Apple’s services business remains at record levels, but faces increasing pressure. A central part of that business, Apple’s App Store, has faced regulatory pressure and a slump in mobile gaming, which has hurt the service’s growth.
However, during Monday’s earnings call, Apple hinted that it may try to increase service revenue through third-party apps. What exactly does that mean? Unfortunately, it is not entirely clear.
Discussing how AI could “contribute to revenue growth over time,” Kevan Parekh, Apple’s chief financial officer, said, “In terms of product, you know, we feel that AI offers a compelling reason for customers to upgrade and move to get the latest features, and we also feel that there are opportunities in third-party apps and partnerships as well as first-party opportunities.”
Parekh did not explain what kinds of opportunities might be available through third-party apps. However, This was reported by the Reuters agency On Monday, investors questioned whether Apple could profit from the distribution of third-party AI agents through the App Store and a cut of the revenue they generate.
Regulatory and legal changes have reduced revenue from App Store commissions in some markets, even as Apple’s services business as a whole continues to grow. For example, third-party estimates from August indicated that the company saw a decrease of 18%. in commission income in the US, with declines also in Brazil and Japan after those countries implemented new regulations. Apple has traditionally strictly controlled payments in its app marketplace and restricted all transactions in the App Store. But a lawsuit by Epic Games eventually forced the company to allow apps to redirect users to external payment systems. Other legal challenges all over the world further hampered business.
During the earnings call, Parekh mentioned the App Store’s woes and revisited the idea that the company’s business could expand into new areas.
“We also saw some factors that affected App Store performance, and during the September quarter, App Store performance was similar to last year and we had a record number of paid subscriptions with double-digit growth for third-party apps on the App Store,” Parekh said. “At the same time, we’ve seen some headwinds in mobile gaming that we talked about earlier, and we expect that to continue into the summer quarter.”
Parekh added: “As we move forward, we expect services to grow between 8% and 9% (in the December quarter). This outlook takes into account our best estimates of sequential headwinds, primarily from third-party licensing and the other half percentage point of foreign exchange that I just mentioned.”
TechCrunch has asked Apple for more information and will update this story if it responds.
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