Apple services revenue misses as App Store changes and gaming lull bite
Apple's services arm fell short of Wall Street estimates for the first time in years, exposing how court-ordered and regulatory changes to the App Store model are beginning to dent the company's most profitable growth engine.
Apple reported $30.74 billion in services revenue for its fiscal third quarter, missing the $31.22 billion analysts had pencilled in. The shortfall, combined with weaker-than-expected China sales, sent the share price down more than 4 per cent in after-hours trading.
The services segment — spanning the App Store, Apple Music, Apple TV, iCloud, AppleCare and Apple Ads — had been the company's most reliable growth story. This was the only line item that disappointed in an otherwise record hardware quarter.
CFO Kevan Parekh pointed to three main drags: a slowdown in mobile gaming spending, unfavourable foreign-exchange movements, and the absence of the one-off boost Apple enjoyed in prior quarters from its hit "F1" theatrical release. He singled out foreign exchange as the single largest factor.
But the most politically charged explanation was structural. Parekh cited "App Store business model changes in certain countries, including the U.S.," a reference to a court order that now compels Apple to let developers steer customers to payment channels outside the App Store, bypassing Apple's commission entirely. Apple did not quantify the revenue impact but noted the dispute is headed to the U.S. Supreme Court for a final ruling.
For European readers the dynamic will look familiar. The EU's Digital Markets Act has already forced Apple to open iOS to alternative app marketplaces and external payment links across the bloc, compressing the take-rate that once flowed automatically from every in-app purchase. Apple's admission that such changes are now visible in quarterly results offers an early signal of how similar rules are reshaping platform economics on both sides of the Atlantic.
Still growing, but the easy years may be over
Apple was careful to cushion the narrative. The App Store still posted a June-quarter revenue record, though that figure now includes the fast-growing Apple Ads business, which recently expanded into Apple Maps. Services revenue hit an all-time high in developed markets and a June-quarter record in emerging markets, with double-digit growth in what Parekh called the "vast majority" of tracked geographies.
The subscriber base crossed 1.5 billion paid subscriptions, up from 1 billion in January 2025. "Both transacting and paid accounts reached new all-time highs in the quarter, with double-digit growth for both in emerging markets," Parekh said.
Apple Music, Apple TV, AppleCare, cloud services and payments all set quarterly or all-time records. Apple TV viewership also reached a peak.
New revenue levers
Looking ahead, Apple flagged several initiatives to keep services expanding. These include the newer Creator Studio subscriptions, bill-splitting features arriving in Apple Cash, and the Apple Upgrade programme launched this week in partnership with Klarna, which lets customers finance a device and bundle services into a single payment.
The strategy is clear: deepen each customer's engagement with Apple's ecosystem so that even if the App Store's commission model is permanently narrowed by courts and regulators, recurring subscription and advertising revenue can fill the gap. Whether that transition happens fast enough to satisfy investors will be the question hanging over the next few quarters.
