Apple (AAPL 2.01%) has produced outstanding returns over the past 20 years. And through much of this period, the company relied on its popular devices, most notably the iPhone, to drive sales growth. However, the tech leader's strategy moving forward will likely be a bit different: Apple will rely increasingly more on its services segment. This isn't new information. Apple's push into services has been ongoing for years. And the company's most recent product announcements gave us more insight into part of the company's strategy.
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Apple's price-sensitive push
Apple has historically used its strong brand name and pricing power to charge premium prices for its products, even for base models. Chip upgrades or devices that came with more memory or other added features often -- though not always -- cost more. Apple's latest product lineup doesn't exactly follow that pattern. The tech leader's new lineup features a budget-friendly iPhone 17e, for instance, whose starting price is $599. This cheaper "e" series isn't new. Apple released the iPhone 16e last year. However, the latter had the same starting price despite half the storage capacity and a less powerful chip.
Then there is the MacBook Neo, the company's cheapest laptop ever, for $599. Apple's most affordable laptop used to be $999, so this is a meaningful price reduction. Now, customers can find cheaper, non-Apple options for all of these products. However, when comparing the company's most recent lineup to previous product announcements, this year's prices are one of the things that stand out.
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Apple's long-term plans
Apple's decision to decrease prices across the board may squeeze margins somewhat within its device segment. But it will also attract more customers. This isn't just about boosting sales volume. It's about bringing more people into Apple's ecosystem. And once they are in, offering them all sorts of services they can sign up for on a monthly (or yearly) basis, thereby creating a high-margin, recurring source of revenue. Apple's services include music and video streaming, a digital wallet, fitness-related offerings, and more.
In time, services may account for a larger percentage of revenue than devices. This won't happen overnight. As of the company's fiscal year 2025, ending on Sept. 27, services accounted for just 26% of total sales. However, imagine what it will be in five, 10, or 15 years, considering services sales have generally grown faster in recent years. Apple's long-term strategy is one of the reasons investors shouldn't be too concerned about short-term issues plaguing the company's device segment, particularly tariffs.
Not only has the company navigated this threat just fine -- it generated double-digit sales growth for the first time in a while in its Q1 2026, largely thanks to the iPhone 17 -- but over the long run, device sales, which can be cyclical, will contribute less to the top line, and even less to operating and net profits as higher-margin services take over. That's why Apple's shares remain attractive for investors focused on the long game.
