Apple’s services revenue is at a record high, yet the App Store faces regulatory headwinds and a slump in mobile gaming that threaten future growth.
On Monday, the company’s earnings call suggested a potential new revenue stream through third-party applications, though specifics remain vague.
Kevan Parekh, Apple’s chief financial officer, stated that AI offers a compelling reason for customers to upgrade devices and switch systems to access the latest capabilities. He noted there are opportunities across third-party apps and partnerships, as well as first-party opportunities.
Parekh did not elaborate on the nature of these opportunities. Reuters reported that investors are now questioning whether Apple might profit by distributing third-party AI agents through the App Store and taking a cut of the revenue they generate.
Regulatory and legal changes have reduced App Store commission revenue in several markets, even as the wider services business continues to expand. Third-party estimates from August indicated an 18% drop in U.S. commission revenue. Similar declines occurred in Brazil and Japan following the introduction of new regulations there. Apple has traditionally controlled payments within its app marketplace tightly, taking a cut of all App Store transactions. A lawsuit by Epic Games forced the company to allow apps to redirect users to outside payment systems. Other legal challenges globally have further hampered the business.
During the call, Parekh referenced these App Store issues while returning to the idea that the service business could expand into new territory.
“We’ve also seen some factors that impacted the performance of the App Store,” Parekh said. “During the September quarter, the performance on the App Store was similar to the prior year, and we had a record number of paid subscriptions with double-digit growth for third-party apps on the App Store.”
Parekh added that headwinds in mobile gaming, discussed previously, are expected to continue into the summer quarter.
“As we move ahead, we expect services growth to be between 8 to 9% [in the December quarter],” Parekh said. “This outlook contemplates our best estimates on sequential headwinds, primarily from third-party licensing and the additional half percentage point of foreign exchange I just mentioned.”
TechCrunch has contacted Apple for further information and will update this story if a response is received.
