Apple's Services Business Was a Major Catalyst Last Year, and 2026 Will Likely Be Even Better | The Motley Fool

"Services is no longer just a supporting character inside Apple . It has become a substantial portion of revenue and represents an even bigger share of profits -- and it's helping the company turn its massive device footprint into repeatable, higher-margin revenue. This, in turn, improves Apple's earnings potential and helps the tech company be less dependent on iPhone, which accounts for more than 50% of revenue."

"In Apple's fiscal fourth quarter of 2025 (ended Sept. 27), services revenue rose to $28.8 billion -- up 15% year over year and putting the segment's revenue at an all-time record quarterly record. The increase, Apple said in its fiscal fourth-quarter earnings call, was driven primarily by higher sales from advertising, the App Store, and cloud services. Zooming out to the entire fiscal year, the company reported services revenue of $109.2 billion, up 14% from fiscal 2024."

"Including sales from the App Store, iCloud, Apple Music, Apple TV, Apple Pay, AppleCare, and advertising, the segment ultimately represents how Apple earns money after a device is already in a customer's hands, making it a valuable business segment for Apple. In addition, the segment boasts a higher profit margin than Apple's hardware sales. In fiscal Q4, for instance, Apple's services gross margin was 75.3% -- compared to 36.2% for products."

Services revenue rose to $28.8 billion in fiscal Q4 2025, up 15% year over year and marking an all-time quarterly record. Services revenue for fiscal 2025 totaled $109.2 billion, up 14% from fiscal 2024. The services segment includes the App Store, iCloud, Apple Music, Apple TV, Apple Pay, AppleCare, and advertising. Services delivered a gross margin of 75.3% in fiscal Q4, compared with 36.2% for products, reflecting substantially higher profitability. The recurring nature of services turns device sales into repeatable, higher-margin revenue and reduces dependence on the iPhone, which still accounts for over 50% of revenue. Management expects momentum to carry into fiscal 2026.

Read at The Motley Fool