Apple Eyes Third-Party AI Apps to Offset App Store Pressure
Apple eyes AI apps and partnerships for revenue as third-party estimates show U.S. App Store commissions fell 18% amid mounting legal and gaming pressure.
Summary
Apple’s services business remains at record levels, but App Store regulation and weaker mobile gaming are constraining growth. On Monday’s earnings call, CFO Kevan Parekh said AI could encourage customers to upgrade or switch while creating first-party, third-party app and partnership opportunities. Investors are considering whether Apple could distribute third-party AI agents through the App Store and collect a revenue share, but Apple has not explained its plans.
August estimates indicated U.S. App Store commission revenue had fallen 18%, alongside declines in Brazil and Japan after regulatory changes. Epic Games’ lawsuit forced Apple to permit links to external payment systems, weakening its control over transactions. App Store performance in the September quarter matched the prior year, although paid subscriptions reached a record and third-party apps delivered double-digit growth. Mobile gaming headwinds are expected to continue into the summer quarter. Apple forecasts 8% to 9% services growth in the December quarter, including sequential pressure from third-party licensing and an additional half percentage point of foreign-exchange impact.
Positives
- Record paid subscriptions strengthened Apple’s services business during the September quarter.
- Double-digit growth for third-party App Store apps showed continued demand despite regulatory and gaming pressure.
- 8% to 9% services growth is forecast for the December quarter.
- AI capabilities could encourage Apple customers to upgrade or switch devices.
- Third-party AI apps, partnerships and first-party products could create additional revenue channels.
Risks & concerns
- 18% lower estimated U.S. App Store commission revenue in August highlighted damage from payment-rule changes.
- Brazil and Japan also recorded commission declines after introducing new regulations.
- September-quarter App Store performance was unchanged from the prior year.
- Mobile gaming headwinds are expected to continue into the summer quarter.
- Epic Games forced Apple to allow apps to direct customers toward external payment systems.
- Third-party licensing and a half-point foreign-exchange impact will pressure December-quarter services growth.