For its fiscal third quarter, Apple (NASDAQ: AAPL) reported total revenue of $53.8 billion at a time when the company’s services, which reached an all-time high of $11.5 billion compared to $10.2 billion this time last year, are making up for slumping iPhone sales.
Apple said services accounted for 21% of its total revenue, spanning iCloud, Apple TV, Apple News, and Apple Music.
Apple released its earnings one day before Spotify’s. Both reports show the performance of two of music streaming’s fiercest, publicly traded competitors.
Apple: “Well On Our Way” to 500 Million Subscriptions
“This was our biggest June quarter ever, driven by all-time record revenue from Services, accelerating growth from Wearables, strong performance from iPad and Mac and significant improvement in iPhone trends,” said Tim Cook, Apple’s CEO.
“Customer engagement in our ecosystem continues to grow. We now have over 420 million paid subscriptions across the services on our platforms and are well on our way to our goal of surpassing the 500 million mark during 2020,” he said.
Cook singled out the retooled Apple TV app, which launched in 100 countries in May. He did not talk about Apple Music’s performance, expressly.
Apple Music recently surpassed Spotify in U.S. paid users. Spotify holds a distant lead in worldwide paid users at 108 million, compared to Apple Music’s 60 million paid users.
Table: Spotify Q2 2019 Earnings Highlights (€)
|Q2 2018||Q1 2019||Q2 2019||Y/Y||Q/Q|
|Premium Financials (€M)||1,150||1,385||1,502||31%||8%|
|Ad-supported Financials (€M)||123||126||165||34%||31%|
Spotify: Subscriptions Shortfall an “Execution” Problem
For its fiscal second quarter, Spotify (NYSE: SPOT) reported total revenue of €1,667 billion, or $1,852 billion, a comparatively small figure to Apple services.
The company reported slightly slower subscriber growth, overshadowing revenue gains and a narrower loss ending the quarter with 108 million subscribers to its premium service, below the 108.5 million forecast by analysts and Spotify’s internal forecast.
“We missed on subs. That’s on us,” said Daniel Ek, Spotify’s CEO. He explained that the shortfall was rooted in “execution,” citing a failure to market a plan for students.
Investors have worried that competition from Apple, Amazon and Alphabet’s YouTube would slow Spotify’s growth. But Spotify said its subscribers grew 31% compared to a year ago, nearly double the rate of Apple Music. Spotify’s overall user base grew to 232 million, above Wall Street projections of about 227 million. Most of those users use the free, advertising-supported version.
The company expects to add 4 million paying subscribers in the third quarter, and to have 240 to 245 million monthly active users worldwide in the September quarter.
What to Know: Apple Services
- Apple’s strategic push to transform itself into a leading digital services provider
- Introduced in March 2019 as Apple’s first major strategy shift in more than a decade
- A response to flat or waning hardware sales by focusing on new subscription services
- The iPhone still produces a majority of the company’s revenues.