Apple Services Growth Slows as App Store Fee Changes Bite

Apple's services segment, long the company's profit engine, is starting to show the impact of regulatory rulings that allow iPhone app developers to steer users toward payment systems outside the App Store. In the June quarter, services revenue hit a record $30.7 billion but fell short of the $31.4 billion analysts had expected. Gross margin for the division came in at 75.6%, also below consensus, according to Visible Alpha. Apple shares dropped about 9% in the days following the report.

Chief Financial Officer Kevan Parekh attributed part of the weaker performance to the recent App Store changes, alongside foreign exchange effects. Apple's regulatory filings now warn that the company "may not earn a commission at all" when customers complete purchases through alternative payment methods.

The shift traces back to a US court order stemming from Epic Games' lawsuit, which required Apple to let developers include links to outside payment options in their apps. Apple cannot collect its usual commission—up to 30% on digital goods and subscriptions—on transactions that occur through those external links. That ruling has reduced Apple's control over the payment process and begun to erode the fee model behind its services growth.

Third-party data point to a slowdown. Sensor Tower reported that US App Store consumer spending fell 6% in the second quarter, a sharp reversal from 9% growth a year earlier. Globally, App Store spending rose just 3%, compared with 13% growth in the prior-year period. The research firm said the Epic ruling had "significantly impacted" US spending, while also citing weaker consumer demand and broader economic uncertainty.

Appfigures estimated that Apple's US commission revenue has fallen 18% this year. It also observed App Store revenue declines in Brazil and Japan, where new app store rules have recently taken effect.

Regulatory pressure extends beyond the United States. The European Union, South Korea, and Brazil have already required Apple to open parts of its mobile platform to alternative app stores or payment systems. The UK and Australia are weighing similar proposals. Last year, the EU fined Apple €500 million over alleged violations of the Digital Markets Act; Apple is appealing. In the US, the Supreme Court has agreed to review parts of the Epic case after a lower court judge found Apple had failed to comply with an earlier order on App Store payment rules.

Apple has argued that its control over app distribution and payments protects users, but regulators have pushed for more competition and choice.

Investors are watching closely because services have become a major source of Apple's profit growth. UBS analyst David Vogt called the slower App Store growth a "concern." Bank of America analyst Wamsi Mohan said services revenue was "somewhat weaker than we expected." Nicholas Rodelli, director of legal research at Washington Analysis, told the Financial Times that the impact was now becoming visible in the numbers after being absent before. He added that Apple's premium valuation depends on services, with the App Store as "the crown jewel," and predicted the market would reprice the durability of the services take rate.

As regulatory actions unfold and more developers adopt external payment links, Apple's services margin and growth trajectory may face continued pressure, though the company maintains that its approach is designed to protect users.