Apple Hints at Third-Party AI Revenue Opportunities
During a recent earnings call, Apple hinted at possible revenue growth driven by third-party artificial intelligence apps and partnerships, even as its core services division faces ongoing industry headwinds.
Radwan AbdulhadiEditor and technology writer
Earnings Call Hints at Future Growth
Apple’s services business continues to operate at record levels, but the division is experiencing growing pressure. During a recent earnings call, Apple signaled that it may look to boost its services revenue through third-party apps and partnerships, though the exact execution remains undefined.
When discussing how artificial intelligence could contribute to long-term revenue growth, Apple Chief Financial Officer Kevan Parekh noted that AI offers compelling reasons for customers to upgrade. He also highlighted potential opportunities spanning first-party initiatives, third-party apps, and broader partnerships.
The Role of Artificial Intelligence
While Parekh did not elaborate on specific third-party app opportunities during the call, external observers have begun speculating about potential strategies. Reuters reported that investors are wondering whether Apple could profit by distributing third-party AI agents through its marketplace and taking a cut of the generated revenue.
Apple has traditionally maintained tight control over payments within its app marketplace, ensuring it collects a commission on all transactions. However, regulatory shifts and evolving market demands are prompting discussions around how the platform might adapt to new technologies like AI.
App Store Headwinds and Pressures
The central pillar of Apple’s services division, the App Store, has faced numerous regulatory hurdles alongside a broader slump in mobile gaming. These combined factors have hurt services growth over recent quarters, creating a challenging environment for the company's financial expansion.
Legal challenges and regulatory changes have directly impacted commission revenue in several international markets. For instance, third-party estimates suggested an 18% drop in U.S. commission revenue, alongside notable declines in Brazil and Japan following the introduction of local regulatory measures.
Regulatory and Legal Challenges
Apple's strict control over its marketplace has faced intense judicial scrutiny. A high-profile lawsuit by Epic Games ultimately forced the tech giant to permit apps to redirect users to alternative, outside payment systems.
Beyond the Epic Games litigation, other legal challenges throughout the world have further hampered Apple's traditional business model, including strict gatekeeper rules enforced in international jurisdictions.
Financial Outlook and Next Quarters
Despite these headwinds, Parekh noted that the App Store achieved a record number of paid subscriptions during the September quarter, driven by double-digit growth for third-party apps. Nevertheless, mobile gaming headwinds are expected to persist into future quarters.
Looking ahead, Apple anticipates that overall services growth for the upcoming December quarter will land between 8% and 9%. This forecast accounts for sequential headwinds primarily stemming from third-party licensing and ongoing foreign exchange fluctuations.
Sources
- TechCrunchApple may try to increase revenue by doing…something with third-party AI apps
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