Apple unveiled new iPhones and wearables, but the focus is on its high-margin services business, which now makes up nearly one-third of revenue. Apple’s services, like the App Store and iCloud, are growing faster and contributing more to profits than hardware. Investors are banking on services growth to drive stock performance.
In fiscal Q3, Apple reported $94.0 billion in revenue, a 10% increase, with services revenue hitting an all-time high. CEO Tim Cook emphasized growth in iPhone, Mac, and Services. Services revenue rose 13% year over year, making up 29% of total sales with a 76% gross margin, compared to 35% for products.
Services have become a larger piece of Apple’s revenue, growing from less than 18% in fiscal 2019 to roughly 25% in the nine months ended June 28, 2025. Services’ high margins and steady growth offset hardware variability. Investments in AI aim to boost services growth further, with personalized Siri expected in 2026.
Apple’s latest product lineup includes the iPhone 17 Pro, iPhone 17 Air, and updates to AirPods and Apple Watch with features like live translation and health tracking. While these products drive upgrades and potentially higher selling prices, the company’s future success is expected to be driven by services growth and profitability.
Investors are looking to Apple’s services business as the key driver for stock performance in fiscal 2026. The subscription-heavy segment, combined with Apple’s large installed base, provides a strong growth runway. With services accounting for a significant portion of revenue and profit, incremental gains in this area can offset fluctuations in hardware sales.
Despite potential risks like tariff uncertainty and competition in streaming and cloud services, Apple’s strong financial position, focus on services growth, and high margins provide a solid foundation for investors. The stock’s high valuation reflects the market’s belief in the steady, high-margin earnings growth driven by Apple’s services business.
Read more at Yahoo Finance: Apple’s New Products May Help the Stock, but Services Matter Most Heading Into Fiscal 2026