Apple says gaming slowdown and App Store changes hurt services growth

Apple says it has now topped 1.5 billion subscribers for its services business, up from 1 billion in January 2025. However, this segment of Apple’s business, which includes the Apple Store, AppleCare, music, video, and cloud services, was the only miss in what was otherwise a record-breaking quarter for the company’s hardware sales.

In Apple’s fiscal third quarter, the company reported $30.74 billion in services revenue, falling short of the $31.22 billion Wall Street analysts had expected. Combined with a miss in China, Apple’s stock tumbled over 4% in after-hours trading.

When asked to dive into what led to the decline in services revenue, Apple CFO Kevan Parekh pointed to several factors. Most notable, however, were the impacts on Apple’s cash cow, the App Store.

One factor contributing to the App Store’s performance in the quarter was a slowdown in mobile gaming. It also called out the App Store business model changes in certain countries, including the U.S.

The latter is a reference to Apple being under a court order that requires it to now allow app developers to process customer payments outside the App Store — and outside the reach of Apple’s commission. While Apple didn’t say to what extent this specific issue had impacted App Store revenue, it did remind investors that the matter will be heard by the Supreme Court for a final decision.

The company didn’t fully blame App Store issues for the services revenue miss. Other factors included foreign exchange, which Apple claimed was the main driver, as well as a comparison to prior quarters where Apple was raking in money from the success of its F1 theatrical release.

Overall, the App Store still set a June quarter revenue record, Apple noted, but that total figure also includes revenue from Apple Ads, which have become a more significant part of Apple’s business, and recently expanded to Apple Maps.

Despite these issues — and other “headwinds” attributed to foreign exchange rates — Apple touted the potential for growing its services business in the future.

It noted the segment set an all-time revenue record in developed markets and a June quarter record in emerging markets. It also said the total services business saw double-digit revenue in the “vast majority” of markets Apple tracks.

“Our services continue to attract more customers, and we have now surpassed one and a half billion in paid subscriptions. Both transacting and paid accounts reached new all-time highs in the quarter, with double-digit growth for both in emerging markets,” said Parekh.

The company also shared that specific segments were doing particularly well, including Apple Ads, App Store, AppleCare, Apple Music and Apple TV, which saw June quarter records, as well as cloud and payment services, which hit all-time highs. Apple TV additionally saw its viewership reach an all-time high in the quarter.

Apple also reminded investors of potential new services revenue streams, including the newer Creator Studio subscriptions and the upcoming bill-splitting features in Apple Cash, which could deepen customers’ engagement with Apple’s payments ecosystem.

This week’s launch of the Apple Upgrade program, in partnership with Klarna, could drive other increases in services revenue too, especially if it drives more people to buy an iPhone or other Apple device, adding on services to their bill.