Apple (NASDAQ:AAPL) did it again. The world’s biggest company (by market cap, profits and sales) reported revenue and earnings that both topped estimates after Tuesday’s close, prompting a 5%+ advance from Apple stock Wednesday. All is right with the world … right?

Not exactly.

There are concerns raised by the consumer technology giant’s fiscal third-quarter numbers. Namely, while iPhone revenue was up 20% year-over-year to $29.9 billion, the raw number of iPhones was only up 1% to 41.3 million. The average selling price per iPhone — mostly the iPhone X — simply grew from $606 a year ago to $724 this time around.

All in all, it’s not a horrifying dynamic. It would be better if Apple sold more iPhones at an ever-increasing price, but there’s no denying that the smartphone race is heating up in a big way just as market saturation becomes a clear reality. For AAPL stock, growth is growth, no matter how it’s mustered.

Ever-rising prices aren’t the ideal long-term solution, however, particularly when the flagship product’s average selling price has already started to cause even the biggest Apple fans to balk.

The scenario leaves many Apple stock owners asking one big question: Where does measurable, sustainable growth come from now that “peak iPhone” is within sight?

You probably already heard the answer.

Services to the Rescue

Last quarter’s total revenue of $53.3 billion was up a solid 17% year-over-year. But, Apple’s Services arm — apps and video/audio content — saw much faster growth of 37%. That red-hot pace hasn’t been an unusual one for the division.

Its total contribution to Apple’s overall revenue was $9.5 billion … a respectable figure, but still less than 18% of the company’s total revenue for the recently ended quarter. Give it time.

How much time? The outlooks vary, though, in broad terms, the scope is clear.

Take Morgan Stanley analyst Katy Huberty’s call from earlier this year as an example. She notes that while the iPhone has generated 86% of Apple’s total revenue growth since 2012, between the end of last year and 2022, its Services will account for 55% of the outfit’s top-line growth.

Meanwhile, Apple itself has established a goal of getting more than $50 billion worth of annual revenue out of its Services arm by 2020. That still pales in comparison to the iPhone’s revenue, but it’s anything but chump change.

Where Apple’s fast-growing Services arm could really shine going forward, however, is in terms of profitability.

The company doesn’t break down each unit’s profitability levels, and certainly doesn’t divulge what kind of margins its AppleCare business produces relative to margins on digital music sales.

Industry insiders think they have a pretty good read on Services’ profitability. And as it turns out, it’s better than profit margins on sales of hardware. RBC Capital Markets analyst Amit Daryanani believes App Store revenue collected by Apple, for instance, sports gross margins of 85%, while gross margins on Apple Pay are a healthy 80%. All told, Daryanani reckons Services as a whole boast weighted average gross margins of 59%.

Loup Ventures’ Gene Muster suggests similarly impressive profitability on digital subscriptions and services, saying operating margins for its Services arm are around 38% versus operating margins only on the order of 25% on hardware like the iPhone and iPad.

Bottom Line for Apple Stock

It’s encouraging, but don’t be misled. As rapidly as the Services arm is growing and as profitable as that unit is, Apple is still first and foremost a hardware company. It has to keep making progress of some sort (either by selling more units, or higher selling prices, or both) for the foreseeable to keep Apple stock edging higher.

The advent of the company’s higher-margin growth machine certainly takes the edge off of the festering ‘peak iPhone’ worry, however. It’s not terribly surprising Apple stock rallied in response to the earnings report.

Indeed, the strengthening focus on digital content and subscription may still not be fully appreciated. Gene Munster calculates that the average annual Services revenue per user of an Apple product will reach $34.76 by the end of 2018, up from last year’s $30.76, and en route to $54.58 per user by 2023.

The future Apple may not be quite as potent as the Apple of yesteryear, but Apple on a bad day is still a better stock pick than most other names on their best day.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.