Apple Services Gross Margin Reaches New Record High

Apple announced its quarterly earnings, and the services division continues to be a standout performer. This quarter, the company hit a new all-time high with a gross margin of 75.7% on services, which is impressive considering the costs came in at $6.46 billion against sales of $26.64 billion.

On the hardware side, Apple didn’t quite hit analyst expectations with a gross margin of 35.9%, totaling an overall company gross margin of 47.1%. Despite this, the Services business remains a strong force with revenues from iCloud, Apple Music, Apple TV+, AppleCare, and more, as well as a good chunk coming from Apple’s commission on App Store in-app purchases. Some critics call this the ‘Apple tax’ and argue that the company is leveraging its position over software distribution on the iPhone.

Apple’s CEO, Tim Cook, highlighted the success of the Services division, emphasizing the record revenues of $26.6 billion, marking a 12% increase from the previous year. Apple TV+ in particular has seen great success with popular shows like The Studio, Your Friends and Neighbors, and Severance, along with highly anticipated content like the upcoming movie F1 starring Brad Pitt.

Over the past decade, Apple’s services business has consistently shown growth, with revenues up by 11.6% compared to the same period last year. Despite concerns from investors about sustainability, especially in the face of regulatory challenges and court rulings like the recent Epic case, the services division continues to outperform and contribute significantly to Apple’s overall revenues.