Apple Ties Services Miss to App Store Regulatory Shifts and Gaming Weakness
*Regulatory changes in the US and other markets are now cutting into the growth rate of Apple's services segment.*
Apple posted services revenue of $30.7 billion for the quarter, up 12 percent from $27.4 billion a year earlier, yet the result landed below analyst forecasts. The company attributed the shortfall to softness in mobile gaming and adjustments to its App Store business model driven by regulatory requirements.
CFO Kevan Parekh addressed the impact during the earnings call. He cited headwinds in mobile gaming along with changes to the App Store model in certain countries. In the United States the company continues to operate under a court ruling that affects link-out transactions.
Apple said it has now surpassed 1.5 billion paid subscriptions. The services category still expanded year over year, but the pace slowed enough to prompt questions from analysts about the durability of prior growth rates.
Regulatory pressure surfaces
The comments mark the first time Apple has directly linked App Store rule changes to a measurable effect on reported revenue. Parekh noted that the company made deliberate adjustments in several markets and must comply with the US court order on external payment links. Both factors reduced the share of transactions that flow through Apple's payment system and its associated fees.
Sources differ slightly on emphasis. TechCrunch and 9to5Mac highlight the combination of gaming softness and regulatory moves, while MacRumors quotes Parekh at greater length on the ongoing US litigation.
Outlook for services
Services remain a high-margin contributor to Apple's results. Continued regulatory intervention in the US and abroad will require the company to operate under multiple payment and distribution rules simultaneously. The immediate financial effect appears modest, yet the trend points to a structural reduction in the share of revenue Apple can capture from its own storefront.
---
Sources:
No comments yet