Apple’s services division grew 12% year-over-year to $30.7 billion during the June quarter. However, the result fell short of analyst expectations, leading the company’s chief financial officer to explain the shortfall on Thursday’s earnings call.
CFO Kevan Parekh pointed to two factors dragging on App Store performance: a slowdown in mobile gaming spending and fee structure changes Apple has been forced to adopt in several markets.
In the U.S., a federal court ruling requires Apple to allow developers to link users to external payment pages without collecting a cut of those transactions.
In the European Union, apps distributed through alternative marketplaces now pay reduced fees. Japan and Brazil have also seen adjustments to Apple’s standard commission structure.
What the Court Ruling Actually Costs Apple
The U.S. situation stems from the Epic Games lawsuit, which resulted in a court order compelling Apple to allow developers to direct customers to outside payment options.
When purchases happen through those external links, Apple collects nothing. Parekh confirmed that arrangement continues to weigh on revenue, though he declined to quantify the impact. Apple said it welcomed the Supreme Court’s decision to hear its appeal of that ruling.
For consumers, those link-out provisions mean some apps now offer the option to pay through a developer’s own website, sometimes at a lower price than going through Apple’s own in-app purchase system. That dynamic has been playing out quietly across a range of apps since the ruling took effect.
Mobile Gaming Revenue Is Flattening
Gaming has historically been among the largest revenue categories inside the App Store, driven heavily by in-app purchases in free-to-play titles. Parekh described the current environment as soft without providing specific figures.
The mobile gaming market broadly has been under pressure for several quarters as player spending habits shift and some of the biggest titles age without replacement hits emerging at the same scale.
Despite those pressures, Parekh noted the App Store still posted a June quarter revenue record. Growth elsewhere in the services portfolio offset the drag, with double-digit gains in cloud storage, Apple TV+, Apple Pay, and advertising. Apple Pay in particular reached a record number of active users during the quarter.
1.5 Billion Paid Subscriptions
Apple now counts 1.5 billion paid subscriptions across its ecosystem, including everything from iCloud storage plans to Apple One bundles to third-party app subscriptions transacted through the App Store.
Both the number of paying accounts and the number of transacting accounts hit all-time highs in the quarter.
Currency headwinds added another layer of pressure. Parekh said foreign exchange movements reduced reported growth, and a year-over-year comparison was made harder by the theatrical release of the F1 film during the same quarter last year, which had no equivalent this year.
Looking ahead, Apple guided for services growth in the September quarter to come in at roughly the same rate as June, once a 2.5 percentage point currency drag is stripped out.
