Apple isn\u2019t just counting on customers to keep buying iPhones. It also expects them to keep paying every month long after they\u2019ve bought one.<\/p>\n
Read more Tesla has 3 main concerns heading into earnings report, says Deutsche Bank<\/a><\/p>\n While Apple built its reputation selling cutting-edge devices, its fastest-growing profit engine has become Services, the business that keeps generating revenue after customers leave the store.<\/p>\n Despite its name, Apple\u2019s Services segment is about far more than servicing devices.<\/p>\n Apple\u2019s Services segment is the catch-all for all the ways the company makes money after a device is already in a customer\u2019s hands. That includes the commissions the company gets when you pay for something in the app store, or buy an in-app service from a downloaded app.<\/p>\n It also includes subscriptions like Apple Music, TV+, and iCloud+, AppleCare warranties, the multibillion-dollar licensing payment Google makes to stay Safari\u2019s default search engine, advertising, and Apple Pay.\u00a0<\/p>\n It\u2019s a business that might not get a lot of media attention, but it provided roughly a quarter of revenue in fiscal 2025. More importantly, Services carries a gross margin north of 75%, more than double the 36% Apple earns on hardware, according to Apple\u2019s fourth-quarter earnings release<\/a>.<\/p>\n Now, Apple has made a bold play to increase that revenue by raising the prices on a number of its subscription services.<\/p>\n Like many Apple customers, I have a bundled Apple One Family subscription.\u00a0<\/p>\n Every Apple One tier includes Apple Music, Apple TV, and Apple Arcade, plus iCloud+ storage. The tiers differ in storage amount, whether you can share with family, and, at the top, two extra services.<\/p>\n Apple has raised the price of the Family and Premier Apple One tiers, while the Individual offering\u2019s price has not changed.<\/p>\n Apple did not announce the price change. Instead, it just changed the pricing on its website.<\/p>\n The company also quietly raised the cost of its Apple Music subscriptions:<\/p>\n \u201cAs a result of rising licensing costs, Apple Music is increasing its subscription price beginning today,\u201d the company shared in a statement to 9to5Mac<\/a>.\u00a0<\/p>\n Apple\u2019s move follows Spotify\u2019s own subscription price increases earlier this year, narrowing the pricing gap between the two streaming rivals. Even after the latest increases, Apple Music still costs less than Spotify\u2019s standard individual plan.<\/p>\n RTM Nexus<\/a> CEO Dominick Miserandino thinks Apple raised the price of Apple Music along with the One bundle price for a strategic reason.<\/p>\n \u201cBy jacking up the price of Apple Music, they make the Apple One bundle look like a bargain by comparison, practically forcing you to upgrade. It\u2019s sad, but because of the way the digital platforms are working, more iPhone users are going to be forced into this situation of paying for subscriptions,\u201d he told TheStreet.\u00a0<\/p>\n The increase, assuming it does not cause people to drop their subscriptions, should add to Apple\u2019s bottom line.<\/p>\n \u201cServices are no longer just a supporting character inside Apple. It has become a substantial portion of revenue and represents an even bigger share of profits — and it\u2019s helping the company turn its massive device footprint into repeatable, higher-margin revenue,\u201d according to The Motley Fool\u2019s Daniel Sparks<\/a>.<\/p>\n Apple\u2019s growing Services revenue makes it a more stable company that\u2019s not as dependent on product replacement cycles.<\/p>\n Read more Home sellers face discounting decision in current housing market<\/a><\/p>\n \u201cThis, in turn, improves Apple\u2019s earnings potential and helps the tech company be less dependent on iPhone, which accounts for more than 50% of revenue,\u201d Sparks added.<\/p>\n Evercore ISI analysts believe that investors have ignored Apple\u2019s Services business by focusing too much on its short-term prospects as a hardware company.<\/p>\n \u201cThe firm recently raised its price target on Apple stock to $365 while maintaining an \u2018Outperform\u2019 rating, citing the company\u2019s growing ability to monetize its massive installed base of more than 2.5 billion active devices through subscriptions, payments, cloud services, advertising, licensing, and artificial intelligence (AI<\/a>)-driven offerings,\u201d according to Yahoo Finance<\/a>.<\/p>\n More Tech:<\/strong><\/p>\n The company set a number of records in its most recent quarter with Services leading the way.<\/p>\n \u201cApple Inc. is proud to report $111.2 billion in revenue, up 17% from a year ago and a March record, which was above the high end of our guidance range despite constraints. Customer enthusiasm for iPhone has been extraordinary, with revenue growing 22% year over year to achieve a March record. Services reached an all-time revenue record, growing 16% from a year ago, while EPS set a March record of $2.10, up 22% year over year,\u201d the company shared in its second-quarter earnings release<\/a>.<\/p>\n Apple raised prices on June 25, according to TheStreet\u2019s Aparajita Chatterjee<\/a>. The company raised prices on Macs and iPads, but has excluded the iPhone for now.<\/p>\n The company raised prices on several Mac and iPad models by $200 or more, with the base MacBook Air rising $200 to $1,299 and the base MacBook Pro rising $300 to $1,999, according to the Wall Street Journal<\/a>.\u00a0<\/p>\n The iPad Air and iPad Pro also saw price increases, according to the report.<\/p>\n The increases come after Apple CEO Tim Cook<\/a> told the Journal that price increases were becoming unavoidable due to higher costs for memory and storage chips.<\/p>\n It\u2019s likely that Apple will wait until its next iPhone release before it raises prices on its phone. It\u2019s also possible that the company is willing to sacrifice margins on its phones in order to keep its customer base intact in order to support its Services revenue.\u00a0<\/p>\n Analysts expect an increase, but disagree on the amount.<\/p>\n Some investors and consumers have worried that Apple could eventually need to raise iPhone prices by $200 or more to offset higher component costs.<\/p>\n Bank of America recently raised its assumed price increase for some iPhone models, as covered by TheStreet<\/a>.<\/p>\n However, JPMorgan analyst Samik Chatterjee reportedly sees a less dramatic outcome.<\/p>\n According to Seeking Alpha<\/a>, Chatterjee expects the iPhone 18 series to launch with a more modest price increase than some press estimates, closer to about $50 or a mid-single-digit percentage range.<\/p>\n There are over 150 million active iPhones in the U.S., making it a core part of American life, according to Statista<\/a>.<\/p>\n