Here’s why Apple’s second-largest business unit will continue to grow regardless of iPhone sales

Apple reported a 6.4% year-over-year increase in Services revenue for the fiscal first quarter of 2023

But the most important part of the Services business are the apps that generate recurring subscription revenue. These apps include Apple Music, Apple TV+, Apple News+, Apple Fitness+, Apple One, and Apple Arcade. Because these are subscription-based offerings with monthly fees, these services become a reliable source of sales for Apple regardless of how many iPhone units it sold in a given year.

Apple also jacked up the monthly price of an individual Apple TV+ subscription from $4.99 to $6.99 per month. Apple did have an explanation for the 40% price increase as it blamed the rising price of content for the increased cost of the service.

Apple has two billion active devices including 1.5 billion iPhone units

The price changes also affected the Apple One bundle packages. The individual plan consisting of Apple Music, Apple TV+, Apple Arcade, and 50GB of iCloud+ storage received a price hike of $2 a month to $16.95. The Family plan which includes Apple Music, Apple TV+, Apple Arcade, and 200GB of iCloud+ storage was hiked $3 monthly to $22.95. The Premier Apple One bundle subscription package was priced $3 per month higher to $32.95.

These price hikes might not be good for users but they are good for investors who are now conditioned on seeing a nice percentage increase in Services revenue each quarter. Apple doesn’t break down its Services segment by category but it did say that record revenue was achieved in both payments and cloud services during the fiscal first quarter of 2023.

Also helping to drive Services revenue higher, Apple announced last week that it now has 2 billion active devices. Approximately 1.5 billion of these devices are iPhone units. As long as this number continues to rise, and Apple hikes the pricing for its Services offerings from time-to-time, you can expect Apple’s second-largest business unit to continue to generate higher revenue each year. And that is likely to occur regardless of the global economic environment.