Apples (AAPL) 2024 has been a tough year so far. But despite the company’s challenges, from antitrust lawsuits to slowing iPhone sales, there is one big bright spot for Apple: its services business. In the first trimesterServices revenue jumped 11% year-over-year to $6.3 billion.
And according to Wamsi Mohan of BofA Global Research, Apple is expected to report another quarter of double-digit growth for the segment when it announces its second-quarter results later this month.
Apple’s Services business includes App Store sales, advertising revenue, AppleCare+, subscription services like Apple TV+, and more. App Store revenue grew 11% in the first quarter of the year, compared to 3% in the first quarter of 2023 and 5% in the first quarter of 2022, according to market intelligence firm Sensor Tower.
Apple’s App Store also appears to be surviving the new European Digital Markets Act (DMA) without too many problems. The legislation, which took effect in March, requires Apple and Google to allow consumers to download and install third-party app stores and to notify users that they can switch to third-party web browsers.
Data from Sensor Tower shows that while app spending on the App Store increased by 13% globally in March, it increased by 28% in the EU.
“Although the DMA has been in effect for approximately a month, it appears that there has been no significant impact on Apple’s revenue from in-app purchases (or subscriptions),” the company said.
According to Reutersthe number of users of third-party browsers like Aloha in the EU increased by 250% in March.
But with more than 2.2 billion active Apple devices in circulation, the company likely won’t face a major impact from third-party browser installations. In fact, according to Mohan, App Store installs in the EU have increased by 2% year-over-year since the DMA took effect, while revenue has increased by 24%.
That said, Apple also requires app developers who offer apps through third-party app stores to pay a “core technology” fee of 50 cents for each app users install after the first million apps. ‘facilities. Apple says the fees are necessary to maintain the security and maintenance of the apps, but the European Union’s antitrust watchdog, the European Commission, is investigating whether Apple is violating the terms of the DMA.
For now, however, Apple’s Services business continues to perform well at a time when the company’s other segments are facing declining revenue. In the first quarter, Apple reported an 11% decline in its Wearables, Home and Accessories segment, while revenue from its iPad business fell 25% during the quarter.
And while iPhone sales rose 6% year over year in the first quarter, they declined 13% in China, Apple’s third-largest market behind North America and Europe. Part of that problem has to do with China’s sluggish economic environment, but the company is also grappling with the resurgence of Huawei as well as other local smartphone makers that are stealing market share.
Apple’s iPad business is also facing challenges, with revenue down 3% in 2023 and 8% in 2022.
On the legal side, the Justice Department is suing Apple for allegedly hindering competition in the smartphone space. The European Union also fined the company $2 billion over antitrust concerns related to music streaming services.
We’ll know more about Apple’s performance during the quarter when it reports its second-quarter financial results on May 2.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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