apple's juicy profit came largely from its software services (App Store spending, iCloud plans, and AppleTV+ subscriptions), which is up 16.3%. Meanwhile, its Mac, iPad, Apple Watch, and AirPod sales battled hard.
💡Tech companies are drawn to the products and services where gross margins are the strongest or hit hardest.
💡While Apple is known for its hardware products, like the Mac and iPhone, it's really making its money in the software. Get this: Apple makes a gross margin of more than 71% on its services business but less than 35% on its hardware business.
💡It makes sense that Apple is making the shift in its revenue mix. In fact, it has now managed to shift 24.9% of its overall revenue into its services business.
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