Apple has conceded for the first time that new regulatory mandates, which force it to relax its grip on the App Store, are now weighing on its services business, a division valued at over $100 billion. This rare acknowledgment signals that antitrust actions are beginning to erode one of the company's most profitable segments.
The tech giant reported services revenue and profit margins for its June quarter that both fell short of Wall Street expectations. In its latest regulatory filing, Apple warned that if users complete transactions through third-party payment systems, it "may not be able to collect a commission at all."
This disclosure is the clearest sign yet that years of court rulings and regulatory interventions across the US, Europe, and beyond are gradually chipping away at the commission income that underpins Apple's high-margin services arm.
Recent data supports this trend. Mobile analytics firm Sensor Tower found that US consumer spending in the App Store dropped 6% year-on-year in the second quarter, a stark reversal from the 9% growth recorded a year earlier. Meanwhile, Appfigures estimates that Apple's commission revenue in the US market has already contracted by 18% so far this year.
UBS analyst David Vogt described the App Store's slowing growth as a "potential concern," while Bank of America's Wamsi Mohan noted that despite the $30.7 billion services revenue hitting a record high, it still came in "slightly below our expectations."
Apple has previously attributed the segment's performance to various factors, including currency fluctuations. However, Chief Financial Officer Kevin Parekh also acknowledged that recent App Store changes have taken a toll on the business.
According to data provider Visible Alpha, services revenue for the June quarter reached $30.7 billion, missing the analyst consensus of $31.4 billion. The division's gross margin of 75.6% also fell short of market forecasts. In the days following the earnings release, Apple's shares slid approximately 9%.
Courts and regulators worldwide are compelling Apple to loosen its control over app payments and distribution, which threatens the up-to-30% commission it collects on in-app digital purchases and subscriptions.
Last year, Epic Games secured a US court injunction forcing Apple to allow app developers to direct users to third-party payment options outside the App Store without penalty, effectively bypassing the traditional commission mechanism.
Sensor Tower stated that the slowdown in the US market reflects how the ruling has had a "significant impact" on consumer spending within the App Store.
The firm's data shows that global App Store consumer spending grew just 3% year-on-year in the June quarter, down sharply from the 13% growth seen a year prior. Sensor Tower added that weaker consumer demand and macroeconomic uncertainty could also be suppressing spending.
A separate study from Appfigures found that App Store revenue has also contracted in Brazil and Japan following the introduction of new regulations in recent months.
Apple argues that its strict oversight of iPhone apps is essential for user protection. Yet regulators in the EU, South Korea, and Brazil have already mandated that Apple open its devices to third-party app stores or alternative payment methods, with the UK and Australia advancing similar regulatory reforms.
Last year, the EU fined Apple €500 million for allegedly violating the Digital Markets Act, a penalty the company is appealing. In the US, after a judge ruled that Apple failed to comply with an injunction on App Store payment rules, the Supreme Court has agreed to review parts of the Epic Games case.
"It's logical that regulatory impact is now showing up in the financials," said Nicholas Rodelli, research director at Washington-based analysis firm. "What's more surprising is that it wasn't detectable in the data before."
He added: "Apple's high valuation is built on its services business, and the App Store is the crown jewel of that segment. We believe the market will begin reassessing whether the services commission rate can be sustained over the long term."
Comments