Apple services revenue misses estimates as App Store rules bite

Apple ↘ 0.80% reported record June-quarter revenue of $109.4 billion on July 30, but its closely watched Services segment fell short of expectations as regulatory pressures on the App Store began to materialize in the company's financial results for the first time.9to5mac+2

Services Miss Clouds a Strong Quarter

Services revenue came in at $30.7 billion, up 12% year over year and a June-quarter record, but below analyst expectations of $31.22 billion, according to Yahoo Finance. The figure also represented the segment's first sequential decline since 2022, dropping from $30.98 billion in the March quarter.finance.yahoo+1

During the earnings call, CFO Kevan Parekh pointed to "some factors that impacted the performance of the App Store," identifying headwinds from mobile gaming and regulatory changes to the App Store's business model. In the United States, Apple remains temporarily barred from charging commissions on purchases made through external links, a consequence of the Epic Games lawsuit. Similar rules are now in effect in the European Union under the Digital Markets Act, as well as in Japan and Brazil.9to5mac

"We also made some changes to the App Store business model in certain countries," Parekh said. "And in the US, we do continue to operate under a court ruling impacting the link-out transactions. But we're pleased the Supreme Court will hear our appeal".9to5mac

Gaming Weakness and a Tough Comparison

Parekh also noted that a slowdown in mobile gaming spending weighed on App Store performance. Gaming apps have historically accounted for roughly 70% of App Store revenue, according to findings from the Epic v. Apple case. An additional factor in the year-over-year comparison was the prior-year theatrical release of Apple's F1 film, which Parekh described as "one of the highest-grossing sports films in history," boosting last year's Services figure.9to5mac

Hardware Strength Offsets Concerns

Despite the Services miss, Apple beat overall estimates. Total revenue rose 16% year over year, earnings per share reached $2.02 versus consensus of $1.89, and gross margin expanded to 50.1%. iPhone revenue climbed to $54.3 billion while Mac revenue hit $10.4 billion. Reuters reported that $0.11 of the per-share earnings were attributable to tariff refunds from the U.S. government.marketbeat+3

The Supreme Court is set to hear Apple's appeal on whether it can charge commissions on off-App Store purchases, a decision that could determine whether the current revenue headwinds intensify or recede in coming quarters.9to5mac