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Apple says gaming slowdown and App Store changes hurt services growth
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- DeepHorus
Apple’s services business, a key growth driver for the company, fell short of Wall Street expectations in the fiscal third quarter, missing revenue estimates by nearly $500 million. The Cupertino-based tech giant reported $30.74 billion in services revenue for the quarter ended June 29, 2025, below the $31.22 billion analysts had forecasted. Combined with a sales miss in China, Apple’s stock dropped over 4% in after-hours trading, signaling investor concerns about the slowdown in its high-margin services segment.
The services division, which includes the App Store, Apple Music, Apple TV+, iCloud, and AppleCare, has been a cornerstone of Apple’s strategy to diversify beyond hardware. Apple now boasts over 1.5 billion paid subscribers across its services, up from 1 billion in January 2025. However, the quarter’s disappointing performance marks a rare stumble for a segment that has consistently delivered double-digit growth in recent years.
Apple CFO Kevan Parekh attributed the revenue miss to several factors during the earnings call. The most notable was a slowdown in mobile gaming, which weighed on App Store performance. Additionally, Apple cited changes to its App Store business model in certain countries, including the United States, following a court order that now allows developers to process payments outside of Apple’s commission system. While Apple did not quantify the impact, it noted that the matter is pending a Supreme Court decision. Foreign exchange fluctuations were also highlighted as a major headwind, along with a comparison to the prior year’s strong revenue from the theatrical release of “F1.”
Despite these challenges, Apple emphasized that the App Store still set a June quarter revenue record, partly boosted by growth in Apple Ads, which has expanded to Apple Maps. Other services segments also performed well: AppleCare, Apple Music, Apple TV+, cloud services, and payment services all reached June quarter or all-time revenue records. Apple TV+ saw viewership hit an all-time high during the quarter. Parekh noted that both transacting and paid accounts reached new all-time highs, with double-digit growth in emerging markets.
Analysts and investors will be watching closely to see how the App Store changes and gaming slowdown evolve. The court-ordered payment flexibility could erode Apple’s lucrative commission revenue over time, though the ultimate impact remains uncertain. Apple’s stock decline reflects these uncertainties, but the company’s robust subscriber growth and record performances in many segments suggest resilience.
Looking ahead, Apple highlighted potential new revenue streams, including Creator Studio subscriptions and upcoming bill-splitting features in Apple Cash, which could deepen user engagement with its payments ecosystem. The recent launch of the Apple Upgrade program in partnership with Klarna may also drive device sales and attach more services. These initiatives, combined with continued expansion in emerging markets, position Apple to sustain long-term services growth despite current headwinds.
