Apple AAPL has been riding on a strong Services business, driven by strong streaming content and an expanding Apple Arcade game portfolio. In the first quarter of fiscal 2026, the Services business accounted for 20.9% of net sales with revenues growing 14% year over year to $30.01 billion. Strong Apple TV content and an expanding Apple Arcade game portfolio have been catalysts for the Services business in the recent past.
Apple TV saw significant momentum in December, with viewership increasing 36% year over year. The streaming service benefited from the success of shows like Pluribus. A strong upcoming slate that includes Cape Fear from Steven Spielberg and Martin Scorsese, and the fourth season of Ted Lasso. Apple’s focus on expanding sports content is noteworthy. This year, all Major League Soccer (MLS) games are available to stream for Apple TV subscribers at no additional cost. Apple TV has become the exclusive new broadcast partner for Formula 1 in the United States in 2026 under a five-year partnership. Beginning March 27, “Friday Night Baseball,” a weekly Major League Baseball doubleheader, returns on Apple TV.
Apple’s endeavor to continuously expand its Arcade game portfolio is expected to keep subscribers engaged. The company offers more than 200 family-friendly games, and the latest additions include fishing adventure DREDGE+, zen puzzle game Unpacking+, and My Very Hungry Caterpillar+. Apart from streaming and games, Apple’s Services business benefits from the growing popularity of Apple Music and Apple Pay. In calendar 2025, Apple Music climbed to all-time highs in both listenership and new subscriber growth while Apple Pay eliminated more than $1 billion in fraud for the company’s partners.
Apple’s strong installed base of more than 2.5 billion active devices offers excellent growth opportunities. The company saw increased customer engagement across its service offerings, with both transacting and paid accounts reaching all-time highs in the fiscal first quarter. Apple now expects the March quarter’s (second-quarter fiscal 2026) net sales to grow between 13% and 16% on a year-over-year basis. Services are expected to grow at the fourth quarter of fiscal 2025 rate. The Zacks Consensus Estimate for sales is currently pegged at $108.9 billion, suggesting 14.2% growth from the figure reported in the year-ago quarter.
Invest in Gold
AAPL is facing stiff competition from the likes of Netflix NFLX and Alphabet GOOGL in the services space.
Netflix now expects more healthy growth on an organic basis for 2026. The company reported 16% revenue growth in 2025, with advertising sales growing 2.5 times to $1.5 billion. Netflix expects this advertising business to roughly double again in 2026 to $3 billion. Netflix benefits from a healthy engagement level. In the second half of 2025, viewing hours increased 2% year over year, driven by a 9% rise in viewing of branded originals. With over 325 million paid memberships, Netflix is now serving an audience approaching one billion people globally.
Alphabet’s Google Services business includes the Pixel family of devices. In 2025, Alphabet’s Google Services generated 85.1% of total revenues, with revenues hitting $342.72 billion, up 12.4% from 2024. Alphabet is benefiting from accelerated growth across AI infrastructure, Google Cloud and Search. Search is benefiting from AI Overviews and AI Mode, which have driven growth in overall queries. The launch of personal intelligence in AI Mode in search and the Gemini app bodes well for Alphabet’s prospects.
