Apple Inc. (AAPL) reported its strongest earnings and revenue growth in recent history in FY 2021, driven primarily by rapid increases in product sales. But the company’s overall growth is slowing sharply, and Apple now is focusing on its services business again for leadership. Analysts expect services revenue to grow at double the pace of the company’s overall revenue in the current fiscal year.
1 Growth in services revenue has a major impact on Apple’s profits because sales of advertising, the App Store, and Apple TV+, and other services generate dramatically larger margins than the company’s products. It’s no wonder that Apple is now working on a subscription service for its iPhone and other hardware devices.
Analysts expect Apple’s financial performance to moderate considerably in Q2 FY 2022. EPS is expected to grow 2.2% compared to the year-ago quarter, sharply slower than the previous quarter’s pace. Revenue is forecast to expand 5.3% YOY, its slowest pace since the final quarter of FY 2020. For full-year FY 2022, analysts expect EPS to increase 9.5%, the slowest annual pace since earnings declined in FY 2019. Annual revenue is expected to grow 8.4%, which would be the slowest pace since FY 2020.
In Q1 FY 2022, services revenue rose 23.8% YOY, faster than the 9.2% pace of growth for products revenue. Analysts expect Apple’s services revenue to grow 17.0% YOY in Q2 FY 2022. For full-year FY 2022, analysts are currently forecasting Apple’s services revenue to expand 17.2%.