Investors may have been focused on the decline in iPhone shipmentswhen Apple reported its latest quarterly results on Tuesday, but there was one bright spot which could be a key driver of growth for the U.S. technology giant: Services.
This section in Apple's earnings includes products like Apple Pay, Apple Music, iTunes and the App Store and is now the second biggest segment in terms of revenues, outstripping both iPad and Macs.
Revenue from services came in at $5.99 billion in the fiscal second quarter — topping analyst estimates of $5.78 billion, according to StreetAccount. This was a 20 percent rise from the same period last year, highlighting the focus Apple has been putting on the segment.
As the overall smartphone market matures and users wait for a new iPhone model, focusing on services that give recurring revenues will be crucial for Apple, analysts said, especially since the company has an customer base of 1 billion across all its devices.
"Focusing on services is the best strategy and the increase is quite remarkable. They are starting to fully explore the 1 billion users in its customer base and it is one of the best customer bases a company can have," Francisco Jeronimo, research director for European mobile devices at IDC, told CNBC in a phone interview.
"If they continue through normal sales of iPhone there is not much they can do in terms of hardware and bringing something new. The next iPhone will be an incremental upgrade, not a revolution. So services are the only way they can keep momentum or revenues."
Jeronimo added that the current 13 million subscriber number for Apple Music, which chief executive Tim Cook announced yesterday, was small in comparison to the over 1 billion install base of Apple devices, so there was big room to grow.