Apple says gaming slowdown and App Store changes hurt services growth
Apple’s services division fell short of analysts’ revenue expectations despite Apple reporting record hardware sales and more than 1.5 billion paid subscriptions. The miss, alongside weaker results in China, sent its shares down by more than 4% in after-hours trading, highlighting pressure on a business increasingly important to Apple’s growth.
Services revenue reached $30.74 billion in the fiscal third quarter, below the $31.22 billion forecast. Apple cited foreign exchange rates as the main factor, but also pointed to slower mobile gaming and App Store payment-rule changes, including a US court order allowing developers to take payments outside Apple’s commission system; the App Store nevertheless set a June-quarter revenue record.
In short
- Apple services revenue missed Wall Street expectations.
- Gaming slowdown and App Store changes weighed on growth.
- Apple now has over 1.5 billion paid subscriptions.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Apple’s explanation is plausible: currency movements can reduce reported revenue, while slower mobile gaming and changes allowing some payments outside its commission system may weigh on App Store income. As services become more important to growth, investors can reasonably scrutinise whether these pressures will persist, even though the App Store still set a quarterly revenue record.
The case against
The shortfall was modest, and Apple attributed it mainly to foreign exchange rates; the reported figures do not establish that gaming or payment-rule changes caused a lasting deterioration. Record App Store revenue, more than 1.5 billion paid subscriptions and strong hardware sales support the view that services remain resilient, so one quarter’s miss may overstate the underlying concern.
Explained simply
Apple's services division comprises subscription services such as iCloud and Apple Music, as well as its App Store where customers buy applications and games. These services have become increasingly important to Apple's profits, as demand for physical devices like iPhones stabilises.
In its latest financial results, Apple's services revenue came in at $30.74 billion, below what financial analysts had predicted. The company blamed foreign exchange rates as the primary factor, but also pointed to slower gaming demand and changes to how developers can process App Store payments following a US court ruling.
This shortfall is significant because services have become increasingly critical to Apple's long-term growth strategy, even as the company continues to generate strong hardware sales. The results prompted a sharp stock market reaction, with Apple's shares declining more than 4%.
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