● Covered by 2 sources · 2 reportsMedium impact2 neutral
Apple Services Revenue Misses Expectations Due to Gaming Slowdown and App Store Changes
Key points
- Services revenue was $30.74 billion, below $31.22 billion expectation.
- Mobile gaming slowdown impacted App Store performance.
- App Store business model changes affected revenue.
- Apple now has over 1.5 billion services subscribers.
- Services growth was the slowest since Q2 2025.
Services Revenue Falls Short
Apple reported $30.74 billion in services revenue for its fiscal third quarter, which did not meet the Wall Street analyst expectation of $31.22 billion. This segment, which includes the App Store, AppleCare, music, video, and cloud services, was the only area where Apple did not achieve a record-breaking quarter, unlike its hardware sales.
Despite the miss, Apple's services business has now surpassed 1.5 billion subscribers, an increase from 1 billion in January 2025. The reported services revenue was up 12% year over year, but it marked the segment's first sequential decline since 2022, down from $30.98 billion in the previous quarter. It was also Apple’s slowest Services growth since Q2 2025 and its weakest Q3 growth rate since 2023.
Factors Impacting App Store Performance
Apple CFO Kevan Parekh identified two primary factors contributing to the decline in services revenue, particularly impacting the App Store. One significant factor was a slowdown in mobile gaming.
The other notable factor was changes to the App Store's business model in certain countries, including the U.S. These changes stem from a court order requiring Apple to allow app developers to process customer payments outside the App Store, thereby bypassing Apple's commission system.
Regulatory Changes and Their Effect
The regulatory changes to the App Store business model, both in the U.S. and internationally, are beginning to affect Apple's Services revenue growth. The App Store is traditionally one of Apple’s largest revenue drivers within its Services category. Estimates from last year suggested the App Store accounts for nearly one-third of this category’s revenue, with gaming apps alone contributing a significant portion.
Market Reaction
Following the services revenue miss and a miss in China, Apple’s stock experienced a decline of over 4% in after-hours trading.
✨ This summary was generated by AI from the outlets' reporting listed below. It is not independently verified and may contain errors — check the original sources. How BrevFeed works →
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How outlets covered it
Apple's CFO Kevan Parekh stated that regulatory changes to the App Store business model in the US and internationally are beginning to affect the company's Services revenue growth. This slowdown contributed to the Services segment's first sequential decline since 2022, despite setting a June-quarter revenue record for the App Store.
Apple reported that its services revenue in the fiscal third quarter fell short of Wall Street expectations, despite reaching 1.5 billion subscribers. This miss was attributed to a slowdown in mobile gaming and changes to the App Store's business model, which now allows developers to process payments outside Apple's commission system.