As Apple's (NASDAQ:AAPL) iPhone business continues to slow, with iPhone revenue falling 9% last quarter, the company's installed base growth is likewise slowing. That's especially true in developed markets like the U.S., where most purchases are upgrades instead of first-time users. Consumer Intelligence Research Partners (CIRP) has released new estimates this week that suggest the Cupertino tech giant's U.S. iPhone installed base inched higher to 204 million at the end of the third quarter.

Here's what investors need to know.

Customer outside of an Apple store holding up an iPhone 11 Pro at launch

Image source: Apple.

Slowest installed base growth in six years

CIRP estimates that Apple sold 43 million iPhones in the third quarter at an average selling price (ASP) of $783. That would represent an 8% drop compared to the 46.9 million iPhones that Apple sold a year ago, which was the final quarter that it disclosed unit sales. This represented the lowest installed base growth in many years, according to CIRP. The research firm bases its estimates on a survey of 500 U.S. Apple customers.

"Apple added the fewest number of iPhones to the US installed base in a quarter in six years," CIRP partner Josh Lowitz said in a statement. "Both quarterly and annual growth have slowed to the lowest levels we've seen since we started tracking iPhone sales and retirements in 2012."

CIRP attributes the sluggish growth to fewer first-time smartphone buyers, fewer Android switchers, and consumers holding onto their phones for longer. Strategy Analytics recently estimated that the average U.S. smartphone upgrade cycle has hit 33 months.

Apple said last week that its iPhone installed base had reached record levels. "Our active installed base of iPhone continue[s] to grow to a new all-time high in each of our geographic segments," CFO Luca Maestri said on the conference call with analysts. Maestri did not specify how large the figure has grown, but the finance chief said earlier this year that the global iPhone installed base had topped 900 million and that Apple would provide updates on installed base metrics "on a periodic basis."

Monetizing through services

The slowing growth of the installed base is why Apple has been so intensely focused on its services business in recent years, as that segment has been strengthening the monetization of the installed base. Additionally, the company's trade-in program, which saw trade-in volumes jump fivefold last quarter, helps grow the installed base through the market for used handsets.

"And so the installed base is clearly a piece of it getting the trade-in program going, and the secondary market moving has been helpful in that as well," CEO Tim Cook said. Apple's average revenue per user (ARPU) is also on the rise, Cook added, without providing a specific figure. The third lever is "getting more people that are enjoying things for free to pay for some of the premium services," according to Cook.