Apple's (NASDAQ:AAPL) next-biggest business segment after iPhone is no longer Mac or iPad. Instead, Apple's services business comes in second in importance at Apple, beating Mac and iPad by a wide margin. In the trailing 12 months, Apple's services revenue was 31% greater than Mac revenue and 69% higher than iPad revenue.
As Apple's services segment continues to grow in importance to Apple's overall results, the fast-growing business is becoming an increasingly important catalyst for the stock. To help investors grasp how vital Apple's services segment is to its growth story, here's an overview of it in eight key metrics.
1. Q2 services revenue jumped 31%
Quarterly services revenue in Apple's second quarter of fiscal 2018 was $9.2 billion, up 31% from revenue of $7 billion in the year-ago quarter. Highlighting just how powerful Apple's momentum in services is, year-over-year growth rates for services revenue have been accelerating in recent quarters when adjusted for some one-time items. Adjusted year-over-year growth in services revenue in the fourth quarter of fiscal 2017 and the first quarter of fiscal 2018 was 24% and 27%, respectively.
2. Services accounted for 15% of total Q2 revenue
This was up from 13% of revenue in the second quarter of fiscal 2017 and 12% of revenue in the second quarter of fiscal 2016. On a trailing-12-month basis, services now accounts for 14% of revenue, up from 12% one year ago.
3. Apple has 270 million paid subscriptions
One area of Apple's services business where it's seeing significant growth is its paid subscriptions, or subscriptions across apps on its app store and its own native services like Apple Music and iCloud. Total paid subscriptions reached more than 270 million in Q2, up over 100 million on a year-over-year basis.
4. Apple Music subscribers surpassed 40 million
Highlighting Apple's ability to launch and grow new services, Apple Music subscribers impressively surpassed 40 million during Q2 -- less than three years after the service first launched.
5. iCloud storage revenue soared 50% year over year
Though Apple doesn't specify how much iCloud revenue it records, management did say that iCloud revenue was at an all-time high during the quarter.
6. Apple Pay transactions more than tripled
Apple Pay's momentum continued in Q2 as active users more than doubled and transactions more than tripled compared to the year-ago quarter.
7. Apple's active installed base of devices saw double-digit growth
Management says a major driver of its growth in services is growth in its active installed base of devices, or the number of its devices that are used at least once a month. Though management didn't specify how many active devices it ended the quarter with, management said the important metric saw double-digit year-over-year growth.
In Apple's fiscal first-quarter update, management said its active installed base of devices reached 1.3 billion, rising 30% in just two years.
8. Annual services revenue is marching toward $49 billion
With $33.4 billion in trailing-12-month services revenue, the segment is on track with management's target to double its fiscal 2016 services revenue by fiscal 2020. This would put 2020 services revenue at about $49 billion.
Apple's soaring growth in its services segment remains one of the main reasons to bet on Apple stock over the long haul. As this rapidly growing business continues to become more material to Apple's results, it likely will have an increasingly positive impact on the company's overall growth.
Daniel Sparks owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.