Apple's Services Revenue Reaches New High

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Apple CEO Tim Cook

The division that includes revenue from subscriptions like Apple Music and Apple Pay had sales of $11.46 billion during the tech giant's fiscal third quarter.

Apple's services business was once again a bright spot for the technology company as it reported fiscal third-quarter earnings on Tuesday. 

The division, which includes revenue from subscriptions like Apple Music, iTunes, Apple Pay and iCloud, brought in sales of $11.46 billion during the period, an all-time high.

IPhones remain a key piece of Apple's overall business, bringing in $25.99 billion in revenue, more than any other division but lower than what analysts were expecting. People are holding onto their phones longer and are less likely to upgrade during every new release cycle. That's placing increased pressure on Apple to grow its other lines of business, including the long-overlooked services division. CEO Tim Cook is investing heavily in the space, with plans to launch a TV offering, video game service and credit card later this year. In 2016, the exec stated that the goal was to double services revenue by 2020, and on Tuesday he said the company is on pace to reach its goal.

Overall, Apple reported quarterly revenue of $53.8 billion, up 1 percent from the same period last year. Earnings dropped 7 percent during the period to $2.18 per share. Wall Street, per FactSet, was looking for revenue of $53.32 billion and profit of $2.09 per share.  

In a statement ahead of a Q&A with analysts, Cook noted improvement in iPhone trends, adding "we're confident about what's ahead. The balance of calendar 2019 will be an exciting period, with major launches on all of our platforms, new services and several new products."

Apple unveiled some of the details for its forthcoming TV service during a March 25 event. Called Apple TV+, it will offer up original programming that supplements other TV offerings that people can subscribe to through their Apple TV set-top boxes. Among the shows that are planned for the service are The Morning Show, starring Jennifer Aniston and Reese Witherspoon, and See, starring Jason Momoa.

The exact launch date and pricing for the service have yet to be announced, but Apple executives teased a few details during the earnings call. The company currently has 420 million total subscriptions to its services businesses, and CFO Luca Maestri said that the launches of Apple Arcade and Apple TV+ will add to that base. That suggests that Apple will likely charge a subscription fee for Apple TV+ instead of offering it as a free ad-on for Apple TV users, as has been previously speculated. He also said that there would be trial periods upfront, so "the road to monetization takes some time." 

The company said it expects to bring in revenue between $61 billion and $64 billion during the fiscal fourth quarter. 

Apple shares closed the day down less than 1 percent to $208.78. The stock was up more than 3 percent after-hours on the Nasdaq.