Many investors are focused on iPhone sales, which is not surprising given that they have been large part of the sales, or 63% for the last fiscal year 2015 for Apple (NASDAQ:AAPL). But by focusing only on one segment, one may get blinded and not see the others where revenue is growing fast, in between the iPhone cycles - those are Services, which includes Internet Services, AppleCare, Apple Pay, licensing and other services. Included in that is App store and music revenue.
The Services growth has been increasing with the growing install base of iOS devices. The combined revenue is shown in the Figure below for Services only for each quarter (Apple IR).
According to Benedict Evans the estimated number of iOS devices in use in March, 2016 was around 880 million. For Services revenue of 25 billion for 2016, thus Apple is making about $28 per iOS device per year for Services. Note that services does also include Mac Store revenue which is a small part.
Alphabet's (NASDAQ:GOOGL)(NASDAQ:GOOG) Android revenue, reported as Google other revenues, for Q1 of this year was $2.1 billion, this includes Google Play store, cloud and apps offerings for enterprise and some hardware (Google does not break it down further, Alphabet IR). This revenue is shown in the Figure below, but Alphabet will report second quarter after the closing today (note that Q1 for Alphabet is comparable with fiscal Q2 for Apple).
The install base for Android was estimated to be 1.5 billion devices (by Evans, excluding China, see above reference) and if the Play store revenue will be $3-$4 billion this year, it results in $2.0-$2.7 per Android device of service revenue (note that Android revenue does come from more sources than the Google Play Store).
Apple CEO, Tim Cook, said this about Services on the Apple earnings call yesterday:
The growth was broad-based, with App Store revenue up 37% to a new all-time high, in addition to strong increases in Music, iCloud, and AppleCare.
He likened Services to a Fortune 100 company referring to the $25 billion yearly revenue.
On the same call, Luca Maestri, Apple's CFO, said:
We set a new record for customers transacting on our iTunes Stores. And among our customers who purchase apps and content, the average amount spent per customer was the highest that we've ever measured. The App Store's growth rate has now accelerated for four consecutive quarters, reaching 37% in Q3.
Even though the growth of phone sales is slowing down the services are still growing and will probably do so for both iOS and Android as the install base grows larger.
The iOS install base of active devices is about two and a half times smaller than for Android, but still the revenue is about ten times more per iOS device than Android, which is a striking difference.
Due to accounting differences and that some sales for Android devices are outside of the Google Play Store, this analysis is based on that most of the revenues for these devices come from the Apple Store and the Google Play Store.
Disclosure: I am/we are long AAPL.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.