IT Home, November 3: Apple's services revenue remains at a historical high, but pressures are intensifying. As the core of this business, the App Store is facing dual challenges from regulatory scrutiny and a sluggish mobile gaming market, hindering growth in its services segment.
However, during its earnings call on Monday local time, Apple signaled that it is considering leveraging third-party apps to drive service revenue, though it remains unclear what this specifically entails.
When discussing how artificial intelligence is expected to “drive revenue growth in the future,” Apple’s Chief Financial Officer Kevan Parekh said: “From a product perspective, we believe AI can serve as a compelling reason for users to upgrade their devices and switch to Apple products to experience the latest features. At the same time, we see growth opportunities across third-party apps, partnerships, and Apple’s own services.”
Parikh did not elaborate on what opportunities third-party apps might exploit. However, according to Reuters on Monday, investors are speculating whether Apple will distribute third-party AI agents through the App Store and generate revenue by taking a cut.
IT Home notes that although Apple’s overall services business continues to grow, new regulatory and judicial rules in multiple regions have reduced App Store commission revenues. For example, third-party estimates from August showed a 18% decline in Apple’s commission income in the U.S. market; similar declines occurred in Brazil and Japan after new regulations were introduced. Apple previously maintained strict control over payment processes within its app store, taking a cut from all transactions made through the App Store. However, the lawsuit initiated by Epic Games ultimately forced Apple to allow apps to direct users to external payment channels, and ongoing legal disputes worldwide continue to impact this business.
During the earnings call, Parekh mentioned the challenges facing the App Store and reiterated that Apple's services business is poised to explore new directions.
“We did observe certain factors impacting the App Store’s performance. During the September quarter, App Store revenue was largely flat compared to the same period last year, while paid subscriber numbers for third-party apps within the store reached a new high, maintaining double-digit growth,” Parekh said. “Meanwhile, the mobile gaming business continues to face the headwinds we previously mentioned, and this pressure is expected to persist into the summer quarter.”
Parekh added, "Looking ahead, we expect service revenue growth for the December quarter to be between 8% and 9%. This expectation incorporates headwinds from sequential growth, primarily from third-party licensing business, as well as an additional negative impact of 0.5 percentage points from exchange rates, as mentioned earlier."