Apple announces that it has surpassed 1.5 billion subscribers for its services division, an increase from 1 billion in January 2025. Nevertheless, this portion of Apple’s operations, which encompasses the Apple Store, AppleCare, music, video, and cloud offerings, was the only segment that fell short in an otherwise record-setting quarter for the company’s hardware sales.

In its fiscal third quarter, Apple disclosed $30.74 billion in services revenue, missing the $31.22 billion anticipated by Wall Street analysts. Coupled with a decrease in China, Apple’s stock dropped over 4% in after-hours trading.

When asked to analyze the reasons behind the dip in services revenue, Apple CFO Kevan Parekh highlighted several elements. The most prominent, however, were the effects on Apple’s primary revenue source, the App Store.

One element affecting the App Store’s performance during the quarter was a decline in mobile gaming. Additionally, Apple noted changes in the App Store business model in certain regions, including the U.S.

The latter pertains to a court order requiring Apple to permit app developers to handle customer payments outside the App Store — and consequently outside of Apple’s commission reach. While Apple did not specify the extent to which this issue affected App Store revenue, it reminded investors that the case will be reviewed by the Supreme Court for a conclusive verdict.

The company did not solely attribute the App Store issues to the revenue shortfall. Other contributing factors included foreign exchange, which Apple asserted was the primary contributor, as well as a comparison to previous quarters where Apple garnered significant revenue from the success of its “F1” theatrical release.

Overall, Apple pointed out that the App Store still achieved a revenue record for the June quarter, although that figure also encompasses income from Apple Ads, which have become an increasingly important part of Apple’s business, and have recently extended to Apple Maps.

Despite these challenges — and additional “headwinds” related to foreign exchange rates — Apple expressed optimism about the growth potential for its services division in the future.

It emphasized that the segment set an all-time revenue high in developed markets and a June quarter record in emerging markets. It also reported that the total services sector experienced double-digit revenue growth in the “vast majority” of markets tracked by Apple.

“Our services are continuously attracting more customers, and we have now exceeded one and a half billion paid subscriptions. Both transactional and paid accounts reached new all-time peaks in the quarter, showing double-digit growth for both in emerging markets,” stated Parekh.

The company also indicated that specific segments were performing exceptionally well, including Apple Ads, App Store, AppleCare, Apple Music, and Apple TV, which all achieved June quarter records, as well as cloud and payment services, which reached all-time highs. Apple TV also experienced its viewership hitting an all-time record during the quarter.

Apple also reminded investors of potential new revenue streams from services, including the newer Creator Studio subscriptions and the forthcoming bill-splitting features in Apple Cash, which could enhance customer engagement with Apple’s payment ecosystem.

The launch of the Apple Upgrade program this week, in collaboration with Klarna, could also boost services revenue, especially if it encourages more individuals to purchase an iPhone or other Apple devices, adding services to their charges.