Apple's (AAPL -1.14%) better-than-expected third quarter took investors by surprise earlier this week. After the report, the stock hit a new all-time high. The quarter benefited from broad-based growth across all of Apple's product segments. But one segment stood out as an exceptional contributor to the tech-giant's growth -- and it wasn't the iPhone.
Apple's services segment, which includes revenue from the App Store, iTunes, AppleCare, Apple Pay, licensing, and other services, continued to deliver strong growth for the company in Q3. With Apple's services business consistently growing by double digits year over year, the segment is becoming more important than ever before.
App Store. Image source: Apple.
Here's a look at seven telling metrics that help break down just how important services revenue is becoming to Apple.
1. $7.3 billion: Apple's services revenue hit an all-time high of $7.3 billion during Apple's third quarter, up 22% year over year. Importantly, Apple said it's seeing services growth across all of its geographic segments.
2. 16%: Services revenue accounted for an impressive 16% of Apple's revenue, up from about 14% of revenue in the year-ago quarter. Apple's recent services growth has made the segment its second largest -- bigger than both Mac and iPad.
3. $27.8 billion: On a trailing-12-month basis, Apple's services segment generated revenue of $27.8 billion. This time last year, Apple's trailing-12-month revenue for its services segment was $23.1 billion. As Apple CEO Tim Cook pointed out during Apple's third-quarter earnings call, the segment is now as big as a Fortune 100 company -- a milestone Apple achieved earlier than it expected.
4. 35%: The App Store, once again, was the "major driver" for Apple's services segment, noted Apple CFO Luca Maestri in Apple's third-quarter earnings call. Consumer spending on the App Store increased 35% during Apple's third quarter, according to data from App Annie. This growth outpaced Google Play's 30% year-over-year growth in consumer spend during the same period.
5. 185 million: Apple's services segment is showing benefits from strong growth in paid subscriptions -- whether those are Apple Music subscriptions, or popular subscriptions from other apps like Netflix, Hulu, or Spotify, and was up by 20 million in the last 90 days. The quarter's growth in paid subscription was mind-boggling.
6. 90%: Apple Pay is quickly becoming a popular mobile-payment solution, dominating global near-field communication (NFC) payments. Apple Pay accounts for 90% of all NFC transactions globally. Apple management also noted that Apple Pay is particularly popular outside the U.S., where 75% of all Apple Pay transactions occur.
7. $51 billion: Apple management doesn't think this growth in its services segment is about to cool off. The company expects its services segment's annual revenue to soar to $51 billion by 2020. And an overview of the underlying drivers behind Apple's services growth in Q3 suggests the tech giant should be able to pull this off.
Apps. Image source: Apple.
iPhone, of course, is still Apple's main product. Driving this point home, iPhone accounted for 63% of Apple's trailing-12-month revenue. But given the consistently strong growth in Apple's services segment, services should become increasingly important to Apple in the coming years. Services offer a more reliable stream of revenue than Apple's unpredictable product revenue, so growth in this more dependable segment is good for Apple investors.
