Apple said Thursday that regulatory changes to the App Store business model are beginning to affect its Services segment growth, as the company reported a record but slower-growing quarter for the division.
In its fiscal third quarter of 2026, Apple recorded Services revenue of $30.7 billion, a new record for the June quarter. The figure was up 12% year over year, yet it marked the segment's first sequential decline since 2022, falling from $30.98 billion in the previous quarter. It was also the slowest Services growth Apple has posted since Q2 2025 and the weakest third-quarter growth rate since 2023.
What Apple said about the slowdown
During the earnings call, Apple CFO Kevan Parekh pointed to several factors that weighed on Services performance, particularly within the App Store, which has long been a major revenue driver for the category.
"We also had some factors that impacted the performance of the App Store," Parekh said. "We did see some headwinds in mobile gaming. And keep in mind, we also made some changes to the App Store business model in certain countries. And in the US, we do continue to operate under a court ruling impacting the link-out transactions. But we're pleased the Supreme Court will hear our appeal. Despite this, the App Store set a June-quarter revenue record."
The comments offer the clearest acknowledgment yet that a wave of regulatory actions across the globe is starting to reshape the economic underpinnings of Apple's digital marketplace.
Regulatory changes across multiple markets
Over the past year, Apple has been compelled to introduce alternative app distribution methods, alternative payment systems, and out-of-app purchase offers in jurisdictions including Japan, Brazil, and the European Union. These changes stem from new laws and court rulings aimed at loosening Apple's control over app distribution and payments.
In Japan, Apple agreed to allow developers to use external payment links in certain circumstances, settling a Japan Fair Trade Commission investigation. In Brazil, regulators have pushed Apple to open its iOS ecosystem to third-party payment systems and sideloading. The European Union's Digital Markets Act has forced the company to permit alternative app stores and reduce commission rates for developers who choose not to use Apple's payment system.
These adjustments have introduced complexities into Apple's App Store business model, which historically has charged a 15% to 30% commission on digital goods and services. When developers steer users outside the App Store to complete transactions, Apple may lose some or all of that commission revenue.
Epic Games lawsuit and US court rulings
In the United States, Apple's App Store practices remain entangled in the long-running Epic Games v. Apple litigation. A federal court previously ruled that Apple must allow developers to add links and buttons in their apps that direct customers to external purchase options. That injunction took effect, and Apple has been temporarily barred from charging any commission on purchases made through those external links.
The company is now asking the Supreme Court to review whether it can be held in civil contempt for charging off-App Store commissions despite the injunction. The lower court injunction did not explicitly prohibit such commission charges, and Apple has argued that charging for transactions facilitated through external links is consistent with its long-standing business model.
At the same time, the lower court is evaluating what commission, if any, Apple may charge on those purchases. The outcome could have significant financial implications for both Apple and the developers who rely on the App Store for distribution.
App Store's importance to Services revenue
Apple does not break down Services revenue by individual product lines, but estimates cited last year by The Wall Street Journal suggested the App Store accounts for nearly one-third of the category's total revenue. Additionally, findings from the Epic v. Apple trial revealed that gaming apps alone generated roughly 70% of App Store revenue.
That heavy concentration means any weakness in mobile gaming or changes to App Store commission structures can move the needle for Apple's entire Services business. In the June quarter, Parekh cited "headwinds in mobile gaming" as one of the factors that dampened App Store performance. This aligns with broader industry trends showing a slowdown in consumer spending on mobile games following a post-pandemic correction.
The App Store's June-quarter revenue record indicates that the platform is still growing in absolute terms, but the rate of that growth is clearly being tempered by both market dynamics and regulatory pressures.
Last year's F1 movie success also played a part
Beyond App Store issues, Apple's Services growth in the quarter was also affected by a tough comparison with the previous year. Parekh noted that Apple had a theatrical release of "F1: The Movie" in the June quarter of 2025, which became one of the highest-grossing sports films in history.
"We [had] the theatrical release of F1, which is one of the highest-grossing, you know, sports films in history," Parekh said. "And this year, we didn't have a theater release. So that had a favorable impact on both the June quarter, and also the September quarter in the year ago."
Because Apple's Services category includes revenue from its entertainment divisions, such as TV and film releases, the absence of a blockbuster theatrical release in the current quarter reduced the year-over-year growth rate.
Historical context of Services growth
Apple's Services segment has been a key growth engine for the company over the past decade, expanding from a complementary business to a major profit center. The division includes the App Store, Apple Music, Apple TV+, iCloud, Apple Pay, Apple Arcade, and licensing revenue, among other offerings.
In recent years, the growth rate has fluctuated. During the height of the COVID-19 pandemic, Services revenue surged as people spent more time on digital entertainment and remote work. That was followed by a period of moderation as the world reopened. The segment has also faced occasional quarterly slowdowns, but a sequential decline is rare. The last time Services revenue fell on a sequential basis was in 2022, before the current period of regulatory upheaval.
The current slowdown, however, appears to be more structural than cyclical. The combination of new regulations, court rulings, and changing consumer behavior suggests that Apple's App Store business model is evolving from its original form, and that evolution will inevitably affect Services revenue growth.
What could happen next
Apple is not standing still. The company continues to invest in new Services offerings and to expand its ecosystem. At the same time, it is appealing the US court ruling related to link-out transactions, and it is adjusting its business model in various countries to comply with local laws.
The Supreme Court's decision to hear Apple's appeal could clarify the scope of the lower court's injunction and potentially restore Apple's ability to charge commissions on external link transactions. That would help mitigate some of the revenue impact from the Epic case.
In the meantime, Apple is likely to face continued regulatory scrutiny in multiple jurisdictions. The European Commission is actively monitoring compliance with the Digital Markets Act, and other countries are considering similar legislation. These actions could force further changes to the App Store's commission structure, fee schedule, and distribution rules.
For investors, the Services slowdown in Q3 2026 serves as a reminder that Apple's regulatory exposure is not limited to antitrust fines; it also has direct consequences for one of the company's most profitable business lines. While the App Store remains a dominant platform in the mobile app ecosystem, its role is being redefined by governments and courts around the world.
Apple's ability to navigate this new landscape will be critical to the future trajectory of its Services segment. The company has the resources and the developer relationships to adapt, but the outcome is far from certain.
As the Supreme Court prepares to weigh in on the Apple v. Epic case, and as regulators continue to shape the rules of the digital economy, the Services segment's growth rate will remain an important metric to watch in the coming quarters.
Source:9to5Mac News