Apple’s gross margin hits -record as the service business continues to grow

Apple Struggling to push the growth out of its flagship iPhone device, but its profit margin continues to go up thanks to a thriving service business.

In its first quarter, in its fiscal revenue report on Thursday, Apple reported a gross margin surplus that remained after accounting for the cost of goods sold at 46.9%. It is the highest on the record that surpasses the margin’s record of 46.6% during the period ended March 2024.

For Apple, Services include the App Store purchases, advertising, payments, AppleCare support and other subscription offers. The growth of these products has offset a slowdown in the sale of iPhone and a saturation in the global smartphone market.

“The service company is generally assembled because of the overall company margin,” Apple CFO Kevan Parekh said of the earnings peel after the report.

In the current quarter, Apple said its gross margin will be between 46.5% and 47.5%.

The iPhone sale slipped almost 1% in the last quarter from a year earlier when the company reported weakness in Greater China. Total revenue increased almost 4% to $ 124.3 billion.

The income of the service increased approx. 4% to $ 26.34 billion and beat the analysts’ estimates. The company now accounts for approx. 21% of Apple’s total revenue. Last quarter, Apple announced that its service unit had become a $ 100 billion business a year.

“We were happy to bring customers our best series of products and services ever during the holiday season,” said CEO Tim Cook in Press release.

Cook’s emphasis on services has transformed Wall Street’s view of a company defined over decades of its iconic devices. For many years in the iPhone era, Apple’s gross margin would predictably enter between 38% and 39%, reflecting the company’s tight grip on its supply chain and its price strength on the market.

But with iPhone growth that subsides in recent years, Apple’s transition to services has changed the equation. The company hit a gross margin of 40% in 2021 and has continued to expand it.

Due to Wall Street’s love of profit, Apple has been able to continue delivering to investors. The share rose 31% last year and surpassed Nasdaq and the company’s market capital has risen to $ 3.6 trillion.

“We believe Apple deserves to trade in prizes for its historic comparable valuation as it differs further from each other as a provider of Premium Electronic Consumer Units and High Margined Digital Services, and especially when the age of the generative AI is in progress is in time, “Analysts at Argus wrote in a report earlier this month. They recommend buying the stock.

Apple shares increased more than 3% in extended trade after Thursday’s report.

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