Apple CFO Cites App Store Headwinds and Regulation for Services Growth Slowdown
Apple reported $30.7 billion in quarterly services revenue, marking a 12% annual increase but falling short of expectations. Chief Financial Officer Kevan Parekh attributed the slowdown to mobile gaming headwinds and recent international and domestic regulatory changes affecting the App Store business model. Despite these pressures, the company reached a milestone of 1.5 billion paid subscriptions.
Key points
- Kevan Parekh, the Chief Financial Officer of Apple, addressed analysts during the earnings call regarding the services revenue performance.
- Apple posted $30.7 billion in services revenue for the quarter, representing a 12% increase year-over-year but missing general expectations.
- Parekh attributed the segment's softer growth to mobile gaming headwinds and regulatory business model modifications for the App Store across the U.S., Japan, Brazil, and the European Union.
- Apple reached a milestone of 1.5 billion paid subscriptions during the quarter, three years after hitting the 1 billion mark in 2023.
- Despite regulatory pressures—including U.S. court rulings on link-out transactions and lower fees for alternative marketplaces in the EU—the App Store achieved a June quarter revenue record.
Apple reported its financial results for the third quarter of 2026, posting $30.7 billion in services revenue. While this figure represents a 12% increase compared to the $27.4 billion recorded in the same period last year, the performance came in below expectations and saw a sequential decline from the previous quarter's $30.98 billion.
During the earnings call, Apple CFO Kevan Parekh explained that the softer metrics were influenced by headwinds in mobile gaming and adjustments to the App Store business model. The company faces various regulatory shifts globally, including fee updates in Japan and Brazil, reduced commissions for alternative app marketplace apps in the European Union, and ongoing compliance with a U.S. court ruling regarding link-out transactions.
Despite these regulatory and market challenges, Apple highlighted several bright spots within its services division. The company announced it now has 1.5 billion paid subscriptions, climbing from 1 billion subscriptions reached three years prior. Additionally, double-digit growth was observed across cloud services, video, advertising, and payment services, with Apple Pay achieving record user levels alongside an all-time high in transacting accounts.
Sources
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