Apple touts strong App Store revenue finish to 2019 ahead of Q1 results, strong services, iPhone 11 demand

Apple said that App Store customers spent $1.42 billion between Christmas Eve and New Year's Eve. The results indicate a strong finish for Apple's services business, which will have fiscal 2020 revenue north of $50 billion.

Apple said its App Store customers spent $1.42 billion between Christmas Eve and New Year's Eve, up 16% from a year ago, in what the company added was an illustration of its pivot to services.

Indeed, Apple's services revenue has surged in calendar 2019 as the company aims to offset a plateau in iPhone sales. Increasingly, Apple devices are just a conduit to sell you subscriptions.

Apple didn't outline its services revenue, but the company will deliver its financials results on Jan. 28. Apple said App Store customers spent $386 million on New Year's Day, up 20% from a year ago.

Developers have earned more than $155 billion since the App Store launched in 2008 with a quarter of that sum in 2019.

Wedbush estimates that Apple will deliver services revenue of $53.65 billion in fiscal 2020 and sales of $12.7 billion for the first quarter ending Dec. 31.

Apple's services business includes Apple Arcade, Apple TV+, Apple News+ and Apple Card as well as Apple Music and iCloud. Apple has bundled free annual subscriptions with the purchase of new devices to jump start Apple TV+.

The company will outline more about its services business when it reports its fiscal first quarter results later this month. Wall Street is looking for first quarter revenue of $88.3 billion, up from 4.73% from a year ago. Earnings are expected to be $20.15 billion, or $4.53 a share.

Analysts have been upbeat about Apple's iPhone 11 sales as well as the 5G upgrade cycle ahead. Meanwhile, revenue from AirPods and Apple Watch are likely to be strong along with services. Wedbush analyst Daniel Ives said in a research note:

Our recent checks around iPhone 11 units for the holiday season look robust and coupled with an "eye popping" AirPods performance should lead to clear upside in the upcoming FY1Q/Dec. set to be announced after the bell on January 28th. iPhone 11 strength appears to have legs both in the US and China as installed base demand continues to look healthy into the March/June quarters with the drum roll into the highly anticipated 5G upgrade cycle in September.

Those upgrades equate to more services revenue.