Apple touts services growth as iPhone sales fall

Excluding iPhone sales Apple's revenue grew 14 per cent

Apple has emphasised the growth in its services business after announcing an expected fall in iPhone sales.

The Cupertino-based vendor saw revenue drop five per cent year on year to $84.3bn (£64.5bn), attributed to a 15 per cent drop in iPhone revenue.

Taking the smartphone out of the equation, Apple's revenue grew 14 per cent, with services revenue up 19 per cent to an all-time high of $10.9bn.

On an earnings call, transcribed by Seeking Alpha, Apple CEO Tim Cook said that the number of active devices in the market increased in the quarter, despite the drop in iPhone revenue.

He claimed this will play a part in expanding Apple's services revenue in the future.

"Not only is our large and growing installed base a powerful testament to the satisfaction and loyalty of our customers, it's also fuelling our fast-growing services business," he said.

"We generated our highest global services revenue ever, and we also had all-time records across multiple categories of services including the App Store, Apple Pay, cloud services and our App Store search ad business, and we had a December quarter record for AppleCare.

"And I'm very proud to say that nearly 16 years after launching the iTunes Store, we generated our highest quarterly music revenue ever thanks to the great popularity of Apple Music now with over 50 million paid subscribers."

Earlier this month Apple warned investors that it would fall below revenue targets, blaming the miss on stalling iPhone sales.

It said that fewer users than expected have upgraded, while also highlighting shrinking sales in China.

On the earnings call one analyst seemed to suggest that Apple is harming itself by designing products that are built to last for a relatively long time - highlighting that Apple is still offering cheap iPhone battery replacements and makes software updates available to older handsets.

Cook said that Apple's aim will always be to provide the best experience to customers.

"We do design our products to last as long as possible," he claimed.

"The average cycle has extended. There's no doubt about that. We've said several times I think on this call and before that the upgrades for the quarter were less than we anticipated...

"Where it goes in the future, I don't know, but I'm convinced that making a great product that is high quality is the best thing for the customer and we work for the user."

Apple's share price rose over five per cent when the stock market opened this morning.