Apple’s fast-growing services could be its key to original content, analyst says – CNBC
Apple’s earnings report not only handily beat estimates, but also revealed a fast-growing part of business that some see as a formidable stepping stone for the tech giant’s foray into original content, analyst Will Power told CNBC on Wednesday.
The Robert W. Baird & Co. senior research analyst told “Squawk Box” that Apple’s services revenue, which came in at $7.17 billion versus StreetAccount’s expectations of $6.91 billion, could enable it to start producing original material, something Apple CEO Tim Cook hinted at in a Tuesday conference call with analysts.
“I think there’s some tantalizing opportunities, particularly around content,” Power said. “Tim Cook suggested they’ve dipped their toe in the water, so to speak, but it sounds to me like there could be more to come on that front.”
“Perhaps that opens up a new growth avenue for them to capitalize on that big installed base of users they have out there,” Power continued.
Though Apple’s services, which include the App Store, Apple Music, Apple Pay, iTunes and iCloud, have all been around for some time, Power suggested they are still growing and may have more room to run.
“They’re continuing to drive more subscription, recurring-based revenue streams,” he said. “And I think the real big question then is, where do they go from here?”
Power also cited Apple’s “aggressive assumptions” driving its forecast for services growth to double in four years.
“To the degree they can add more capabilities and functions that drive much more interaction and usage, that continues to drive the ecosystem and … some of the services revenue opportunities,” Power said.
“So over time, sure, they’ll need some new product categories, but I think they’ve still got some room to run on what they have in the current pipeline,” he added.