Apple's services revenue beats expectations

Key Points
  • Apple reported revenue for its services segment of $11.45 billion for its second quarter of 2019 as it seeks to shift attention from iPhone unit sales.
  • The company beat analyst estimates of $11.37 billion, according to Refinitiv.
  • Apple stopped reporting iPhone unit sales last quarter.
Tim Cook, CEO, Apple 
Brendan McDermid | Reuters

Apple reported $11.45 billion in services revenue for its second quarter of 2019 as it continues its quest to shift the narrative around its business away from iPhone unit sales. That topped analysts' expectations of $11.37 billion, according to FactSet.

Apple also reported services margins of 63.8% for the quarter. Services now accounts for about 20% of Apple's revenue, up from 16% a year earlier and 13% in the first quarter.

Apple's stock was up more than 5% in after hours trading.

Apple announced on its Q4 2018 earnings call that it would stop reporting iPhone, Mac and iPad unit sales in its quarterly reports. At the time, CFO Luca Maestri said the metric is "not necessarily representative of the underlying strength of our business," after the company reported iPhone unit sales that missed analyst expectations.

Beginning last quarter, Apple began reporting its active installed base instead, which represents the number of devices in active use. Apple is not providing a new active installed base figure from its last update of 1.4 billion devices, but Apple CEO Tim Cook told CNBC's Josh Lipton that the metric hit an all-time record last quarter across all categories.

Shifting to reporting its active installed base allows Apple to highlight the scale of the potential audience for its services, which were the center of its media event in March. The company announced three new subscription services at the event, including a TV service, gaming and magazine bundles.

Last quarter, it seemed like investors were beginning to buy into Apple's new narrative as the stock climbed nearly 7% following its earnings report despite plunging iPhone sales compared to the previous year.

Correction: This article has been updated to reflect the correct source of the analyst consensus estimate for services revenue.

Subscribe to CNBC on YouTube.

Watch: Apple shows off new Apple Arcade service, video games

Apple shows off new Apple Arcade service, video games
Apple shows off new Apple Arcade service, video games