Apple's services business is starting to feel the pain from losing its grip on App Store payments
The Cupertino company reported $30.7 billion in services revenue for the June quarter, a record but below analysts' expectations of $31.4 billion. Gross margin for the division was 75.6%, also below forecasts, according to Visible Alpha. Apple shares fell about 9% in the days after the results. Read Entire Article
Apple's lucrative services division is facing challenges as it grapples with rules permitting app developers to direct users to payment systems outside the App Store. The latest quarter saw services revenue at $30.7 billion, slightly below expectations, while gross margin fell short of forecasts. Apple's CFO attributed the slowdown to recent App Store changes and foreign exchange effects, hinting that it might not earn commissions in some cases.
This marks a significant shift as Apple traditionally earned high commissions on digital purchases and subscriptions. A US court order requiring developers to link users to alternative payment options has curtailed Apple's control over the payment process. This trend is not isolated, with Sensor Tower reporting a 6% decline in US App Store spending and Appfigures estimating an 18% drop in Apple's US commission revenue this year.
The company's premium valuation relies heavily on its services segment, with investors closely watching for any further erosion in this critical area.
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