The giant tech company sold 40.4 million iPhones in the last quarter — 15 percent fewer than a year ago, according to its earnings report Tuesday.
SAN FRANCISCO — You can expect to hear a lot more from Apple about the virtues of mobile apps and online services in coming months. And for good reason: They’re about the only part of Apple’s business that’s growing.
Apps and services have always been key to the appeal of Apple products. But with iPhone sales down for the second quarter in a row — and speculation that a major redesign won’t come until late 2017 — Apple is talking up its online business, promoting it with new kinds of ads and even sponsoring an upcoming reality-TV show called “Planet of the Apps.”
The giant tech company sold 40.4 million iPhones in the last quarter — 15 percent fewer than a year ago, according to its earnings report Tuesday. Analysts say consumers just aren’t as excited about the newest models.
As a result, Apple’s overall revenue fell 15 percent to $42.4 billion for the three months ending June 30.
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Third-quarter net income fell 27 percent to $7.8 billion, or $1.42 a share, compared with analysts’ average per-share forecast of $1.39.
Apple also sold fewer iPad units, Mac computers and Apple Watches in the last quarter. Revenue from iPads increased, thanks to the introduction of higher-priced iPad pro models. And a modestly better forecast for the next quarter sent Apple shares up 5 percent in late trading, after closing at $96.63.
But the biggest bright spot in the company’s report was a 19 percent sales jump for the segment that includes iTunes, Apple Music, the App Store and services like Apple Pay and iCloud storage. That segment produced nearly $6 billion in sales — more than Apple pulled in from quarterly sales of either iPads or Macs.
Apple makes money from online services by taking a percentage whenever users pay to download a song from iTunes, buy an app from the App Store or subscribe to a streaming service like Apple Music. It keeps 30 cents of every dollar spent in the App Store, for example, and passes 70 cents to the app developer.
Apple also collects fees from people who buy extra iCloud storage and from banks when customers use credit cards with Apple Pay.
Since growth is what Wall Street likes to see, Apple executives are increasingly touting the purchasing power of the company’s massive customer base — nearly 600 million owners of Apple devices who spend an average $68 a year on apps, music and other services, according to estimates by Credit Suisse.
“We have more than 1 billion active devices out there, and those are all customers that are spending on our services,” Chief Financial Officer Luca Maestri told The Associated Press.
“We expect this business will continue to grow,” even if Apple sells fewer devices in a particular quarter, Maestri said. “It’s becoming a very meaningful portion of what we do.”
That’s where shows like “Planet of the Apps” come in. Apple is partnering on the project with a team of veteran Hollywood producers and musician/entrepreneur will.i.am.
Apple also announced Tuesday it will sponsor another unscripted video series based on the popular “Carpool Karaoke” segments hosted by CBS talk-show host James Corden.
Separately, Apple has been tweaking the App Store itself. In one change, it is reducing its commission on apps that are sold on a subscription basis.
That could lower its revenue in the short term, but experts say Apple benefits in the long run if more developers adopt a sales model that requires consumers to renew every year — since Apple gets a slice of every renewal fee.
Some of Apple’s online ventures are facing challenges, however. Music sales in the iTunes store are being undercut by the growing popularity of streaming apps like Spotify.
Apple’s own streaming music service is growing, Maestri said, but still lags Spotify in paying subscribers.
Apple’s iCloud storage service, meanwhile, has a host of online competitors.
“It remains to be seen how long it takes Apple to build a service layer meaningful enough to offset potential future declines in smartphone revenue,” said analyst Colin Gillis at BGC Financial in a recent note.
Most experts think iPhone sales will pick up in fall, when Apple is expected to release new models. But some analysts warn of tepid sales even then, citing industry rumors that Apple may wait until 2017, the 10th anniversary of the iPhone’s release, before making dramatic improvements to its signature smartphone.