Apple's Services Is Now An Important Part Of Investors' Conversation

Apple Inc. AAPL gained around 5 percent after the company's first quarter earnings consisted of a top and bottom line beat along with record iPhone sales. Perhaps flying a bit under the radar is Apple's growth in the Services segment, which is becoming a bigger part of the conversation moving forward.

Tim Long of BMO Capital Markets broke down Apple's performance in the Services segment in a report following the earnings print.

Long noted that Apple's services related revenue rose 18 percent year-over-year in the quarter to $7.2 billion and exceeded the analyst's estimates of $6.5 billion.

The analyst also pointed out that last year's quarter included a one-time payment from Samsung of $548 million and was also one week shorter. Taking these factors into account, Long estimates the segment's revenue were 21 percent higher year-over-year, which is a growth rate that's approximately on par with the past few quarters.

Apple management continues to believe it can double the segment's revenue in four years, which implies a compounded annual growth rate in the high teens that exceeds the analyst's 10 percent growth rate through 2019.

Bottom line, Long believes Services will be "an important part of the story" given the now stronger than expected growth rate relative to expectations heading into Tuesday's earnings report.

Shares of Apple remain Outperform rated with a price target boosted to $142 from a previous $135.