Apple’s Q1 2025 financials are a great real-world illustration of the value that service can bring to a business – even one who has built its immense success on products. The company’s most recent reporting shows service revenue has reached an all-time high. On the earnings call, after the report, Kevan Parekh, CFO of Apple said, “the services business in general in aggregate is accretive to the overall company margin.”

For a company made famous by its innovative products who maintain a cult following, this is a big deal. It’s also an opportunity for service leaders within businesses where leaders might not see the full potential of service to make a case citing a brand everyone knows and many fiercely love.

This write up from CNBC calls out the significant contribution to profit margin service can bring, saying, “Apple is struggling to squeeze growth out of its flagship iPhone unit, but its profit margin keeps going up thanks to a flourishing services business. Services revenue rose about 4% to $26.34 billion, beating analysts' estimates. The business now accounts for roughly 21% of Apple's overall revenue. Last quarter, Apple announced that its services unit had turned into a $100 billion a year business.”

As the global smartphone market has become saturated, Apple’s decision to invest in its services business is paying off. The company’s services are varied, allowing the company to create value for a number of stakeholders to diversify its portfolio. This includes everything from the App Store to payments and AppleCare support to AppleTV and Apple Music, among many other subscription offerings.

CNBC’s article also points out that Apple’s service strategy has not only positively impacted its financials but has changed the company’s perception among Wall Street, stating that “Cook’s emphasis on services has transformed Wall Street’s view of a company that’s been defined over the decades by its iconic devices. For many years in the iPhone era, Apple’s gross margin would predictably come in at between 38% and 39%, reflecting the company’s tight grip over its supply chain and its pricing power in the market. But with iPhone growth slowing in recent years, Apple’s move into services has changed the equation. The company hit a 40% gross margin in 2021 and has continued to expand it.”

Sharing the Success Story of Services

So, what are the key points here I’d take to leadership to emphasize or reinforce how service can drive value for a business?

• Service can be a revenue driver but can also have a phenomenal impact on profit margin. This lift in margin can add value to a business in many ways – offsetting times where product sales decline, diversifying value if products begin to become commoditized, allowing headway for product innovation, and so much more.
• A business doesn’t have to be product OR service-centric; they can peacefully co-exist. Many product companies can view a services play as moving “away from their identity,” but this doesn’t have to be true in any way. In fact, when executed well, the investment in services can compliment product to strengthen the overall business – as you see in Apple’s example.
• Offering services allows a business to diversify its value proposition, offsetting risk and allowing for a more differentiated and personalized customer experience.
• Services can be a powerful driver of customer loyalty. If you think about what Apple has done, they’ve created ways post-product sale to keep customers immersed in the Apple experience. To solidify their presence in the lives of their loyal fans while diversifying their revenue streams and improving their profit margins. It’s a great showcase of what service can do!