Apple says gaming slowdown and App Store changes hurt services growth
Apple reports surpassing 1.5 billion services subscribers, but misses revenue expectations due to mobile gaming deceleration and App Store policy shifts.
Stock photo for illustration only, not from the actual event
- Apple's paid services subscribers surpassed 1.5 billion, up from 1 billion in January 2025.
- Services revenue reached $30.74 billion in Q3, falling short of Wall Street's $31.22 billion expectation.
- CFO Kevan Parekh cited mobile gaming slowdowns and App Store model changes in regions like the U.S. as key factors.
Apple has announced that its ecosystem has now crossed 1.5 billion active subscribers across its services business, marking a substantial increase from the 1 billion milestone recorded in January 2025. Despite this user growth, the services division—which encompasses the App Store, AppleCare, music, video, and cloud offerings—was the solitary shortfall during an otherwise record-setting quarter for the company's hardware sales.
During the fiscal third quarter, Apple generated $30.74 billion in services revenue, which failed to meet the $31.22 billion consensus estimate anticipated by Wall Street analysts. Combined with softer performance in China, this revenue miss caused Apple's stock to decline by over 4% during after-hours trading.
Stock photo for illustration only, not from the actual event
Addressing inquiries regarding the deceleration in services income, Apple CFO Kevan Parekh highlighted multiple contributing elements. Most prominently, the company pointed toward headwinds impacting its primary cash cow, the App Store, driven by a noticeable slowdown in mobile gaming and adjustments made to the App Store business model in select jurisdictions, including the United States.
The slight hiccup in Apple's services revenue highlights the increasing regulatory and market pressures facing the company's app distribution model. As legal changes and alternative payment mandates take effect in the U.S. and other key territories, the historically high-margin App Store revenue stream is beginning to feel the friction, signaling a shift in how digital marketplaces operate globally.
Apple clarified that the App Store challenges were not solely responsible for the revenue shortfall. Other contributing factors included foreign exchange fluctuations, which the firm identified as the primary driver, alongside difficult comparisons to previous quarters that benefited heavily from theatrical box office returns linked to its F1 film release.
"Our services continue to attract more customers, and we have now surpassed one and a half billion in paid subscriptions. Both transacting and paid accounts reached new all-time highs in the quarter, with double-digit growth for both in emerging markets."
Kevan Parekh, Apple CFO
Looking ahead, Apple reminded investors of upcoming monetization opportunities, including new Creator Studio subscription tiers, upcoming bill-splitting capabilities within Apple Cash, and the newly introduced Apple Upgrade program established in partnership with Klarna.
Source: TechCrunch
Found something wrong in this article? Report an issue with this article
Comments
Leave a Comment